by Lisa Scholz, PharmD, MBA, FACHE, Senior Vice President Industry Relations
August 4, 2022
Welcome to the dog days of summer. Like much of the country, the temperature is slowly being turned up underneath the 340B pot and it’s downright hot in the kitchen. The 340B Coalition Summer Conference has just concluded outside Washington D.C.
I spoke at this year’s conference early in the morning on Aug. 3 to a full house, presenting some “Lessons from the Field” on what the recent history of 340B tells us about its immediate future, from the perspective of both strategic trends and legislative activity. I covered the impact of pharmacy benefit managers, manufacturer contract pharmacy restrictions and legal challenges, plus what a spate of recent mergers, acquisitions and consolidations says about the future of the 340B compliance industry. I also spent some time drawing lines between anti-340B legislation introduced in previous Congresses and what could await our swath of the healthcare safety net if the GOP regains control over the House, Senate or both in January.
Past experience with 340B Summer had us primed for an August surprise. Would the Biden administration finally release its long-awaited new administrative dispute resolution (ADR) process? Alas, not this time.
Carol Johnson, the new administrator of the Health Resources and Services Administration, set a tone of support while remaining silent on the legal battle with manufacturers. We also heard from Dr. Emeka Egwim, the new director of HRSA’s Office of Pharmacy Affairs (OPA), for the first time in public. He shared that there will be a similar volume of audits in the new fiscal year — set at 200 as they just now wrapped up 195 audits for the previous fiscal year. Most uplifting was former Surgeon General Jerome Adams, who praised covered entities for their work in 340B. His experience and insights during the public health emergency focused on opioid abuse, maternal health, and of course, COVID. He connected the dots between the safety net and the “business of healthcare,” pointing out that understanding revenue and expenses ultimately helps non-profits do more for their communities. We at The Craneware Group couldn’t agree more!
Meanwhile, we just saw the Biden administration, following last month’s Supreme Court decision, pull the plug on cuts to Medicare Part B drug reimbursements to 340B entities that had been in place since 2018, pledging to reinstate average sales price plus 6%. CMS is openly soliciting suggestions from the public for ways to make 340B hospitals whole for the five years of slashed payments. The final Outpatient Payment Prospective System rule is due in early November.
Also this month, don’t forget that hospital recertification for 340B begins Aug. 24!
Drug manufacturers and manufacturing
On the manufacturer side, Bausch Health, a Canadian company with U.S. headquarters in New Jersey, became the 18th drug maker to restrict access to 340B pricing at contract pharmacies. Effective Aug. 1, it will require covered entities that lack an in-house pharmacy to submit claims data and designate a single contract pharmacy, limiting claims to 45 days from the dispense date. Merck became the eighth drug manufacturer to sue HRSA over its cease-and-desist letter regarding its contract pharmacy restrictions. Lastly, Gilead added a 45-day lookback period for submitting contract pharmacy claims for 340B eligibility.
In a positive twist, the state of California will start making its own insulin in a bid to lower prices, with $100 million devoted in the new state budget to develop three biosimilars and manufacture them “close to at-cost,” Gov. Gavin Newsom said.
340B legalese
The gears of justice are turning slowly in the various court cases focused on the contract pharmacy dispute. Hospital groups filed briefs in the appeals from Eli Lilly and AstraZeneca, citing the recent Supreme Court decision knocking down Medicare Part B reimbursement cuts. In the combined Novo Nordisk/Sanofi appeal, the federal government filed a brief arguing it’s the judge’s role, not that of HRSA, to resolve the question of the allowed number of contract pharmacies. And in another combined appeals case, PhRMA and Johnson & Johnson filed briefs in support of United Therapeutics and Novartis.
War of wills
A new report from the Berkeley Research Group, the parent company of the organization behind the 340B ESP contract pharmacy claims submission platform, released a new study that estimated the program’s size at $38.8 billion — essentially agreeing with HRSA’s own estimate of $38 billion, made in its fiscal 2023 budget request. However, the study compared that figure to an overly inflated wholesaler acquisition price, or WAC, at which covered entities would never purchase 100% of their drugs (just as consumers traditionally buy vehicles below the sticker price, or MSRP). The report, which was funded by the Pharmaceutical Research and Manufacturers of America, is yet another attempt to divert attention away from the underlying causes of increased drug prices in a market saturated with high-cost specialty drugs.
