20190416 April 340Buzz - The 340Buzz: 340B drug ceiling prices finally debut

The 340Buzz: 340B drug ceiling prices finally debut

In this month’s buzz: HRSA launches the long-awaited 340B drug ceiling prices website, two new bills that would affect 340B are proposed in the House, and the government begins to examine 340B rebates for Medicare Part D drugs.

340B ceiling prices no longer a mystery

After a very long road, on April 1 HRSA finally made available online a way for covered entities to view the ceiling prices—or maximum amount drug manufacturers are allowed to charge—for drugs under the 340B program. The website will also serve as a mechanism to look at historical pricing, as the database grows over time.

The requirement for such a website was passed into law in 2010 under the Obama administration, and the final regulation implementing the changes was issued in January 2017, but it has encountered delay after delay under the current administration.

After having delayed the effective date of the ceiling price rule five times, HHS in November last year issued a new proposed rule to move up the date that the rule would finally take effect by six months, from July 1, 2019, to January 1, 2019.

“Today’s launch of a secure website listing the maximum allowable prices for all 340B covered drugs brings a healthy dose of sunlight into a marketplace that has, for far too long, been a black box. Until today, hospitals, clinics, and health centers participating in 340B had no way to be sure they were paying the correct amount for the drugs they purchase,” said 340B Health President and CEO Maureen Testoni in a statement. “With this new transparency comes a needed increase in accountability for drug manufacturers. When this information is combined with the civil monetary penalty authority that Congress granted HRSA, manufacturers that knowingly and intentionally charge safety-net providers too much will be subject to financial penalties.”

Tom Nickels, Executive Vice President of the American Hospital Association, said in his statement, “This website will help make sure hospitals participating in the program are not being overcharged by drug companies and that instances of price gouging can be uncovered and penalties enforced. As prescription drug prices continue to skyrocket, the 340B program is as crucial as ever in helping hospitals provide access to health care services for patients in vulnerable communities.”

New House bills continue to crop up

Two new bills have been introduced in the House in recent weeks, both in favor of limiting or regulating the 340B program in some way.

  1. The Fair Care Act

The first, H.R. 1332, the “Fair Care Act,” was introduced by Bruce Westerman (R-Ark.)  on February 25. The bill has two sub-sections that, if passed, would impact 340B.

The first section focuses on data reporting to improve transparency into how covered entities provide care for patients. It asks for hospitals to provide insurance claims data for patients seen at child sites, S-10 data to demonstrate charity care at such sites, and the name of the vendors that provide services related to 340B.

The second section of the bill addressing 340B is titled, “Requiring 340B discount program reports by DSH hospital covered entities on low-income utilization rate of outpatient hospital services.” The language takes an existing definition of low-income utilization for inpatient under the Social Security Act and inserts new language to define it as outpatient for the purposes of 340B, and requires certain DSH hospitals to report the calculations regularly as a covered-entity compliance requirement to HHS.

Sentry believes that the bill’s focus on charity care is misguided, as many covered entities may have lower charity care percentages, but higher Medicaid and Medicare populations, and often end up operating at a loss when treating those populations. Such a bill could result in covered entities with lower charity care percentages losing eligibility, without taking into account the populations they serve. Charity care alone does not take into consideration bad debt or under-reimbursements from government payers.

In the meantime, adjustments in the Medicare cost report worksheet S-10 reporting that evaluates uncompensated care, which encompasses both charity care and bad debt, is currently in the works. Instructions for this reporting have changed considerably over the years, and how these numbers are calculated may impact hospitals. The administration and Congress should proceed with caution on use of this data until has been defined and consistently utilized.

  1. The 340B Protection and Accountability Act

The second newly proposed bill, H.R. 1559, the “340B Protection and Accountability Act,” was introduced by Chris Collins (R-NY) on March 6. It should be noted that Rep Collins was also behind the December 2017 bill H.R. 4710, the “340B PAUSE Act,” which sought to place a moratorium on new covered entities enrolling in the program. Collins was indicted last August for insider trading and has since lost his seat on the health subcommittee of the Committee on Energy and Commerce. He was indicted for tipping off family members about the failed clinical trials of a drug from Innate Immunotherapeutics, a pharmaceutical company whose board he sat on and in which he held more than two million shares.

