Sept 340buzz - September 340Buzz: Spotlight on drug costs

September 340Buzz: Spotlight on drug costs

As the days grow shorter and kids head back to school, we can celebrate a little good news here in the late summer.

The biggest news in our corner of healthcare is the president’s signing of the Inflation Reduction Act, the scaled-back version of Build Back Better. Starting in 2026, it requires Medicare to negotiate prices on up to 10 of the highest-expense drugs for Medicare Part D. By 2029, Medicare can negotiate an additional 20 Part B and Part D drugs each year.

While it partly realizes a long-sought goal, the immediate question is how this will affect 340B.

If a drug price drops, it follows that the 340B discount would also decline. But the good news is that unlike previous price-negotiation proposals, the new law will allow covered entities to select the price they want — either 340B or negotiated Medicare, whichever is lower. So in that sense, the program seems neutral for 340B, however it does raise questions about Medicare reimbursement in the future. Will it eventually mirror fee-for-service Medicaid, which caps 340B reimbursement at acquisition cost plus a dispensing fee? I’ll have more to say on this blog about the Inflation Reduction Act and 340B.

Another question: What happens to price negotiations if Republicans win back control of the House or Senate (or both) after the November elections, or the White House in 2024?

To that, I would offer that lowering drug prices enjoys at least some bipartisan support. Remember, former President Trump supported various measures to reduce costs, from his “most-favored nation” executive order, which set up a pilot program tying some Medicare drugs to the lower prices paid in other developed countries, to a failed deal with Big Pharma to lower drug costs.

So I think price negotiation will survive. How it gets implemented could change — for example, slowing the number of drugs under negotiation each year.

Drug prices, continued

Staying on drug prices, a subsidiary of Civica Rx, a nonprofit manufacturer of low-cost generic drugs, has released its first outpatient medication. It will sell abiraterone acetate, a generic version of Janssen’s Zytiga, used to treat metastatic prostate cancer, to pharmacies for $160 for a one-month supply and recommend they charge no more than $171 per bottle. That’s nearly $3,000 per month less than the average cost for Part D patients, the organization says.

CivicaScript, the subsidiary, plans to begin making and distributing low-cost insulin in 2024.

Meanwhile, 340B critic Adam Fein, using a FOIA request to HHS, reports that the program grew to $43.9 billion in 2021, up 15.6% from the previous year. The numbers, which are based on figures from Apexus (and since verified by HRSA), are the latest credible tally to emerge on 340B. They suggest the program continues to grow despite the efforts of so many manufacturers — 10 at the end of last year, now 18 — to take contract pharmacies out of the mix.

But while Fein cites this as proof of supposed runaway growth in discounted drugs (gasp!), he says nothing about the effect of spiraling drug prices on the spending growth. As a reminder, Americans spend more on prescription drugs than any other country, at $1,310 per person annually. A peer-reviewed study this year found that the median launch price of a new drug in the U.S. in 2021 was $180,007, with an annual inflation rate of 20% since 2008, and that nearly half of new drugs in 2020 and 2021 cost more than $150,000 per year.

So a significant portion of the growth in 340B is tied to the ever-escalating price of drugs.

340B news

Two key Republican leaders have asked the Government Accountability Office to study the new law reinstating 340B eligibility for hospitals that lost it due to changes in patient mix during the pandemic. Sen. Richard Burr of North Carolina and Rep. Cathy McMorris Rodgers of Washington are the top Republicans on committees that have jurisdiction over 340B. They’ve reportedly asked GAO to look at the hospitals granted exceptions to the disproportionate share adjustment, plus HRSA’s oversight of them. Another bill introduced recently by a Republican congressman calls for reporting from both GAO and Office of Inspector General, conjuring up discussions once again on transparency.

It’s a harbinger of the kind of scrutiny 340B could see if Republicans regain power in Congress next year.

The Department of Health and Human Services is asking a court for more time to determine how to reimburse hospitals after the Supreme Court in June ruled it had illegally instituted a nearly 30% cut in Medicare Part B payments for 2018 and 2019. The American Hospital Association and other hospital groups say the government should not be allowed to devise its own remedy, since it hasn’t shown how it would stop future illegal reimbursement cuts. HHS faces six lawsuits from hospital groups over the cuts.  September is the opportunity to respond to the HHS Hospital Outpatient Prospective Payer System

Turning to contract pharmacy restrictions, the various appeals cases involving HRSA and the drug manufacturers are proceeding slowly. In D.C., oral arguments will take place Oct. 24 in the consolidated Novartis and United Therapeutics cases, making it the first appeals case to reach this stage. Meanwhile, the federal government filed briefs in the AstraZeneca and Eli Lilly cases, arguing in the former that “Congress did not enact a statute that defeats itself” by allowing manufacturers to withhold savings from covered entities.

Also, starting Sept. 1, Boehringer Ingelheim will expand its contract pharmacy exclusions that previously affected only hospitals to health centers, however there are differences in their policy based on the type of covered entity. More Mayhem.

Definition of ‘patient’

Meanwhile, a court case in South Carolina could upend the definition of a 340B-eligible patient.

Genesis Health Care, a federally qualified health center, was briefly expelled from the 340B program after a 2017 audit found it had diverted 340B drugs to ineligible patients. Genesis protested, saying HRSA’s definition of “patient” was too narrow. It sued HRSA, which responded by reinstating Genesis, vacating the audit findings and persuading a federal court to dismiss the case as moot. But HRSA ordered Genesis to comply with its 1996 guidance on the definition of “patient.”

Genesis then appealed, arguing the guidance contradicts the plain language of the 340B statute and would harm its 340B program. The federal appeals court in July agreed and remanded the case back to the district court.

At issue is Genesis’ contention that the statute makes prescriptions from any source eligible to a patient of a covered entity — even when it was written by an outside provider who referred the patient to a covered entity, as was the case for Genesis’ audit violations. HRSA’s guidance says the covered entity must initiate the service resulting in the prescription and maintain auditable records. The question is, was the audit finding about patient definition, or failure to maintain records?

The U.S. District Court for the District of South Carolina now has an opportunity to clarify what exactly constitutes a patient under 340B. A judge gave HRSA until Sept. 22 to respond.

Mark your calendars

Two quick reminders:

  • Recertification for 340B hospitals continues through Sept. 19.
  • The Craneware Group will host a webinar titled “Optimizing Biosimilar Use – Transforming Data and Insight into Action” on Wednesday, Sept. 7 at 11 a.m. ET. My colleagues will discuss payment, utilization, monitoring and implementation strategies using integrating analytic tools. Register here.

Keep up the good fight and soldier on!