Speaking of our “friends” at PhRMA, they ran an outrageous full-page ad in The Washington Post lambasting 340B. In all-caps, it reads, “340B is helping patients big hospitals & chain pharmacies. Does that seem fair to patients?” It drew a counterpunch from the AIDS Healthcare Foundation, whose president, Michael Weinstein, issued a statement saying “PhRMA calling for drug price fairness is like the tobacco industry promoting lung health.”
Further throwing cold water on PhRMA’s claim is a new report from 340B Health that says 340B disproportionate share hospitals provided nearly 10% more uncompensated care in 2020, during the first year of the COVID-19 pandemic, despite worsening operating margins.
DSH covered entities provided an average of $38 million in uncompensated or unreimbursed care in 2020, compared to $34.6 million in 2019, while their average operating margins fell to -6.1%, from -3.5%, the report says. Meanwhile, the amount of uncompensated care provided by non-340B DSH hospitals remained flat at $14.3 million per hospital despite a 21% increase in operating margins to 3.5%.
Overall, 340B DSH hospitals accounted for 67% of all such care in 2020 despite representing just 44% of the nation’s hospitals — further evidence that these hospitals continue to carry out the original intent of the program.
Speaking of 340B Health, it and five hospital organizations have launched their own ad campaign titled “Protect Patients, Protect 340B.” It’s running in WaPo and other outlets, including CNN, Politico, STAT and Modern Healthcare, per 340B Report, with a link to protect340bpatients.org.
Finally, a rally took place on the closing day of 340B Summer to #defend340B. I was fortunate to participate and meet many fellow advocates and evangelists. Most meaningful was speaking with a woman named Veronica and sharing the bullhorn with her as we chanted “protect 340B!” Her story proves that 340B goes beyond providing just low-cost drugs — it saved her life and put her back in the workforce. Not only does 340B not use taxpayer dollars, she said — it generated more tax revenue by enabling her to return to work.
Veronica is one of many Americans helped by our nation’s safety net.
Congressional action
We’re also starting to hear more about 340B on Capitol Hill:
- The Protect 340B Act now has 106 cosponsors. Roughly, a third are Republicans, which is encouraging, but the odds are against any action on this bill before the new Congress takes over next January.
- One-hundred eighty-one U.S. House members — 144 Democrats and 37 Republicans — signed a letter urging the Biden administration to impose civil monetary penalties against the 18 drug manufacturers enacting contract pharmacy restrictions. By way of comparison, a similar letter in February 2021 netted 226 signatories.
- Senate Democrats released new drug pricing legislation that would be included in a scaled-down version of what the party originally dubbed the “Build Back Better” infrastructure legislation. It would allow Medicare to negotiate drug prices and potentially give covered entities the ability to choose the lower of the 340B price or the negotiated Medicare rate. Conference speakers said this bill is likely to make it to the finish line.
- An even 100 Democratic House and Senate lawmakers sent a letter to HHS Secretary Xavier Becerra to use his statutory authority to lower drug prices, including by introducing generic and biosimilar versions of patented drugs.
- The House Republicans’ Healthy Future Task Force, charged with developing healthcare proposals if the party wins back control of the chamber this fall, adjourned without making any recommendations regarding 340B despite having sought recommendations for the program. Several of the panel’s members are not particularly sympathetic to 340B, so this lack of action suggests 340B could be in for greater scrutiny if Republicans make gains in the midterm elections.
- OPA, which manages the 340B program, would get an extra $2 million in funding under a bill that passed out of the House Appropriations Committee. While it falls short of what the Biden administration requested, it would be the first increase in several years.
I was incredibly excited to see you all at 340B Summer this week. Our team was excited to demonstrate our recent enhancements and get feedback from our Product Advisory Group, met for the first time! We will have a special blog on the conference-stay tuned. Until the winter conference March 27-29, 2023 (yes — more like “spring”), we look forward to seeing you at our ninth annual Performance Summit Oct. 12-14.