20181120 November 340Buzz - The 340Buzz: Let’s talk drug prices

The 340Buzz: Let’s talk drug prices

This month, HHS issues a proposed ruling to move up the implementation of new ceiling price rules, CMS proposes a new Medicare Part B pricing model and Sentry unveils a new feature to help covered entities get the best drug prices under 340B.

Ceiling price rule delayed no more?

After having delayed the effective date of the ceiling price rule—which would cap the prices drugmakers can charge hospitals that participate in 340B—five times, HHS has issued a new proposed rule to move up the date that the rule would finally take effect by six months, from July 1 of next year to January 1 of next year.

The sudden change of heart comes after a lawsuit the American Hospital Association filed against HHS, alleging that the continued drug pricing rule delay was a violation of the Administrative Procedures Act (APA). On October 15, HHS had asked the judge to put the proceedings on hold, in anticipation of this new proposed rule that would move the date up to January 1.

“We are pleased that in response to our lawsuit, HHS today proposed a regulation that would make the effective and compliance date for the 340B enforcement rule Jan. 1, 2019,” said AHA General Counsel Melinda Hatton in a statement. “We encourage HHS to stick by this commitment and to publish the final rule in time to meet that deadline. The rule also requires that HHS make pricing information available online to 340B hospitals and other providers. We strongly encourage HHS to publish that website promptly, which is critical to enforcement of the 340B program, as soon as possible after Jan. 1.”

Covered entities can submit a formal comment on the proposed ruling through November 23.

CMS proposes new payment model to lower drug prices

On October 25, CMS released an advance notice of proposed rulemaking (ANPRM) to seek feedback on a proposed new drug payment model that, if accepted, would go into effect in a “test” phase from Spring 2020 to Spring 2025, in select, randomized geographic areas across the country.

The proposed International Pricing Index (IPI) model for Medicare Part B drug reimbursement would encourage private-sector vendors (such as specialty pharmacies, co-op groups of hospitals or health systems, or GPOs) to negotiate with pharmaceutical manufacturers for the purchase of Medicare Part B drugs, including specialty drugs, infusion drugs and biologics. Hospitals would then purchase drugs from whatever private vendor they choose as opposed to buying directly from manufacturers.

The idea behind the move is that allowing private vendors to negotiate pricing would ultimately drive drug prices down, as manufacturers would seek to make their prices competitive enough for their medications to be selected for purchase by the vendors. Lower drug prices would, in turn, result in lower reimbursement rates that Medicare would need to pay for these often-costly drugs. The move is part of an effort to “phase down the Medicare payment amount for selected Part B drugs to more closely align with international prices,” according to CMS.

The ruling would also “phase in, over a five-year period, a reduced Medicare payment for selected drugs based on a composite of international prices,” as the Health Law Advisor blog from law firm Epstein Becker Green notes. “CMS would reimburse vendors for drugs purchased from manufacturers based on international pricing (except where the ASP is lower), as benchmarked against more than a dozen other nations with economies comparable to the United States that have significantly lower acquisition costs for physician-administered drugs.”

For now, the ruling would only be a test, but could expand to other geographic areas and extend to a longer timeframe if successful.

“340B hospitals voiced concerns that the proposed IPI model would negatively impact the discounts the organizations receive under the drug pricing program,” reports RevCycle Intelligence.

340B Health expressed some of those concerns in a recent statement, noting, “We are concerned that, depending on how it is implemented, the IPI proposal could prohibit 340B hospitals from accessing the statutory discounts the law guarantees but might not provide sufficient reduction in prices to offset these losses … Finally, we question whether the proposed IPI mechanism used to purchase drugs could be considered a group purchasing organization. The 340B program prohibits many 340B hospitals from using a GPO.”

In response to these concerns, CMS said in a recent Q&A, “We are aware of the complex interaction between the 340B program and Medicare Part B compensation for drugs. HHS is open to better understanding how hospitals that invest significant resources into serving vulnerable populations could be impacted by the IPI model.”

Because 340B prices are calculated based on average manufacturer price (AMP) and best price, and the IPI private vendor drug purchases are excluded from AMP calculations (as CMS has said they will be), AMP for those drugs still sold directly from pharma to hospitals could be higher than what covered entities have grown used to seeing, ultimately raising 340B drug prices.

Over time, this could mean that hospitals will want to purchase from vendors in the IPI model rather than through the 340B program (potentially phasing out the 340B program over time), as IPI prices could be lower. However, those 340B hospitals outside the geographic area initially covered by the IPI test program in the first five years will still be forced to purchase drugs though the potentially costlier 340B program, thus losing even more money.

Coupling this with the steep 340B reimbursement cuts that took effect January 1, and the expansion of those cuts to off-site locations that was finalized November 2, this new pricing model could be devastating to rural safety-net hospitals that are already barely keeping their doors open.

CMS is accepting comments on the proposed ruling until December 31.

Sentry unveils new feature to help hospitals access affordable drugs

As the future of the 340B program remains uncertain and as drug prices remain a hot-button political issue, Sentry recently unveiled a new feature within its Sentinel solution that will allow its safety-net hospital customers to obtain drugs for the lowest possible price, even when that lowest price is WAC and not the 340B price. We know that as policy changes push hospitals to do more with less, our customers expect more from our solutions.

Due to some sub-WAC pricing through the Prime Vendor Program managed by Apexus, WAC drug pricing can actually sometimes be the least expensive option. With this in mind, Sentry created a “Split to WAC when the Price is Better” feature to allow you to take full advantage of lower WAC.

This feature is opt-in and thus will be turned off by default. To enable the feature current Sentry customers should visit their Sentinel Configuration page and turn it on in settings using our self-administration functionality. Customers can also submit a support request and have a Sentry team member turn on this option.

While drug-pricing continues to be a focus of the current White House administration, Sentry is very excited to continue offering features that show our customers that they can expect more, delivering solutions that reflect and address the real-world, real-time challenges our customers face.