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We asked five veteran health care attorneys for their takes on HRSA’s recent announcement that its policy clarifications about hospital child sites and telemedicine aren’t simply COVID-19 flexibilities, but permanent changes. From left, Barbara Straub Williams, Richard Church, Todd Nova, Jason Reddish, and Andrew Ruskin.
340B Experts Welcome HRSA’s Policy Clarifications on Hospital Child Sites and Telemedicine
HRSA’s confirmation this week that it is permanently eliminating a significant barrier to access to 340B pricing in the hospital clinic setting is being embraced by veteran 340B health care attorneys. We asked experts for their take on the government’s decision to let patients of a new hospital child site not yet listed on the hospital’s cost report to be eligible for 340B as long as they are patients of the hospital—not just during the COVID-19 pandemic, but for good. We also asked the experts about HRSA’s announcement that its policy clarification confirming that 340B use is permissible in the telemedicine setting is permanent as well.
This change means that hospitals will no longer have to wait to dispense or administer 340B drugs at new hospital outpatient departments. Previously, hospitals had to wait up to 22 months to use 340B at new HOPDs (depending on when in the cost reporting year the HOPD opened). I think that HRSA is recognizing that the 340B statute states that certain “hospitals” are eligible for the 340B program and an HOPD is part of a hospital even before the costs and charges for the HOPD appear on a Medicare cost report or the HOPD is registered on the OPAIS [Office of Pharmacy Affairs Information System].
Richard Church, Partner, K&L Gates
This new flexibility is a welcome change for covered entities. Given the ongoing dynamic reimbursement environment, it has been challenging for covered entities to make decisions about whether to open locations as provider-based departments or convert locations to provider-based departments, particularly when such locations would not be eligible as 340B child sites for many months after converting to provider-based. HRSA’s new flexibility is tremendously helpful in shortening that planning trajectory even as future reimbursement risks will remain.
Todd Nova, Shareholder, Hall Render
This development is no doubt significant and serves to address a longstanding concern regarding HRSA’s as-filed Medicare cost report requirement. We have long maintained that the criminal and civil penalties associated with false Medicare attestations regarding hospital services should be sufficient to establish hospital 340B eligibility. Going forward, we will closely monitor more detailed Apexus and HRSA OPA FAQ guidance on this issue. Of particular interest will be a more-clear statement of this approach since it [now] includes equivocating language that patients “may still be 340B eligible” and also statements regarding application of these provisions to telehealth services, which are generally not billed as a hospital service. This is to say that while important, covered entities should nonetheless be careful with specific implementations and consider getting specific fact patterns approved in writing until more firm written guidance is available.
Jason Reddish, Partner, Feldesman Tucker
The recognition of hospital sites is welcome. Hopefully HRSA will also recognize federally qualified health center sites as 340B-eligible as soon as it deems them active. With respect to telemedicine, the FAQ confirmed what we already believed: telemedicine “is merely a mode by which the health care service is delivered,” and not a different type of health care service. We look to state and local law to determine whether telemedicine is a permissible “mode,” and then we apply the patient definition to a telemedicine arrangement in the same way we apply it to an in-person interaction.
Andrew Ruskin, Partner, Morgan Lewis
This isn’t really surprising that HRSA’s policies are by and large policies that it is prepared to live with, even outside of the pandemic, as it does not share the explicit authority to take certain actions during a Public Health Emergency that CMS does. It is quite possible that HRSA had contemplated some of these relaxations of regulatory policy before the pandemic, and simply accelerated these policies in light of the current circumstances. In any event, HRSA is still acting within its PHSA [Public Health Service Act] statutory authority, as well as with the spirit of that law.
Tennessee Senate Panel Shelves Bill to Stop PBMs From Paying Less for 340B Drugs
A Tennessee Senate committee this week effectively ended further consideration this session of a bill to stop pharmacy benefit managers from reducing reimbursement for 340B-purchased drugs.