Despite his indictment and his loss of position on any subcommittees, Collins has now introduced this latest bill, which proposes several amendments to the Public Health Service Act that would impact the 340B program. His bill proposes that covered entities must:

  • Document the income and insurance status of each patient of the covered entity, and the amount each patient pays to receive covered outpatient drugs
  • Maintain auditable records
  • Establish a process for, and conduct, periodic comparisons of the covered entity’s prescribing records with the dispensing records of each such contracted entity, as applicable, to detect potential irregularities and to ensure that all drugs dispensed by the contracted entity are for patients of the covered entity
  • Maintain arrangements to dispense covered outpatient drugs with no more than 5 contract pharmacy locations at any given time, all of which must be located within (or, for mail-order pharmacies, serve patients residing in) lower-income census tracts served by the covered entity.

This bill marks the first time that lawmakers have suggested directly limiting the number (and location) of contract pharmacies that covered entities could partner with. The bill fails to recognize the importance of access for patients. The belief that patients should only be served in a zip code for lower-income census tracts is discriminatory, impractical and insensitive.

If such an amendment were to pass, the effect would be that while patients of covered entities could continue to fill their prescriptions at any pharmacy they choose, the entities would only receive 340B program benefits from the five contract pharmacies, thus drastically reducing the overall benefit for the entities, endangering their financial ability to continue serving vulnerable patients. As a consequence, entities would reduce the number of locations at which they could provide discounts or assistance to their patients. With Collins having been stripped of his influence following his indictment, however, it remains unlikely the bill will gain a foothold.

Changes to Medicare part D?

Finally, amidst the ongoing legal struggles related to reimbursement cuts for Medicare Part B drugs under the 340B program, there is some indication that CMS could be eyeing changes on the Part D side as well. A web page on the website of HHS’ Office of the Inspector General (OIG) currently reads, “Drug manufacturer rebates reduce the cost of the Part D program to beneficiaries and the Government. Manufacturers frequently do not pay rebates for Part D prescriptions filled at 340B-covered entities and contract pharmacies, since they are already providing a discount on the purchase of the drug. The Medicare Part D program does not share in the purchase discounts. Savings could be realized if sponsors and manufacturers agreed that eligible prescriptions filled at 340B pharmacies would receive rebates. We will identify potential rebate amounts that could have been obtained if pharmaceutical manufacturers paid rebates for drugs dispensed through the Medicare Part D program at 340B-covered entities and contract pharmacies.”

The intent of 340B when it was passed into law in 1992 was to support the state Medicaid programs; it included a prohibition for duplicate discounts paid by manufacturers for drugs used by Medicaid patients. Over time, CMS has looked at additional ways to gain savings and reduce rebates as drug prices have further impacted the government.

In 1992, the 340B law did not have direct Medicare implications. It wasn’t until 2018 that the 340B program began to impact Medicare when CMS passed the ruling that significantly reduced Medicare Part B reimbursements. The courts have since indicated that CMS overstepped its boundaries in making that 2018 decision; one could assume a similar outcome if CMS were to suggest a Part D change in reimbursements specifically for 340B participants.

Since manufacturers are not currently granted a prohibition for duplicate discounts on Part D or commercial insurance for drugs dispensed from 340B pharmacies or contract pharmacies, it is unclear what effect this report, amid the discussion of eliminating rebates, will actually have on the 340B program.

What is known is that hospitals benefit from the current Part D and commercial reimbursements, which allow them to provide charity care, offset bad debt and provide services for which there are traditionally low levels of reimbursement.

The fact that the administration seems to only support 340B eligibility for hospitals if they maintain certain levels of charity care, without considering the lower levels of reimbursement these hospitals receive from treating Medicaid and Medicare patients, seems counterintuitive.

Change in season

As the second quarter begins and spring gets into full swing, Sentry urges its covered entity partners to continue speaking up to lawmakers in your districts and to reach out to Sentry for any 340B compliance or management needs. We will continue to weather the storm together; as the old saying goes, March winds bring April showers, which bring May flowers. We will see what blooms.