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A screen shot of U.S. Reps. Doris Matsui (D-Calif.) and Chris Stewart’s (R-Utah) bill H.R. 7838. It would protect hospitals from losing eligibility for 340B drug discounts and waive the group purchasing prohibition for 340B hospitals during the COVID-19 public health emergency.
340B Bill Introduced in House; Senate 340B Bill Gets Two More Sponsors
U.S. Reps. Doris Matsui (D-Calif.) and Chris Stewart (R-Utah) yesterday introduced their bill (H.R. 7838) to protect hospitals from losing eligibility for 340B drug discounts and to waive the group purchasing prohibition for 340B hospitals during the COVID-19 public health emergency. The text has not been formally published; click here for the final draft.
Meanwhile, comparable U.S. Senate legislation (S. 4160) limited to keeping hospitals from losing their 340B eligibility during the pandemic added its ninth and tenth sponsors—five Republicans and five Democrats. Sens. John Boozman (R-Ark.) and Elizabeth Warren (D-Mass.) were the latest to sign on. Susan Collins (R-Maine) and Sherrod Brown (D-Ohio) became co-sponsors on July 23.
Aides to the sponsors of S. 4160 and H.R. 7838 are in touch with one another about their respective bills.
Although Matsui and Stewart are their bill’s only sponsors for now, they persuaded 121 House colleagues from both parties in early May to sign a letter to House and Senate party leaders asking them to include protection and flexibility for 340B hospitals in the next COVID-19 relief bill. House Democrats, however, failed to include that relief in H.R. 6800, the comprehensive COVID-19 bill the chamber passed in mid-May.
Supporters of S. 4160 suffered a setback earlier this week when their bill was excluded from Senate Republicans’ COVID-19 relief draft. The best chance of getting 340B hospitals more protection and flexibility during the pandemic is through a major COVID-19 bill. House Democrats, Senate Republicans, and the White House continue to negotiate over the next such bill.
“America’s hospitals continue to be on the front lines of the pandemic, which has necessitated operational changes to care for the influx of COVID-19 patients,” Matsui said in a statement announcing H.R. 7838’s introduction. “This bill will ensure that these essential providers will be able to continue to serve as our nation’s health safety net and weather the uncertainty of this public health crisis.”
“The United States asked for all our healthcare providers to step up to help defeat this virus,” Stewart said in the statement. “These hospitals have done exactly that. They’ve prioritized the health and safety of our nation over the viability of their facilities. This bill ensures that they can continue to fight the virus without jeopardizing their financial future.”
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340B and Dispute Resolution—Challenges and Opportunities
Stephen Kuperberg, Counsel, Powers Law
Covered entities and others participating in the 340B program face challenges when evaluating pathways to resolve disputes under the program. Although the 340B program has existed for over 25 years, the statute as originally enacted provided no mandatory mechanism for resolution of disputes between participating parties. Instead, the Health Resources and Services Administration (HRSA) proposed an informal and voluntary dispute resolution process in 1996[i] that remains in place to this day, despite a Congressional mandate in 2010 for HRSA to promulgate and implement a mandatory administrative dispute resolution process.[ii] Compounding the challenges for covered entities, in 2011, the Supreme Court decided unanimously in Astra USA v. County of Santa Clara, 563 U.S. 110 (2011), that only the U.S. Health and Human Services Secretary may enforce the manufacturer’s obligation to charge at or below the 340B ceiling price and that covered entities do not have the right to sue manufacturers for overcharges under the program.
More recently, many states have adopted statutes protecting covered entities and pharmacies participating in the 340B program from discriminatory reimbursement practices by prescription benefit managers (PBMs) and other third-party payers; yet to date, these statutes vest enforcement authority for these laws in state insurance commissioners or other state administrative offices, and do not explicitly provide private rights of action for affected covered entities and pharmacies. Finally, in the absence of established dispute resolution pathways at the state or federal level, covered entities and others may seek to include alternative dispute provisions in contractual relationships concerning the 340B program. However, such provisions are subject to negotiation and modification or exclusion, will typically reflect only generalized arbitration or mediation provisions that do not account for the highly technical and specialized nature of the 340B program, and may ultimately offer little to no additional protection than would resort to conventional litigation in courts.
