This month, we take a deeper dive into the various strategies pharmaceutical companies have been cooking up to curtail the 340B program and skirt payment requirements. We also begin to explore the industry’s response, possible ramifications and next steps. Finally, we pause to remember Associate Justice Ruth Bader Ginsburg and her commitment to justice.
Pharma continues to make waves
As we discussed in last month’s 340Buzz, pharma companies have been exercising several strategies aimed at avoiding paying 340B discounts to covered entities in recent weeks. Some are demanding pharmacy claims data (let’s call this the “data strategy”), while others aim to control where prescriptions for 340B drugs can be filled (we’ll call this the “limited distribution strategy”).
Merck and Sanofi are in the “data strategy” camp and have sent letters to covered entities demanding pharmacy claims data – ostensibly to help the pharma companies avoid paying Medicaid duplicate discounts. Eli Lilly is in the “limited distribution strategy” camp, only honoring 340B pricing on its Cialis drug if prescriptions are filled at on-site hospital pharmacies, not at contract pharmacies. Since our August 340Buzz, other pharma companies have followed these examples.
Novartis has joined Merck and Sanofi on team “data strategy,” demanding claims data from hospitals, while AstraZeneca has adopted Lilly’s “limited distribution strategy” model, only offering 340B prices for prescriptions filled at in-house pharmacies. And Eli Lilly has doubled down, expanding its ban on 340B pricing at contract pharmacies from Cialis to all of its drugs except for insulin, effective September 1.
Data and privacy concerns
Covered entities and contract pharmacies alike have concerns about the privacy and security of the data the pharma companies on team “data strategy” are demanding. While pharma maintains that the reason for the requests is to avoid Medicaid duplicate discounts, in most cases, the data they’re asking for goes well beyond Medicaid data, extending to data on Medicare part B, commercial insurance plans, and more.
“CVS and other pharmacy giants are raising privacy concerns over drug makers’ new data collection requirement … They’re worried that 340B facilities could be held liable for potential data breaches once they share information with a third party,” reports Bloomberg Law. “CVS agreed to let 340B hospitals hand over Medicaid drug claims data to third-party vendors that check for duplicate discounts, but said 340B entities couldn’t offer drug data from Medicare claims or commercial insurance.”
Further, the Bloomberg Law article notes, “Facilities that get 340B discounts say they’re worried that providing the data will come back to bite them later.”
The role and rise of third-party vendors
Involved in this data collection process is 340B ESP, a third-party vendor that acts as middleman, gathering data from CEs and providing it to pharma companies.
It’s worth noting, however, that 340B ESP’s parent company, Berkeley Research Group (BRG), has a history of siding with Big Pharma when it comes to debates about whether the program should be curtailed and has written or co-written studies about the 340B program on behalf of Pharmaceutical Research and Manufacturers of America (PhRMA),” according to an article from 340B Report. BRG “research undergirds many public policy arguments for scaling 340B back, particularly for hospitals. PhRMA, AIR 340B, and COA cite BRG research in arguments that hospitals benefit from the 340B program, but low-income and uninsured patients do not, and that the program raises the cost of cancer care.”
Another third-party vendor, Kalderos, which has historically helped covered entities validate pharmacy claims for Medicaid, is now spearheading a new payment model for how covered entities would obtain 340B discounts they currently receive at time of purchase. On August 25, Kalderos announced a new “rebate solution” called 340B Pay, which the company calls “the first real-time, compliant solution for requesting, verifying and, through integration with a third-party payment provider, paying 340B rebates,” according to a press release.
In practice, what this means is that covered entities would purchase the drugs (from those pharma companies who choose to work with Kalderos) at wholesale acquisition cost (WAC), submit the pharmacy claims to Kalderos, wait for Kalderos to cross-check the claims for Medicaid and other rebates, and then wait for a rebate approval and processing via ACH payment if it’s determined that the drug was indeed 340B eligible.
This means that covered entities – many of whom are rural or critical access hospitals with limited resources – would pay full price for the drug up-front and then be forced to wait for rebates in order to recoup 340B discounts. This could result in limited funding to provide crucial hospital services or affordable drugs to vulnerable patients, and in some cases, could mean the different between a hospital’s ability or inability to continue operations.
Covered entities speak out and take action
The American Hospital Association sent letters to all five drug companies August 21 expressing its concern. “It is an outrage that these actions are being taken at a time when hospitals are in the midst of their response to the COVID-19 public health emergency,” the AHA wrote. “For a drug company to jeopardize hospitals’ ability to care for patients who are already under severe economic, emotional and health-related strain during a public health crisis is unconscionable.”
340B Health president and CEO Maureen Testoni said in a statement, “The action of AstraZeneca is a direct attack on the 340B drug pricing program that will hurt hospitals, health centers, and clinics as well as the low-income and rural Americans who rely on them for care. We believe that refusing to offer discounts that the 340B statute requires is a violation of federal law … If the administration will not use its authority to enforce the law, we will pursue all legislative and legal avenues available to us to defend the safety net.”
In a separate statement, Testoni said, “Lilly and other manufacturers must not be permitted to make an end run around the 340B statute in a brazen attempt to avoid their responsibilities under the program.”
And on September 10, more than 1,100 hospitals participating in the 340B program sent a letter to HHS secretary Alex Azar call for HHS to put a stop to pharma’s actions.
“The recent actions of a growing number of major pharmaceutical manufacturers would undermine the very reason this program exists,” the letter says. “These collective actions to deny access to 340B pricing are clear violations of the 340B statute that will set a dangerous precedent … If the administration permits pharmaceutical companies to continue these practices, 340B hospitals will face increased difficulties serving high volumes of patients living with low incomes in our rural and urban communities.”
The National Association of Community Health Centers (NACHC) “is preparing legal action” in response to drug manufacturers’ recent strategies to stop providing 340B discounts, the group says. In addition, Ryan White Clinics for 340B Access has sent a letter the HHS secretary Alex Azar expressing concerns that “Ryan White providers are especially dependent on their 340B contract pharmacy arrangements to meet the pharmacy needs of their patients and to help finance their fight to end the HIV/AIDS epidemic in this country.” It is anticipated that several other groups will pursue litigation, though HRSA originally maintained that it lacks the authority to legally enforce 340B program guidance. Modern Healthcare reported on September 4 that “an HRSA spokesman said the agency is evaluating potential sanctions … if the drug makers’ actions violate 340B statute.” Congressional members from both the house and senate continue to submit a combination of individual, party and bipartisan letters to HHS, PhRMA, and HRSA in support of covered entities and asking pharmaceutical companies to stop violating the statute and for HHS to take action.
A year to remember
Summer is officially behind us and the year is winding down. With a global health crisis, unprecedented political and social tensions, and a historic election coming up fast, 2020 will surely be a year none of us will forget any time soon. With the recent passing of Supreme Court Associate Justice Ruth Bader Ginsburg, her legacy will be front and center in how the future of the Supreme Court will be shaped over the coming months with critical cases lined up that impact 340B – from the affordable care act and discriminatory pricing. As always, whatever challenges the industry faces, Sentry will be here along the way as a voice for covered entities and to support you in your effort to optimize the 340B program and serve vulnerable patients.