With ceiling price rule delays, the lawsuit against CMS pending appeal, more hearings on the horizon, and new legislation introduced, hospitals are in limbo awaiting decisions that will shape the future of the 340B Drug Pricing Program.
New delay for civil monetary penalties regulation
As we’ve previously discussed, HHS has made a fifth request to delay the 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, which would penalize drug manufacturers for intentionally overcharging participating safety net hospitals for 340B drugs. The mandate for this regulation was created in 2010, through the 340B provisions of the Affordable Care Act.
On June 1, HHS finalized this ruling, further delaying the regulation until July 2019. Hospitals continue to object to this move, noting that such a rule absolves pharma companies from the responsibility of providing transparency into their practices. “The 340B ceiling price and civil monetary penalties rule were intended to shed needed light on drug manufacturer price increases and hold drug manufacturers accountable for price overcharging,” Tom Nickels, executive vice president of the American Hospital Association said in a statement. “The irony is not lost on us that drug manufacturers continue to lobby for increased reporting for hospitals and others while refusing any transparency on their part.”
Legal action on hold
While May 4 saw the beginning of the appeal in the lawsuit that AHA had filed against CMS regarding the January 1 reimbursement cuts, the three DC circuit judges hearing the appeal have not yet reached a decision as of the time of this publication.
Meanwhile, following the May 15 Senate Committee on Health, Education, Labor and Pensions hearing, the committee has announced plans for yet a third hearing to be held June 19. The hearing will be the committee’s third on the program and “the first where HRSA will testify,” according to Inside Health Policy; yet it is not the first time HRSA has appeared before a committee—the last time that happened was at the House Energy and Commerce Committee meeting March 5, 2017, then again on July 18, 2017.
In recent House news, on June 12 Congresswoman Doris Matsui (D-CA) introduced H.R. 6071 – SERV (Stretching Entity Resources for Vulnerable) Community Act in support of long-standing covered entity transparency, with the introduction of protections to the patient definition, expansion of the 340B program, and intention to eliminate the harmful Medicare Part B cuts that went into effect January 1. As the bill states, “savings from the 340B program are used by covered entities to reach more patients and provide more comprehensive services, and covered entities are in the best position to assess the use of their savings for community needs.”
The root of the problem
As 340B-covered entities await further movement from the government, the debate rages on about the root cause — and the solution — to rising drug prices across the country. The current White House administration has pledged to lower drug prices, releasing a blueprint on the topic on May 11 and subsequent request for information on May 16. Yet many hospitals and hospital associations remain frustrated that the government seems to continue pointing the finger at 340B while avoiding the elephant in the room—the actual (and ever-rising) cost of brand-name pharmaceuticals and the global impact to the US from foreign markets.
A March 2018 JAMA study tells us that, “for pharmaceutical costs, spending per capita was $1,443 in the US vs a range of $466 to $939 in other countries,” from 2013 to 2016. “The United States spent approximately twice as much as other high-income countries on medical care, yet utilization rates in the United States were largely similar to those in other nations,” study authors noted. “Prices of labor and goods, including pharmaceuticals … appeared to be the major drivers of the difference in overall cost … there is little evidence that efforts to reform US health care delivery have had a meaningful influence on controlling health care spending and costs.”
Rising drug prices in the US go even further back than that. Prescription drug expenditures rose from $121 billion in 2000 to $338 billion in 2017, and there can be no doubt that hospitals feel the impact. The CDC reports that in 2015, 72.5% of hospital outpatient department visits and 79.1% of hospital emergency department visits involved some form of drug therapy. In fact, the battle for pricing can be seen as far back as 1983 with the Hatch-Waxman Act (which encouraged the manufacture of generics), followed by the Orphan Drug Act in 1984 (which incentivized pharma companies to manufacture drugs for rare diseases).
Many of the price increases over the years can be associated with utilization due to programs like Medicare Part D that expanded prescription benefits to Medicare eligible patients starting in 2006; this, by sheer access, created an uptake in prescription volume. From 2010 to present, rising costs have been a result of a combination of utilization, brand name drug price increases, and the launch of newer, more expensive therapies (such as immunotherapies and personalized cell therapies) weighing down on Americans, causing the percentage of GDP attributable to drug spend to rise. Brand name products have risen faster than the rate of inflation associated with the launch of generic competitors resulting from historical patent cliffs.
“But to hear drugmakers tell it, the pricing problem lies with 340B program discounts, which require no taxpayer dollars and account for a scant 1.3% of the nation’s $457 billion annual tab for drugs,” writes Dr. Bruce Siegel, president and CEO of America’s Essential Hospitals, in a recent article from Modern Healthcare. “They advance the implausible notion that the 340B program somehow is to blame for industry pricing practices that brought us $1,000-a-pill hepatitis C treatments and $600 allergy medicine injectors. It’s regrettable that much of the current thinking on the 340B program flows from a steady stream of misinformation, threatening a program that successfully supports hospitals on which millions of Americans depend.” Americans have woken up to the cost of prescription drugs, as health insurers have shifted to high-deductible plans, placing more burden on the patient, while manufacturers continue to increase pricing to please shareholders. The safety net has stretched in purpose over the years, beyond serving only low-income uninsured patients, to a new class of vulnerable, insured patients who struggle with the choice of paying prescription co-pays vs. their housing costs. 340B is a solution—not a problem.
As the industry continues to hold its collective breath, Sentry recommends that its customers continue to tell their stories of the vital services the 340B program enables them to provide to patients, and to engage with business processes and technology solutions that allow you to make the most of your 340B savings. Safety-net providers are encouraged to continue to stretch scarce resources and demonstrate the high quality and improved outcomes resulting from 340B-enabled services — those they couldn’t provide without the 340B discount program. As the clock is ticking toward the July 16 deadline to respond to the President’s blueprint for drug pricing, hospitals should review and respond to the questions that impact 340B posed in the Request for Information.