Despite these challenges, covered entities and others participating in 340B who have the foresight to anticipate and resolve disputes regarding the 340B program do have opportunities to utilize effective alternative dispute resolution mechanisms. Although HRSA proposed and then withdrew rules for its mandatory Administrative Dispute Resolution process,[iii] HRSA’s informal dispute process does provide a clear procedure by which covered entities may raise claims of manufacturer overcharges and seek relief from the agency. Despite its characterization as “informal” and “voluntary,” the policy provides for specific and mandatory dates by which the agency will act irrespective of the manufacturer’s choice to respond and participate.[iv]
At the state level—with or without the existence of favorable anti-discriminatory reimbursement or other “any willing pharmacy” laws—state insurance commissioners, state legislators, and other state officials can and often will take action when called upon to protect safety-net providers and affiliated pharmacies when facing a dispute with PBMs and other payers.
In contracts governing relationships relating to the 340B program, for example, between covered entities and contract pharmacies, third party administrators (TPAs), and others, both parties share an interest in addressing effective dispute resolution mechanisms that avoid costly litigation. As with any contractual ADR mechanism, providing specifics for the mechanism helps to ensure that it operates as intended. Parties should consider whether to make the ADR mechanism mandatory, and whether the results of the ADR process should be considered binding, such as is the case with mandatory arbitration.
The parties may also wish to consider specifying in advance whether the mediators or arbitrators must have familiarity with the 340B program; doing so can reduce time and expense associated with educating ADR adjudicators who are unfamiliar with the 340B program about the complexities associated with the program. Specifying in advance a list of mediators or arbitrators that meet the criteria of the parties, or agreeing to submit mediators or arbitrators for review of 340B qualifications to a third party such as a trade association or other industry organization, could save time and expense otherwise associated with hiring and preparing testimony from 340B experts.
In many relationships associated with the 340B program, contractual parties are in positions of unequal bargaining power. Nevertheless, careful consideration of ADR pathways in advance can reduce or avoid costly subsequent battles.
[i] 61 Fed. Reg. 65,406-13 (Dec. 12, 1996).
[ii] Pub. L. 111-148 tit. VII § 7102(a), 124 Stat. 823-24 (Mar. 23, 2010), as codified at 42 U.S.C. § 256b(d)(1)(A).
[iii] Although outside Congress’s September 20, 2010 deadline, HRSA proposed rules governing its binding Administrative Dispute Resolution process in 2016, 81 Fed. Reg. 53,381 (Aug. 12, 2016), but later withdrew those rules, see https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201704&RIN=0906-AA90.
[iv] 61 Fed. Reg. 65,406 (Dec. 12, 1996).
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Analyst Says Trump’s Order Casting Shade on FQHCs Is Consistent With President’s 340B Message
President Trump’s executive order stating that health centers fail to pass their “steep” 340B drug discount savings to low-income patients is consistent with his presidency’s recurring theme that 340B is part of the nation’s drug pricing problem, health care journalist and pharmaceutical policy analyst Michael McCaughan said yesterday during the 340B Coalition virtual summer conference.
McCaughan, Editor of The RPM Report and Founding Member of Prevision Policy, said of the four orders Trump signed last Friday, the one that “looks implementable to me” is the order conditioning federally qualified health centers’ (FQHCs) future federal grants on making insulin and injectable epinephrine available at 340B acquisition cost to low-income, uninsured, and/or underinsured patients. “Whether it would survive a court challenge, I have no way of knowing,” he said. (Bloomberg Law reported July 28 that the National Association of Community Health Centers doesn’t plan on suing over the order because it believes it is unenforceable.)
