20190919 Transfairency Part I - Transparency – is it “transfairency”? Part 1: Navigating changes in the 340B program

Transparency – is it “transfairency”? Part 1: Navigating changes in the 340B program

There’s a lot going on in healthcare right now. The industry is changing more rapidly today than it has in decades, and every change has a ripple effect. In order to truly understand the nuances of what’s been happening in the 340B program in recent years and the rationale behind the increased call for transparency, it’s necessary to first set the backdrop of where we are with healthcare overall.

This is part one of a two-part blog on this topic.

The big picture

There are four factors determining the direction of healthcare in the US today: politics, economics, social issues and technology (PEST). Let’s take a look at each of these drivers:

Politics – Republicans and Democrats seem further divided on many issues than ever before, healthcare included. Yet all parties seem to agree that healthcare delivery in the US needs to change. Drug prices and insurance costs are spinning out of control, the opioid crisis is at its peak and value-based care still hasn’t quite taken hold. With a presidential election looming next year, healthcare is likely to be one of the key factors that will shape the country going forward.

Economics – The GDP for healthcare in the US is on the rise. Fortune magazine reports that Americans spent $3.65 trillion on healthcare in 2018; larger than the entire GDP of countries such as Brazil, the UK, Mexico, Spain and Canada. Further, researchers predict that healthcare spending will continue to rise an average of 5.5% annually between now and 2027, when healthcare will reach 19.4% of the county’s entire GDP.

Social factors – For the first time in history, healthcare is being viewed as a consumer good, in which patients get a choice and a voice. Social media has allowed citizens across the US to connect in new ways and share their concerns, grievances, and stories. The general public is more informed than ever, so when prices of lifesaving drugs raise by 5,000%, people are empowered to make their opinions known.

Technology – From EHRs to analytics to AI, care delivery is changing every day. In addition to medical and digital advancements, big tech companies such as Google and Apple and retailers like Amazon and CVS are all trying their hand in the healthcare space. Hospitals must decide whether the march of technological progress will hinder or augment their service delivery.

Where does 340B fit in?

When you look at the developments and debates surrounding the 340B program in recent years, it reads like a microcosm of the larger healthcare landscape. The same four factors mentioned above are at play within 340B, and the program can sometimes serve as a scapegoat for issues such as drug prices, political polarization and general social discontent with healthcare delivery.

More new bills aimed at curtailing and regulating the 340B program have been introduced in the past two years than at any time in the program’s 27-year history. For a time, it seemed the current White House administration was focusing on the 340B program as a way to reduce drug prices, despite the fact that the program only accounts for about 1% of total drug spend in the US each year. In addition to the administration’s focus on drug prices, following are some other factors that contribute to the current volatility of the 340B program:

  • Multiple contract pharmacy arrangements – covered entities can now have relationships with multiple contract pharmacies, complicating the nature of tracking and reporting program savings, yet improving patient access through online accessibility and specialty pharmacy.
  • Community health center expansion – as the number of federally qualified health centers (FQHCs, community-based healthcare providers that receive funds from the HRSA Health Center Program to provide primary care services in underserved areas) in the country continue to grow, use of the 340B program is increasing.
  • Increased government and manufacturer oversight – Audits of 340B covered entities by both HRSA and pharma companies have increased in recent years, aligning with the administration’s call for increased transparency and reduced healthcare costs.
  • Congressional interest – Mention of the 340B program in congressional hearings and committee meetings, on both the House and the Senate side, have also increased in the past few years.
  • Stretched resources – Hospitals’ margins are getting slimmer and resources are getting scarcer. Yet as complexity around 340B reporting and compliance increases, covered entities will need more resources, not fewer, in order to effectively optimize and manage the program.
  • Consulting and technology options broadening – As companies see the program’s complexity increase, more consultants and more technology choices become available and the cost for those services and technologies must be factored into the overall cost of managing the 340B program.
  • PBM reimbursement changes – Pharmacy benefit managers (PBMs) are increasingly changing the way they reimburse pharmacies and there have been efforts recently to deny pharmacies that contract with 340B providers rebates for drugs in the program.
  • Vertical integration and M&A activity – As health systems continue to acquire independent hospitals or practices, retail pharmacy giants acquire payers and tech companies and retailers from Google to Amazon to Uber begin growing roots in the healthcare space, the 340B program will inevitably be impacted.

With all of this volatility, it’s no surprise that 340B seems to have reached a boiling point. That’s why it’s more important than ever for covered entities to be aware of the current healthcare landscape and work with partners that can offer both cutting-edge technology and industry expertise to help optimize 340B program participation; it’s too easy for potential channel partners and conflicts of interest to go unnoticed against this backdrop, as the lines between public and private sector involvement continue to blur.

The call for transparency

Hand-in-hand with the government’s current focus on drug prices has come an overarching call for transparency. On the surface, this seems advisable – covered entities, pharma manufacturers and federal governing bodies should all be able to see with ease how and why the 340B program is working, and to identify areas that need improvement. However, in practice, some of the demands for transparency (including new bills aimed at curtailing the program and reimbursement cuts that have since been ruled unlawful) have crossed the line from practical to burdensome, and in some cases, even harmful to the patients for whom the program was intended.

For example, House Bill H.R. 4710, known as the 340B PAUSE Act, introduced in December 2017 by Rep. Chris Collins (NY-R) and Rep Scott Peters (D-CA), aimed to put a moratorium on allowing new hospitals to join the 340B program. Similarly, in January 2018, Republican Rep. Bill Cassidy introduced S. 2312, the ‘‘Helping Ensure Low-income Patients have Access to Care and Treatment’’ or HELP Act. Much like the PAUSE Act, supporters of the bill tried to spin it as a win for patients and a way to increase transparency in the 340B program, but because the Act would place a two-year moratorium on new, non-rural participants in the 340B program, it would actually be restricting patient access to care and treatment.

While neither of these bills ever gained any traction, they offer insight into how some lawmakers are pushing for “transparency” regarding the 340B program in ways that could be detrimental to patients.

Yet transparency is possible without undoing all the good the program has achieved these past 27 years. Here are some practical standards for transparency that covered entities could deliver while still maintaining the integrity of the program and serving vulnerable populations:

  • Review of all appropriate data points that reflect the covered entities’ true cost burden and benefit received
  • Equal reporting by other involved parties (including manufacturers)
  • Protection of proprietary and confidential information
  • Elimination of anti-competitive behavior

With a little bit of common sense and empathy for vulnerable patients, it’s possible that the government, pharma companies and covered entities could reach a compromise around transparency in which no stakeholder would be made to feel like the “losing” side.

Tune in for part two next week where we discuss how transparency should go both ways and what covered entities can do to be prepared for increased reporting requirements.