As spring rolls into summer, covered entities find themselves in a holding pattern on many items related to 340B, waiting to see how things will shake out. This month, we cover updates and review news-yet-to-come on issues including new drug pricing legislation, the ongoing lawsuit against HHS, the proposed new IPI payment model, possible cuts to Medicare Part D, and more.
Senate HELP leaders introduce “Lower Health Care Costs” Act
On June 19, the Senate Committee on Health, Education, Labor and Pensions (HELP) “introduced the Lower Health Care Costs Act (S.1895), legislation to prevent surprise medical bills, reduce prescription drug prices, improve transparency in health care, invest in public health and improve health information exchange,” the American Hospital Association reported. The legislation was introduced by Senator Lamar Alexander (R-Tenn.) and Senator Patty Murray, (D-Wash.).
“The bill holds patients harmless from surprise medical bills and, in an update from the draft legislation, uses a benchmark rate to resolve payment disputes between plans and out-of-network providers. Under that provision, health plans would pay providers the median in-network contracted amount that insurers have negotiated with other providers in that geographic area,” as the AHA article notes.
As the bipartisan legislation was introduced, the Senators made two specific references to the 340B drug pricing program. Senator Alexander discussed why covered entities presently are not required to report their 340B discounts – a concern that echoes the general calls for more transparency and reporting we’ve heard from the current White House administration and from pharma over the past two years. In contrast, Senator Murray came to the defense of 340B, reiterating that the program is not taxpayer funded, adding in a mention of the high salaries of pharmaceutical company CEOs.
The vote on the bill is scheduled to take place June 26. Sentry will continue to monitor the bill closely for any potential 340B-related amendments.
HHS doesn’t back down on payment cuts
When Judge Rudolph Contreras of the U.S. District Court for the District of Columbia ruled again that HHS’ 340B reimbursement cuts were unlawful in early May, he called for HHS to come up with a plan to resolve the issue, setting an August 5 deadline for them to present that plan.
The judge opted not to require HHS to retroactively pay hospitals back for the amount they’ve lost during the time since the cuts have been implemented.
However, while we wait to see whether HHS’ plan to remedy the situation will be delivered by the August deadline and what that plan might look like, CMS continues to defend its reasoning for attempting to cull the 340B program.
During the American Medical Association Annual Meeting of the House of Delegates held earlier this month in Chicago, CMS Administrator Seema Verma said, “We have seen many examples of anti-competitive behavior by large systems, including efforts to thwart price transparency and use monopoly status to drive up prices. This is why CMS has been working toward site-neutral payments and other policies, like 340B, to level the playing field for independent practices.”
She continued, “Everything we do at CMS is aimed at ensuring that all Americans have access to high-quality, affordable health care. We are using our role as the nation’s largest insurer to address the underlying drivers of health care costs to ensure that we have a sustainable safety net for our most vulnerable and to promote a competitive market that delivers choice, quality and accessibility to all Americans.”
It’s worth noting that the payment cuts, which have since been ruled unlawful, were originally released as part of CMS’ 2019 Hospital Outpatient Prospective Payment System (OPPS) Final Rule that came out last November. Sentry and covered entities will, therefore, be keeping a close eye out for the 2020 OPPS rule this summer to see whether further changes to the 340B program will be folded into that ruling.
Possible Medicare Part D cuts?
As we reported back in April, OIG has made a short statement on its website, entitled, “Medicare Part D Rebates Related to Drugs Dispensed by 340B Pharmacies.” The statement 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.”
While there has been no additional news of what’s to come beyond this statement, OIG’s comment should serve as a red flag to covered entities, signifying that more government oversight is likely.
IPI model still on hold
Also pending further update is the proposed new drug payment model that CMS first floated back in October of last year with the release of an advance notice of proposed rulemaking (ANPRM).
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 whichever private vendor they choose as opposed to buying directly from manufacturers.
Many industry stakeholders who submitted comments on the advance notice had concerns about how the model would affect the 340B program. Of those public comments that addressed the 340B program directly, the majority appeared to be opposed to the IPI model, with concerns raised regarding potential group purchasing organization 340B violations, inefficiency in access and operations, and ultimately the impact on the 340B price.
CMS had originally said that the next step following the advance notice would be a proposed ruling, to be released in June 2019. That date has since been pushed to August.
A HRSA audit surprise
For the first time ever since HRSA began auditing covered entities and pharmaceutical manufacturers for 340B program compliance, the government organization found that a pharma company had not been selling its medications to covered entities at the required 340B discount rate. Specialty pharmacy drug maker Belcher Pharmaceuticals “did not offer covered outpatient drugs to eligible covered entities at the statutory ceiling price,” according to HRSA, and has been ordered to repay the covered entities.
While lawmakers and the current White House administration have pushed for increased 340B transparency and reporting from covered entities in the past two years, there have, until recently, been very few transparency requirements on the part of the pharma companies either.
Up until a few months ago, for example, even though pharma manufacturers are required to offer drugs to covered entities at a price that does not exceed a particular ceiling price under the 340B program, individual hospitals had no way of knowing whether pharma companies were meeting that requirement or not, or what the hospitals’ competitors were being charged for the same drug. And the rule solidifying and clarifying those ceiling prices was delayed by CMS a total of five times since 2010.
It was only on April 1 of this year that those ceiling prices were finally made available online. At the time of that web page launch, 340B Health President and CEO Maureen Testoni said 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.”
Now, in light of HRSA’s audit findings for Belcher Pharmaceuticals, Testoni’s April statement reads more like a prediction.
New survey from 340B Health
This month, 340B Health released a new survey titled, “Evaluating 340B Hospital Savings and Their Use in Supporting Care for Rural and Low-Income Patients.” The survey was fielded from November – December 2018 and targeted more than 1,300 covered entity hospitals. Key findings included:
- 95 percent of hospitals are using 340B savings to support the provision of uncompensated care
- 90 percent of hospitals are using savings to support patient care services, including critical clinical and pharmacy services and auxiliary services such as transportation, translation and social services
- 70 percent of hospitals report using savings to provide discounted and/or free drugs to their low-income and/or rural patients, thereby improving access to potentially life-saving medications
- 72 percent of DSH hospitals report using savings to offset low reimbursement from Medicaid
- 93 percent of rural hospitals said they use their savings to keep the doors of their facilities open and maintain access to care for the rural communities they serve
All hospitals surveyed reported using their savings to benefit low-income and rural patients. The top two reported areas for use of 340B savings were to support uncompensated and unreimbursed care and to support patient care services (including clinical services, pharmacy services and patient auxiliary services). And all hospitals reported that cuts to 340B savings would force them to scale back key programs, including services focused on caring for patients with cancer and diabetes and, more broadly, the provision of uncompensated and unreimbursed care.
Another interesting finding from the report was that “hospitals reported an average of $100,000-$200,000 in 340B compliance costs and an average of two full-time employees overseeing and maintaining a hospital’s 340B program.”
Sentry recognizes the unique challenges covered entities face, and that with already stretched resources, having only one or two full-time employees on hand to manage the 340B program can be daunting and can prevent covered entities from making the most of the program. This is why we offer our 340B customers so much more than software, including custom training programs and online courses, expert services, and the only Apexus-certified audit team in the industry.
As the industry holds its collective breath to see where many legislative, judicial, and administrative issues land regarding 340B, Sentry will continue doing everything we can to ensure that our customers can expect more.