The Commerce & Labor Committee sent the bill, SB 1492, to “summer study” on June 9. Last week, a state House committee paused consideration of a companion bill, HB 1890, until after the state budget is adopted.
The bills’ co-sponsors, state Sen. Richard Briggs (R) and state Rep. Esther Helton (R), said they were “dismayed by the decision of our colleagues.”
“SB1942/HB1890 was written to safeguard revenues that rural hospitals and community health providers depend on to provide services to thousands of vulnerable Tennesseans,” Briggs and Helton said. “Without the protections afforded by SB1942/HB1890, these badly needed dollars remain vulnerable to capture by private entities seeking to add to their own bottom lines. We hope the bill will be introduced again in the next legislative session, and that it will enjoy a more beneficial result at that time.”
Shannon Stephenson, the CEO of Chattanooga-based Ryan White clinic Cempa Community Care, said she was discouraged by the Senate committee’s decision “to halt the progress of this immensely valuable bill.”
“Our goal was to join other states in attaining protections from predatory PBM reimbursement practices aimed at capturing badly needed dollars originally intended to provide care for our most vulnerable friends and neighbors across the state,” said Stephenson, who is also President of the national group Ryan White Clinics for 340B Access (RWC-340B). “Without such protections, corporate middlemen remain able to siphon off revenue designed to provide care for patients across the state. Though our efforts have been thwarted in 2020, I fully anticipate working with the Tennessee Legislature in 2021 to gain passage of this bill.”
HHS Starts Sending COVID-19 Relief to Safety-Net Hospitals and Medicaid-Dependent Providers
The U.S. Health and Human Services (HHS) Department this week began distributing $10 billion in COVID-19 relief to hospitals that provide safety-net health care, and said it expects to distribute about $15 billion more to providers that care for large numbers of Medicaid and Children’s Health Insurance Program (CHIP) beneficiaries. HHS also invited hospitals to update information about their admissions of patients with COVID-19 through June 10 for a second, $10 billion targeted distribution of emergency aid to COVID-19 hot spots.
The $35 billion in new relief comes from the $175 billion CARES Act Provider Relief Fund. Hospital groups and members of Congress from both parties had been pressing HHS Secretary Alex Azar to speed up targeted assistance to Medicaid-dependent health care providers, which they said were underrepresented in HHS’s initial $77.5 billion in general and targeted allocations from the fund. Thirty billion of that amount was allocated based on providers’ Medicare billings and $20 billion on providers’ CMS cost reports or incurred losses.
To get the new $10 billion in relief for safety net hospitals, a hospitals must have:
A Medicare disproportionate payment percentage of 20.2 percent or greater
Average uncompensated care per bed of $25,000 or more
Profitability of 3 percent or less, as reported to CMS in its most recently filed cost report.
HHS identified hospitals meeting those criteria and is sending them the money this week via direct deposit. The most a hospital will get is $50 million.
Medicaid-dependent providers must report their annual patient revenue to HHS to tap into the $15 billion in targeted relief. HHS said, “The payment to each provider will be at least 2 percent of reported gross revenue from patient care; the final amount each provider receives will be determined after the data is submitted, including information about the number of Medicaid patients providers served.” To be eligible, HHS said, “health care providers must not have received payments from the $50 billion Provider Relief Fund General Distribution and either have directly billed their state Medicaid/CHIP programs or Medicaid managed care plans for healthcare-related services between January 1, 2018, to May 31, 2020.”
HHS estimates that close to 1 million providers will be eligible.
“This week’s distribution by HHS is an important step to address our concerns,” House Energy and Commerce Chairman Frank Pallone (D-N.J.), Energy and Commerce ranking Republican Greg Walden (R-Ore.), Senate Finance Chairman Charles Grassley (R-Iowa), and Finance ranking Democrat Ron Wyden (D-Ore.) said yesterday. The powerful bipartisan quartet rebuked Azar for slow walking the relief in a June 3 letter.
