August 3, 2023
I’d like to welcome new and longtime readers to the August 340Buzz. This month marks exactly six years since we first began publishing this award-winning monthly series, and it’s the first time the Buzz appears under a different author (I’ll be filling in until we find someone to oversee Industry Relations). I’ve been working in 340B for more than 20 years now, and have worn many hats since joining Sentry, now The Craneware Group, in 2004. With that being said, let’s dive in.
There are two big issues in 340B right now: the federal government’s proposed Medicare Part B remedy to 340B hospitals, and the mobilization of 340B stakeholders as Congress sends more signals that it is ready to design a fix for the many issues plaguing the program.
Part B remedy
The most tangible big piece of news from the past month was CMS’ long-awaited release of its financial remedy for 340B hospitals following last summer’s Supreme Court decision finding nearly five years’ worth of reduced Part B payments unlawful. By now, you likely know the basic details of the fix: roughly $9 billion in lump-sum payments to more than 1,600 hospitals offset by $7.8 billion in cuts to non-drug items over 16 years, starting in 2025, to align with the department’s goal of staying budget-neutral.
Many customers I’ve spoken with are pleased with the amounts they are due, but there are also questions about whether the payments will ever happen, since lawsuits challenging the cuts in non-drug reimbursements are almost inevitable.
Looming legislative fixes
Last month was the 340B Coalition’s annual summer conference, where one of the under-the-radar storylines was the lack of expected 340B reform legislation from Rep. Doris Matsui (D-Calif.). She had reportedly hoped to have a bill introduced in time for the conference but was apparently unable to find any Republican co-sponsors from the House Energy and Commerce Committee.
Nevertheless, I was pleased to submit comments from The Craneware Group to the “Gang of Six” Senate lawmakers and 340B supporters who asked for feedback on how to best resolve concerns over “ambiguity in the 340B program and the need to strengthen oversight and accountability.” Among our recommendations:
- Clarify the role and scope of 340B contract pharmacies
- Grant “narrow regulatory authority” to HRSA to manage them
- Prohibit manufacturers from dictating terms of contract pharmacy arrangements
- Use the bipartisan PROTECT 340B Act as a model
- Make changes to prevent duplicate Medicaid discounts
- Ensure manufacturers are more proportionately subject to HRSA audits
Meanwhile, larger groups are also mobilizing. The National Rural Health Association (NRHA) released its own two-page policy recommendations, including protecting access to contract pharmacies and beefing up enforcement against manufacturers. The pharmaceutical trade group Biotechnology Innovation Organization (BIO) is out with 12 pages of comments and lots of hand-wringing about the growth of 340B. And per 340B Report, drugmaker Genentech, South Dakota-based Sanford Health and a South Carolina federally qualified health center have joined forces to lobby Congress on behalf of the six senators’ reform effort.
We also recently told you about 340C, an idea from Advocates for Community Health to create a splinter 340B-like program for community health centers, rural hospitals and grantees. The organization recently submitted a letter to Congress signed by more than 100 health centers and other healthcare organizations.
Congress is already starting to nibble at the fringes. The Senate Finance Committee voted 26-1 to advance a pharmacy benefits manager reform bill that would require providers to report total payments above acquisition cost when they bill Medicaid managed care organizations for 340B drugs. And last week, Rep. Cathy McMorris Rodgers (R-Wa.) released a discussion draft in advance of legislation tackling drug shortages. It includes proposals to give manufacturers of low-margin generic drugs relief from 340B and appoint a watchdog to investigate how the program’s penny pricing policy affects shortages, an unfounded accusation that has come up before.
At the state level, Maine Gov. Janet Mills, a Democrat, signed legislation requiring 340B hospitals to do annual reporting consistent with the American Hospital Association’s voluntary good-stewardship principles. Maine becomes the second state after Minnesota to require 340B reporting.
Stay tuned for much more from the legislative branches.
The worsening financial impact
Meanwhile, the contract pharmacy standoff continues to hurt safety net providers. A new report from 340B Health finds that the drugs purchased through 340B from the 21 manufacturers with contract pharmacy restrictions as of June 1 represented $8.4 billion in annual savings from community and specialty pharmacies. It says the new, stricter restrictions — capping the number of allowable contract pharmacies at one and limiting where they can be located — could put 70% of those savings in jeopardy. It's especially concerning given a separate new report from the Center for Healthcare Quality and Payment Reform that finds more than 600 rural hospitals are at risk of closing because of worsening finances.
And the list of manufacturers keeps growing. Astellas made it an even two dozen manufacturers after announcing it will only honor 340B pricing for its Xtandi prostate cancer drug at a single designated contract pharmacy starting Sept. 1. AstraZeneca is now requiring entities to use 340B ESP to designate its lone contract (or in-house) pharmacy.
Medicaid RFI
In May, CMS proposed a new rule for the Medicaid Drug Rebate Program to implement recent changes in Medicaid law. Among other things, it would require states to mandate that Medicaid managed care plans use Medicaid-specific BIN and PCN numbers on beneficiary ID cards. Many PBMs use the same BIN and PCN numbers for commercial and Medicaid patients, which presents significant operational challenges to 340B entities.
In my comments to CMS on behalf of The Craneware Group, I expressed our support for the unique BINs and PCNs because they would help covered entities and state Medicaid agencies remain compliant and avoid duplicate discounts. “Contrary to CMS’s opinion that modifiers can be easily applied at point of sale, we know that point of sale 340B eligibility is not always known,” especially at contract pharmacies, I wrote.
You can find our comments on this and related issues here.
More drug company shenanigans
Drug manufacturers frequently announce refunds after audits find they charged above the 340B ceiling price, but generic and over-the-counter drug maker VistaPharm is introducing a new twist. In a notice, it says it’s giving affected covered entities until Aug. 31 to submit requests for refunds. It’s yet another example of how manufacturers continue to rewrite the rules — and how HRSA needs greater enforcement power.
Finally, drug manufacturers Astellas and Johnson & Johnson, through its Janssen Pharmaceutical subsidiary, filed separate federal lawsuits challenging the constitutionality of the Medicare drug-price negotiation provision of the Inflation Reduction Act, which J&J calls “innovation-damaging.” The U.S. Chamber of Commerce has also requested a federal judge issue a preliminary injunction halting the drug price-negotiation plan. Expect a drawn-out and noisy rollout to this implementation.
In a small but significant victory, Teva Pharmaceuticals is doing away with its contract pharmacy limitations and data-submission requirement altogether in Louisiana, thanks to that state’s new law protecting covered entities.
Time to speak up
To wrap up, the drug manufacturers continue their strategy of introducing hurdles that make running a 340B program more difficult. With Congress finally starting to show an interest in the issue, it’s time to make our voices heard on behalf of the safety net. If you haven’t already, now is the time to connect with your local Members of Congress. 340B Matters. To all of us.
Later this month, I’ll be at the Thinc Healthcare Covered Entities’ and Manufacturers’ 340B Summit in Philadelphia, where we’ll hear from the likes of ASAP 340B as well as some customers, other TPAs and drugmakers. Will we see you there?