As we get into the dog days of summer and more states pass laws that prohibit drugmakers from meddling in 340B contract pharmacy arrangements, manufacturers are filing plenty of lawsuits. But they’re also granting exemptions to their policies to comply with those laws, proving these state-level actions are making a difference for healthcare safety net providers.
In July, Missouri became the eighth state to bar manufacturers from imposing limits to 340B contract pharmacies after Gov. Mike Parson took no action on a bill lawmakers passed overwhelming, allowing it to become law. Parson, a Republican, called 340B a “flawed federal program” in a letter to lawmakers but said he ultimately sided with “patient access and affordability.”
His decision to neither sign nor veto the measure came after his ally, Missouri Attorney General Andrew Bailey, likened the program to taxpayer-funded support for both Planned Parenthood and illegal immigrants, echoing much of the messaging from the dark money groups we’ve been writing about here and at 340B Matters. Parson’s noncommittal way of letting the bill morph into law doesn’t exactly inspire, but in the end, it’s good news for covered entities.
It also comes as Viatris, a company formed from the merger of Mylan and Upjohn, became the 37th drugmaker to enact contract pharmacy restrictions.
Meanwhile, another lobbying group is joining the fray attacking 340B. The Council for Citizens Against Government Waste launched a multi-media campaign during Shark Week urging Congress to “Stop the Feeding Frenzy” on 340B and instead “deliver savings to the patients and communities it was designed to serve,” per its press release. It also falsely implies the program involves taxpayer funding.
Manufacturer audits
Two hospitals have sued HRSA in federal court over manufacturer audits, alleging the agency failed to follow its own protocols, including requiring written notice of the reason, when it approved Johnson & Johnson’s request to conduct them. HRSA has reportedly also approved Eli Lilly to audit 340B hospitals, as we learned at the 340B Coalition Summer Conference.
Many attribute pharma companies’ sudden interest in manufacturer audits to the alternative delivery models that have cropped up in the wake of onerous contract pharmacy restrictions. If the audits go through, any disputed adverse findings could now be taken up by the new administrative dispute resolution (ADR) process overseen by HRSA.
Staying on the administrative front, CMS has proposed a rule to exempt 340B claims when calculating Medicare Part D rebates under the Inflation Reduction Act. It would estimate the “calculated percentage that reflects the portion of 340B purchasing” relative to total Part D sales. CMS already requires the use of modifiers to identify 340B claims billed to Part B. It’s just the beginning of giving form to how the IRA rebates and maximum fair price mechanisms will work.
As the world turns
Recent historical developments could have implications for the 340B program.
First was President Biden’s bombshell announcement that he would end his re-election campaign, making Vice President Kamala Harris the frontrunner for the Democratic Party’s nomination at its convention later in August. What does she think of 340B?
A former Senator, Harris hasn’t said a lot specifically about 340B, but she was a signatory to a letter in 2017 opposing the Trump administration’s foot-dragging on the 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation rule. That same year, she signed on to a letter to the leaders of HHS and CMS urging them to consider stakeholder feedback before finalizing a nearly 30% cut in 340B payments for Medicare Part B drugs.
The Trump administration went ahead and instituted those cuts, which the Supreme Court overturned in 2022. Trump’s new running mate, Sen. J.D. Vance of Ohio, co-sponsored a bill calling for the government to investigate whether “noncitizens” receive outpatient drugs under 340B and Medicaid.
The second big development was the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo in which it overturned the longstanding Chevron doctrine, raising questions about its implications for 340B. Chevron essentially deferred to the expertise of federal agencies in regulatory disputes where statutory language was ambiguous (sound familiar?). The ruling gives courts greater power to determine regulatory scope on a host of issues.
Speakers at the 340B summer conference seemed not as concerned, since the program is primarily governed by guidance from HRSA rather than regulations. But others have suggested the ruling could deepen scrutiny of the role of 340B contract pharmacies, given the dissonance between two recent federal court rulings upholding manufacturer restrictions and the growing number of state laws prohibiting them.
“Absent any legislation clarifying what the contract pharmacy’s role is here, I do wonder if this makes its way to the Supreme Court, given that there have been some split rulings,” Duane Wright, a senior research analyst at Bloomberg Intelligence, told Modern Healthcare.
Stay tuned.
Bad summer for PBMs
Meanwhile, it’s been a summer of bad publicity for pharmacy benefit managers.
The Federal Trade Commission, which in 2022 requested information from the six largest PBMs as part of an ongoing investigation, released an interim report subtitled “The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.” It finds widespread consolidation of market power as PBMs vertically integrate with large health insurers and pharmacy chains.
“PBMs oversee critical decisions about access to and affordability of medications without transparency or accountability to the public,” the report reads. “Indeed, PBM business practices and their effects remain extraordinarily opaque.”
The report arrived on the heels of a scathing New York Times expose that contained this eye-popping observation: “If they were stand-alone companies, the three biggest P.B.M.s would each rank among the top 40 U.S. companies by revenue. The largest, Caremark, generates more revenue than Ford or Home Depot.” One source called PBMs “the arsonist and firefighter of high drug prices.”
Then, during a House Oversight and Accountability Committee hearing in Washington that featured broad bipartisan criticism of PBMs, Rep. Diana Harshbarger (R-Tenn.) accused the leaders of the three biggest companies of inappropriately profiting off 340B.
Meanwhile, states continue to curtail egregious PBM practices. New Hampshire Gov. Chris Sununu signed a law barring payers and PBMs from discriminating against 340B entities, while state lawmakers in Delaware sent an anti-discrimination bill to Gov. John Carney for his signature.
Updates from Congress
While the chances for action from Congress on 340B dim as we wade deeper into a contentious election season, there were a few updates:
- The American Hospital Association weighed in on 340B ACCESS, the bill from Republican Indiana Larry Bucshon, saying the legislation would “undermine” the purpose of the program. “The 340B program is working as Congress intended,” it wrote in a letter. “Drug companies should not be rewarded for intentionally undercutting the program and spreading misinformation about it in an effort to abrogate their 340B responsibilities.”
- Doris Matsui’s 340B PATIENTS Act gained five new Democratic co-sponsors but still lacks any GOP support.
An encouraging sign
Drugmaker Merck and Wisconsin’s Marshfield Clinic Health System have joined 340B Working Table, the lobbying organization promoting the effort from the Senate “Gang of Six” to resolve 340B conflicts, per 340B Report. The organization, made up of both drugmakers and covered entities, is to be commended for being perhaps the only group working to find compromise on the many difficult issues plaguing our program.
The remainder of the year promises to be busy, so I hope you find some time for rest and relaxation in what remains of summer. Stay vigilant!
If you'd like to continue the conversation with me, please contact me at [email protected].
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