U.S. Supreme Court

July 340Buzz: Supreme Court sides with covered entities while FTC goes after PBMs

No, you’re not suffering from amnesia — we really did skip a month (June) in the naming convention for the Buzz. Several readers suggested that the blog, which is always published at the end of the month, should have a forward-looking headline.

Here we are on the cusp of July. We’ll stick with the end-of-month publishing cadence, but name it for the upcoming month, mirroring our forward-looking outlook for all things 340B.

Good news for 340B?

Speaking of which, we’ve had some decidedly good news recently.

The biggest of which was the June 15 Supreme Court decision striking down HHS’s nearly 30% Medicare Part B reimbursement cuts to 340B hospitals in 2018 and 2019 because the agency “did not conduct a survey of hospitals’ acquisition costs” for those years. So, cue the celebrations?

Well, sort of. SCOTUS’s decision leaves aside the cuts from subsequent years, which it kicked back to an appeals court to decide, as well as the issue of compensation to hospitals for the lost reimbursements. CMS has estimated the cuts totaled about $1.6 billion per year. Here, CMS faces a challenge because it is required to be budget neutral and cannot simply issue hospitals checks without making offsetting cuts somewhere else.

In 2019, I sent a letter on behalf of Sentry to then CMS Administrator Seema Verna that read, in part:

“We appreciate the complicated nature by which CMS implemented the original cuts and subsequently increased payment for other hospital services to all hospitals—including non-340B eligible hospitals; however, not-for-profit hospitals that depend on Medicare payments to cover under-reimbursed services should not be used to provide additional profits to for-profit hospitals.”

In the letter, we proposed four different possible remedies, all centered on reinstating the average sales price (ASP) plus 6% reimbursement rate with interest:

  • Staggered increased ASP payments plus a 3% penalty spread over two years
  • Staggered repayment plus interest
  • A lump-sum repayment
  • “Responsible repayments” to CEs that demonstrate responsible 340B stewardship in collaboration with HRSA

You can read the proposals in more detail here, but each lets CMS calculate what it owes and provide remedies going forward, not backward. They also entail skin in the game for CEs, which must demonstrate program integrity and essentially work to reclaim the lost reimbursements.

Meanwhile, we have the appeals court cases over the Part B cuts from 2020, 2021 and 2022 ahead of us, plus the Outpatient Prospective Payment System proposed reimbursements for 2023 due in July, so there is plenty yet to unfold.

More good news arrived with the Federal Trade Commission’s vote to launch an investigation into the effect of what it calls “the prescription drug middleman industry,” a.k.a. pharmacy benefit managers, on the access and affordability of prescription drugs. The agency will require the six largest PBMs to turn over information and records regarding their business practices.

While the investigation isn’t technically focused on 340B, covered entities and advocacy organizations were instrumental in submitting feedback to the FTC during the comment period earlier this year. This strongly suggests that investigators will uncover plenty of dirt on how PBMs handle 340B.

Interestingly, as 340B Report notes, the investigation has drawn support from the Pharmaceutical Research and Manufacturers Association (PhRMA) and the Community Oncology Alliance (COA), neither of which is especially sympathetic to 340B. PhRMA and COA submitted comments to the government arguing that PBMs are using their vertically integrated market power to squeeze profits from 340B. But remember, a zebra can’t change its stripes. We shouldn’t mistake this signal as support for 340B.

Mixed bag news

Elsewhere, Exelixis, a little-known maker of specialty cancer drugs, became the 17th manufacturer to place restrictions on 340B contract pharmacy pricing (grantee covered entities are exempt for now). Its two products, Cometriq and Cabometyx, already had orphan drug status, so only disproportionate share and children’s hospitals had access to 340B pricing and will have to submit claims data to 340B ESP to retain it at multiple contract pharmacies.

And speaking of orphan drugs, GlaxoSmithKline announced it is ending voluntary 340B pricing on two of them — Nucala, a severe asthma drug, and Zejula, an ovarian cancer medication.

In yet another sign of how difficult the exclusions are making things, OptumRx — one of the six big PBMs targeted by the FTC — told covered entities they now need its permission before submitting claims data from its contract pharmacies, outlining a list of information it wants CEs to provide, including for claims data already submitted. OptumRx is a self-described “pharmacy care services” provider and a subsidiary of UnitedHealth Group.

Staying with PBMs, Arizona became the latest state to enact an antidiscrimination law targeting them, while state lawmakers in West Virginia enacted an amendment to its antidiscrimination law prohibiting PBMs from requiring a 340B modifier on drug claims. Here’s to continued momentum supporting 340B at the state level!

Pressure mounting to act

Meanwhile, pressure continues to build on Congress to weigh in and on HHS to crack down on the scofflaw manufacturers, nine of which it has already sent enforcement letters — the latest being UCB — and seven of which it has referred to the HHS Office of Inspector General for possible civil fines.

The National Association of Community Health Centers (NACHC) released a survey of 302 health centers across the country looking at the effects of the contract pharmacy exclusions. Ninety-two percent of respondents said they used 340B savings to increase access for low-income and underserved rural patients, while 87% said program benefits support non-revenue-generating services or providers they otherwise could not afford to offer.

Additionally, the organization reiterated its support for passage of legislation including the Protect 340B Act, state antidiscrimination laws and for Congress to amend the 340B statute “to expressly including contract pharmacies in the program.”

“Health centers are caught in the middle of corporate greed between pharmaceutical manufacturers and PBMs, both of whom want a larger piece of health centers’ 340B savings,” the report said.

In the nation’s capital, a bipartisan group of seven House lawmakers, led by Rep. Abigail Spanberger, a Virginian Democrat who co-introduced Protect 340B, used an hour of floor time to voice their support for 340B — including reading some quotes into the record submitted by yours truly.

Looking ahead, the nonprofit Community Voices for 340B announced it is organizing a march to the U.S. Capitol on Aug. 3 as a bookend to the 340B Coalition Summer Conference. It’s also planning a rally the night before at the Gaylord National Hotel and Convention Center, the conference venue.

Come join us and lend your voice of support! I’ll be there.