“HHS should build on this announcement with additional funds for providers that rely on, but do not exclusively care for, Medicaid beneficiaries, ensuring that our most vulnerable can continue to access care,” the lawmakers said. “There is no question how vital these providers are to their communities, especially during this public health emergency. We will continue to conduct oversight as these relief funds are disbursed and fight to ensure providers are treated fairly and that those most in need receive relief,”
Hospital group America’s Essential Hospitals thanked the Trump administration for making the money available and urged HHS “to continue relief for our hard-hit members and their communities.”
“The heavy costs of battling the coronavirus continue and likely will linger long after this crisis ends,” the group’s President and CEO Bruce Siegel said. “This outlook and the earlier funding gaps that let many hospitals fall through the cracks demand that Congress and the administration keep the focus on the safety net and providers caring for our most disadvantaged people and communities.”
American Hospital Association President and CEO Rick Pollack said AHA was pleased with HHS’s distribution of more relief funds. “AHA continues to urge the department to distribute substantial additional funds to hospitals and health systems in an expedited manner as the COVID-19 virus continues to spread, hospitalizations continue to occur, and many Americans continue to forgo care, including primary care and other specialty care visits,” he said.
State Medicaid Officials Say Having to Cover Almost All FDA-Approved Drugs Causes Problems
The federal Medicaid drug rebate program (MDRP) requirement that forces states to cover nearly all Food and Drug Administration-approved outpatient drugs causes “moderate or significant challenges” for effective program administration, Medicaid officials from 39 states have told the U.S. Government Accountability Office.
The officials pointed out to the GAO for a study dated April 2020 but released only last week that newer drugs that they must cover due to the MDRP requirement often cost more and don’t have proven benefits. The officials recommended letting states cover fewer drugs or letting them delay coverage until clinical effectiveness is proven. While it is not mentioned in the report, any such delays potentially could affect whether such drugs also are considered covered outpatient drugs for 340B drug discount proposes.
Congressional Democrats Ask GAO to Investigate Drug Manufacturer “Rebate Traps”
Four congressional Democrats led by U.S. Sen. Amy Klobuchar (Minn.) have asked the U.S. Government Accountability Office (GAO) to study how drug manufacturers strategically use commercial rebates to exclude competing products.
The June 10 letter asks the GAO to investigate “rebate traps.” The lawmakers explain:
A pharmaceutical manufacturer can set up a rebate trap when it controls access to an established “must have” product – or portfolio of products. Such a manufacturer can use its negotiating leverage to withhold valuable volume-based rebates from buyers unless the buyers grant preferential placement for the seller’s products on the buyer’s drug formulary. In some cases, the pharmaceutical company will demand that the buyer exclude rival drugs from their formularies altogether or risk forfeiting all rebates on the seller’s drugs. Such exclusionary terms can cripple an upstart drug’s ability to gain a competitive foothold against the established product.
Klobuchar and the letter’s other signers—Sen. Richard Blumenthal (D-Conn.) and Reps. David Cicilline (D-R.I.) and Hakeem Jeffries (D-N.Y.)—want the GAO to report on the practice’s prevalence and its impacts on drug pricing and spending, patient access to drugs, prescribing patterns, the introduction of new drugs, and innovation.
Tweets of Note
Wow, with all that money to provide charitable care for the poor I would expect their health outcomes to be so improved ….
Adam J. Fein @DrugChannels
New @HRSAgov Data: #340B Program Reached $29.9 Billion in 2019; Now Over 8% of #Drug Sales
Patients win when 340B is run correctly as it is in the vast majority of 340B facilities. Making treatment accessible to under and uninsured can’t be a bad thing.
Further confirmation 340B is far from a small program. thinkbrg.com/newsroom-publi…found is now 2nd largest federal prescription drug program behind only Medicare Part D
Adam J. Fein @DrugChannels
New @HRSAgov Data: #340B Program Reached $29.9 Billion in 2019; Now Over 8% of #Drug Sales