“It’s narrow in scope, it only goes after the federally qualified health centers, and it just focuses on insulin and EpiPen. And maybe it’s more symbolic than anything else. But…that message that’s been carried through this administration that 340B is somehow part of the problem of drug prices now being crafted into policy,” McCaughan said.
“If there is another Trump administration…it would not surprise me at all if there were additional attempts to find ways to claw back that 340B price so it’s not going to the covered entities,” McCaughan said. He said he thinks Democratic presidential candidate Joe Biden “will be much more sympathetic to the notion that the safety net needs more help. That doesn’t necessarily argue that the 340B program is the way to help it. But cutting revenues from safety net providers is probably not going to be a high priority for him.”
One of the four executive orders Trump signed, but did not implement or make public, would require Medicare “to purchase drugs at the same price as other countries pay,” in the president’s words. Trump said on July 24 that he would meet at the White House with drug company executives this past Tuesday, July 28, to hear their ideas on how to reduce drug prices. If they did not offer “something that will substantially reduce drug prices” during the meeting, he said, he would implement the so-called most favored nation order on Aug. 24.
The meeting never happened. In an Q2 2020 earnings call with market analysts Tuesday, Pfizer CEO Albert Bourla said he was “very disappointed” with the executive orders and did not “think there is a need for right now for White House meetings.”
Bourla and other pharma executives’ rebuff to Trump “probably tells you all you need to know about how the drug industry is handicapping this election,” McCaughan said.
In response to a question, McCaughan agreed that the lame duck session of Congress after the November elections might present opportunities to meddle with the 340B program. “But bet against it,” he said. Lame duck sessions “usually don’t do much.”
“If Republicans feel they are losing control of the Senate, they might want to do something before they leave. It’s their last chance,” he continued. But with the “strange dynamics” of this election, with many mailed-in absentee ballots expected, “it might not be clear to anyone for most of November exactly what the state of play is going to be next year, which will argue against being too creative in the lame duck session.”
“Depending on what doesn’t get done between now and election day, depending on how bad the COVID situation remains, how much urgency there is to get something done and out the door during a lame duck session, anything can happen,” he said. “I personally feel going after 340B isn’t going to be on the top of anyone’s list. But you never know.”
“A lot can change between now and November,” McCaughan said. “This is going to be an unusual election year.” He said there will be “tons” of mail-in ballots and counting will continue long after election day. “Everyone will focus on Trump versus Biden, but…control of the Senate will depend on one or two seats, and it could take days if not week before anyone has a clear answer about what the actual outcome was.”
“Whoever is our next president, drug pricing policy is still going to be very much on top of their agenda,” McCaughan said.
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Health Care Attorneys’ Takes on Trump’s Executive Orders
Due to the volume of breaking news and our publishing platform’s limit on the length of 340B Report email messages, we were unable on Tuesday to publish analyses of President Trump’s recent executive orders on drug pricing from two of our regular legal commentators, Todd Nova, an attorney who represents 340B covered entities, and Donna Lee Yesner, an attorney who represents pharmaceutical manufacturers
Todd Nova, Shareholder, Hall Render
The Executive Orders on their face appear significant, and if fully implemented to the extent suggested by their titles no doubt would be. However, it is important to remember that agencies are still bound by the statutory authority and agency law mandates regarding advance publication of and public notice regarding regulations or substantially similar guidance. The timing of this publication process, along with the timing of the FQHC grant funding cycle, mean that interested stakeholders including FQHCs, drug manufacturers, and of course PBMs will have some time to advocate for their positions and mitigate any potential financial impact these orders may have. This also means that any broad system impact wouldn’t be materially seen or felt until sometime around or after the election.
More specifically, regarding the Executive Order on PBM rebates, this issue has been a longstanding point of contention and if implemented would benefit pharmacies broadly including FQHC-operated pharmacies. Similarly, drug importation and Part B price negotiations would directly and indirectly benefit pharmacies, patients and the Medicare Part B trust fund. Finally, long term, the FQHC insulin and EpiPen executive order may not be as significant as it appears on its face since FQHCs typically have a high Medicaid-eligible population and fee-for-service Medicaid plans either require pass-through of 340B acquisition costs or prohibit prescriptions from being filled using 340B-discounted drugs.
