20190919 Transfairency Part I - Transparency – is it “transfairency”? Part 2: Two sides of the transfairency coin

Transparency – is it “transfairency”? Part 2: Two sides of the transfairency coin

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. For the 340B program, those changes have led to an increased call for transparency that often puts a burden on covered entities and compromises their ability to serve vulnerable populations.

This is part two of a two-part blog on this topic. Part one provided an overview of the political, economic, social, and technological trends shaping healthcare today and illustrated how the 340B program fits into that landscape. You can read part one here.

What is transfairency?

While the government and pharma manufacturers are calling for increased transparency and reporting from covered entities, we’ve seen very little transparency on the part of manufacturers thus far. This is where “fair” comes into play.

For example, consider the Civil Monetary Penalties ruling, in which the online posting of 340B ceiling prices was delayed five times over the course of 10 years before the information was finally made public.

After a very long road, on April 1 of this year 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 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 encountered delay after delay under the current administration.

“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 in April. “With this new transparency comes a needed increase in accountability for drug manufacturers.”

This is just one example in which stakeholders are not exercising “transfairency” – the open sharing of information on all sides. Some additional information that would be beneficial to covered entities in the interest of transfairency include:

  • Good faith inquiries – Manufacturers often contact covered entities to inquire why purchasing on certain drugs in the 340B space may have gone up. Covered entities are encouraged by HRSA to respond to these “good faith” inquiries yet may have no idea how often they’re occurring among their peers. Are there certain manufacturers who look for this information more than others? Do they send out 200 such inquiries a year, or 2,000?
  • Number of manufacturer audits – Covered entities have no insight into how often manufacturer audits occur. Although manufacturers must notify the Office of Pharmacy Affairs (OPA) when they conduct an audit, covered entities have no way to know how their frequency of audits compares with their peers or which manufacturers tend to conduct such audits more frequently.
  • Specialty drugs – Many manufacturers have been limiting access to certain drugs by distributing them only through specialty pharmacies. When this happens, it becomes more difficult for covered entities to access these drugs, and when they do access them, it may not be at the 340B price We know that the number of drugs being put into this limited-distribution, specialty pharmacy category has been increasing over the years, as noted by the OPA’s online posting of letters from manufacturers. What we don’t know is how many drugs actually fall into that category at any given time; there’s no requirement for pharma manufacturers to provide a list.
  • Penny pricing – Whenever a manufacturer increases the price of a 340B drug more quickly than the rate of inflation, the manufacturer is subject to a “penny pricing” penalty – that is, the manufacturer is then required to sell that drug to covered entities the following quarter at a price of one penny. Manufacturers claim this happens frequently, which is one reason they say the 340B program is costing them money, yet we have no way to know how often this really occurs as there are limitations in the recently developed online reporting tool from HRSA. There is no publicly available report to demonstrate the frequency of this penalty.
  • PBM rebates – On July 1, OIG released a report  in which they found that in 2014, PBMs missed out on potential rebates of up to $74.7 million on Medicare Part D prescriptions because those drugs were filled through the 340B program. PBMs, or “sponsors,” typically receive rebates from drug manufacturers in exchange for offering those drugs on their formularies and playing middleman between manufacturers and insurance companies. However, when Medicare Part D drugs are filled through the 340B program, manufacturers are required to sell those 340B drugs to covered entities at a deep discount and – in an effort to avoid paying out double or stacked rebates – the manufacturers, therefore, do not offer rebates on those 340B drugs to the PBMs. Yet covered entities can’t know for certain how many rebates manufacturers are refusing to pay out in circumstances like these, because again, no transparency or reporting requirements exist on the manufacturer side.

These examples serve to illustrate that transparency can—and should—go both ways. When calling for more transparency and more reporting, it’s important that pharma manufacturers, government entities, and other stakeholders think about the limits of what is fair, what is practical, and what is burdensome.

The future of transparency

 As the push for transparency around 340B continues, covered entities must be prepared. It will be imperative to keep track of what their 340B savings are, how they’re being used (whether to provide prescriptions at discounts or to build new oncology clinics), and how they can prove compliance. In order to execute on these responsibilities with confidence, covered entities should engage with a partner that has not only the right technology but the right level of 340B program expertise.

The following chart illustrates some examples of information that a 340B vendor may be able to help covered entities gather for reporting, as well as areas in which the health system may need to do some additional research:

A 340B vendor can identify: Covered entities will need to provide:
Cost for all purchases – direct (EDI) and wholesaler(s) Cost for all purchases – manual outside of software
(340B, GPO, and WAC) over any requested period of time (daily, weekly, monthly, quarterly, or annually) by location Consultant/audit firm cost
Gross revenue received for all claims ingested by payer Employee/resource cost
Fees paid to third parties (e.g., switch, pharmacy) Net revenue received for all claims by payer – collections
Gross revenue received for claims not ingested by software
Fees paid to third parties (e.g., DIR fees)
Community benefit (charity, uncompensated, payer shortfalls)

As hospital leaders think about the future of the 340B program and what reporting will look like, the role of the 340B vendor is threefold: first, to develop a reporting infrastructure to match the needs of the future; second, to integrate and centralize information to create efficiencies and protect sensitive data; and third, to engage with stakeholders on the health system’s behalf to help the covered entity understand the elements of the 340B program that are most important for empowering them to meet the needs of the community.

With the right partners in your corner, maintaining 340B program integrity and compliance is possible, regardless of the changes we face. Transparency is a team effort.