March 2023 Buzz with Text - March 340Buzz: New challenges emerge

March 340Buzz: New challenges emerge

Following a flurry of activity to close out the year and usher in 2023, things on the 340B front have picked up speed once again. Manufacturers are getting bolder, the government is proposing new administrative requirements, and some states are enacting new challenges for covered entities.

In a long-anticipated move, the Biden administration announced that the COVID-19 public health emergency will end on May 11, throwing into question a host of pandemic flexibilities granted to 340B entities, including remote audits and allowing site registrations outside of the typical enrollment windows. And in a surprise move, Eli Lilly announced it will slash the costs of its insulin products and immediately cap monthly out-of-pocket costs for the diabetes drug at $35. That cap mirrors a provision of the Inflation Reduction Act, which applies only to Medicare beneficiaries, and it follows President Biden’s call for a cap in last month’s State of the Union address, suggesting the move was due at least in part to political pressures.

Elsewhere, we may be getting our initial glimpses of life after the adverse ruling in January in the first of three appeals court cases.

Manufacturers growing bolder

In a setback, Johnson & Johnson sent notice Feb. 15 that it will expand its restrictions for 340B hospitals (referred to as non-grantees in their letter) on pricing at contract pharmacies:

  • Hospital entities that lack an in-house pharmacy can designate a single contract pharmacy for delivery of 340B drugs. The retail pharmacy must be within 40 miles of the parent site, and the hospital must submit data for that designated location.
  • Hospitals that have an in-house pharmacy may designate a single contract pharmacy provided they submit claims data for both locations using 340B ESP and adhere to the 40-mile radius requirement.
  • Hospitals can designate a single specialty pharmacy location to order J&J’s four pulmonary arterial hypertension drugs, provided they submit claims data.

The changes, which affect 30 J&J-branded drugs and go into effect March 7, represent a merging of two models — data and limited access — that target hospitals. Under J&J’s previous policy, in effect since May 2, 2022, hospitals were allowed to designate multiple contract pharmacies provided they agreed to share claims data.

It shows how drugmakers are emboldened in the wake of the federal appeals court decision earlier this year siding with three drugmakers in saying that Congress never said manufacturers must ship 340B drugs to an unlimited number of contract pharmacies. J&J’s is the first policy to require data from an in-house pharmacy. It probably won’t be the last.

Regarding the two pending appeals court decisions, the federal appeals court in Chicago, which is hearing Eli Lilly’s appeal, is expected up first. That one may follow the earlier ruling. If there’s any optimism remaining, it’s with the Washington D.C. appellate court, which tends to support HRSA in legal disputes. If that holds true, and the final tally is two courts siding with the manufacturers and one with covered entities, then the case could wind up in the Supreme Court, likely no earlier than May of 2024. If all three courts go against 340B? Then the path to a remedy through the courts is probably kaput. Congress will be the only remaining option.

Part D rebates and ADR

As a reminder, CMS is soliciting comments by March 11 on the best way to identify 340B drugs dispensed to Medicare Part D beneficiaries so they are excluded from rebates under the Inflation Reduction Act. The law requires manufacturers to issue rebates on certain Part B and D drugs when prices rise faster than inflation. (As we all know, this penalty already exists for 340B through the penny-pricing policy.)

CMS in December issued guidance requiring all covered entities to use either the “JG” or “TB” modifiers to identify 340B drugs billed to Part B, effective Jan. 1, 2024. Meanwhile a new whitepaper from IQVIA questions whether claims modifiers can be used successfully for this purpose for retail. It notes that the 340B status must be known at the point of sale to the patient and prior to adjudication, something that does not apply to contract pharmacies that use the 340B replenishment model and virtual inventory.

We agree that retail modifiers are not the solution and will provide comments to CMS detailing alternatives based on our experience with the National Council for Prescription Drug Programs and contract pharmacies. For medical claims, our Trisus Claim application provides modifier capabilities for Medicaid and Medicare Part B transactions.

CMS issued its proposed guidance here. You can send comments to

Speaking of submitting comments, The Craneware Group submitted feedback to HRSA regarding the agency’s proposed rule revamping the administrative dispute resolution process. Among our positions, we:

  • Support the proposal to eliminate the $25,000 minimum claims threshold and other rules to increase access to ADR for covered entities with more limited resources
  • Agree with removing CMS from the ADR panels
  • Question HRSA’s use of the phrase “good faith effort”
  • Support stripping language from the existing 2020 ADR allowing manufacturers to bring claims questioning a covered entity’s eligibility

Read our full letter here.

Changing political winds

Turning to Congress, Democrats have finally begun making committee leadership appointments. As expected, Sen. Bernie Sanders of Vermont will chair the Senate Health, Education, Labor and Pensions (HELP) Committee, where Sen. Bill Cassidy (R-La.), a foe of 340B, will be the ranking Republican. This week Sanders hosts the first of what will be many hearings, highlighting community health centers.

Sanders says he intends to go after the pharmaceutical industry on drug prices, yet he recently recounted trying to revoke a Vermont hospital’s tax-exempt status while he was mayor of Burlington in the 1980s. “Right now the criteria to receive tax-exempt status is extremely nebulous,” he told Kaiser Health News. “That’s an issue somewhere down the road I want to look at. If you’re not going to pay taxes, what are you, in fact, doing?”

Meanwhile, Democrats tapped Sen. Tammy Baldwin of Wisconsin to chair the Senate Appropriations Subcommittee on Labor, Health and Human Services, and Related Agencies, which has funding purview over 340B. Baldwin is a strong supporter of 340B on issues including changes in eligibility due to patient mix changes from the pandemic and manufacturer restrictions on contract pharmacies.

In Connecticut, Gov. Ned Lamont, a Democrat, has introduced a bill as part of his proposed annual budget that would require 340B hospitals to report how they use their savings to benefit their communities, per 340B Report. While his bill would also prohibit manufacturer limitations on contract pharmacy access and discrimination from pharmacy benefit managers, it’s another illustration that changes may be coming for the 340B program — and the varying mindset of politicians in how to find a balanced solution.

Next door in New York, a controversial new Medicaid pharmacy carve-out takes effect April 1.

Dubbed NYRx, the plan would shift Medicaid pharmacy claims from a managed care model to a fee-for-service reimbursement that requires Medicaid patients to purchase medications through the state.

Essentially, New York is heading down the same path that California took a year ago, requiring covered entities to bill at acquisition costs and add a small dispensing fee, ceding 340B savings to the state. The New York State Department of Health argues that the new plan will allow it to negotiate with pharmaceutical companies and save the state money. Covered entities argue those savings will come at their expense and result in fewer safety net patient services. Health centers and Ryan White clinics say the changes will be financially devastating. A bill introduced in the New York State Senate Health Committee would repeal the change and revert to managed care reimbursement.

As we’ve been saying, transparency will be center to many conversations. We continue to see states introducing bills to protect 340B from discriminatory practices, with Missouri and Rhode Island as recent examples.

Our safety net program faces a lot of uncertainty and mounting complexities. We are here for our customers because 340B Matters. Visit us at our exhibit booth at the 340B Coalition winter conference to learn more and join us for our customer appreciation event by registering here.

Stay focused on your mission of helping patients and running a productive, compliant program. Ours is the right path.


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