Donna Lee Yesner, Senior Counsel, Morgan Lewis
Speaking for myself, I can say generally that the policy of requiring federally qualified health centers to pass through the 340B discount to uninsured and underinsured patients is consistent with the original purpose of the 340B program, that is, to assist people without adequate coverage access their medication. I would also note that covered entities were allowed to provide 340B drugs to insured patients in order to assist the entities care for their uninsured and underinsured patients, and this directive ensures these patients will receive the benefit of the program without disturbing revenue from insured patients. However, the [executive order] can only go into effect in accordance with its terms and there may be procedural issues that could delay implementation, such as whether a change in conditions of the grant would require a legislative amendment.
Passing through the [340B discount to FQHC patients] might prevent patient rejection of prescriptions, and to the extent the FQHCs use contract pharmacies, it would force the pharmacies to determine if the patients qualify for the discounted price at the point of sale so they would get it, unlike the current system that determines use of 340B drugs after they are dispensed and paid for. The GAO determined this system sometimes prevents identification of uninsured patients of covered entities until it’s too late to help them with payment.
Drug Industry-led Group Says Trump’s 340B Executive Order Should Have Gone After Hospitals
President Trump’s executive requiring health centers to pass their 340B discounts on insulin and EpiPens to low-income patients “misses the mark by not targeting the large hospitals abusing the program,” the drug industry-led group AIR 340B says.
AIR 340B includes Pharmaceutical Research and Manufacturers of America (PhRMA), Biotechnology Innovation Organization (BIO), Community Oncology Alliance (COA), and drug manufacturers Baxter Healthcare, Eli Lilly, Genentech, Horizon Therapeutics, and Johnson & Johnson subsidiary Janssen.
While Trump’s 340B-related order “takes steps to help improve Americans’ access and affordability to certain medications…his narrow change does not address the myriad of remaining issues that prohibit 340B from currently functioning as it was intended,” AIR 340B said in a string of tweets on July 29.
“Specifically, it does not address the lack of reporting requirements and accountability measures in place to ensure 340B hospitals are actually helping vulnerable and low-income patients,” the group said. “Any future discussion about Americans’ ability to afford and access medications should include comprehensive improvements to the 340B program, particularly around DSH hospital participation and their lack of accountability compared to federal grantees.”
Adam Fein, CEO of Drug Channels Institute and a frequent critic of 340B hospitals and contract pharmacies, made similar observations in his Drug Channels blog on July 26.
“The [executive order] applies only to the roughly 1,000 Federally Qualified Health Centers (FQHCs) in the 340B program,” he wrote. “That’s surprising, because I generally consider these covered entities to be the good guys of 340B. FQHCs account for less than 2% of the 112,000 relationships between covered entities and contract pharmacies. Notably, the executive order doesn’t mention hospitals, which are the worst abusers of the 340B program.”
Fein called the order “a useful first step toward reforming and modernizing” 340B. “That’s why you can expect tremendous pushback from hospitals, PBMs, and pharmacies,” he said. “They will all recognize the existential threat to their 340B profits.”
Manufacturer Notices on HRSA Website
Astellas Pharma US announced on the U.S. Health Resources and Services Administration (HRSA) website that it is issuing refunds for overcharges for four formulations of its overactive bladder medication Myrbetriq for Q3 2019.
Merck announced refunds for 340B overcharges on its contraceptive NuvaRing covering the periods 1Q 2019, 2Q 2019, 4Q 2019, and 1Q 2020.
Almatica Pharma posted a limited distribution notice for its hypertension drug Zestril; Sunovion for its Parkinson’s disease treatment Kynmobi; and BioMarin for Palynziq, its treatment for phenylketonuria, a rare, genetic brain-threatening condition.
