340B Hospitals Face Another Year of Deeply Reduced Medicare Drug Reimbursement

A sculpture outside of the CMS headquarters building in Baltimore, Md. The federal agency yesterday said it would continue a deep cut in 340B hospitals’ Medicare drug reimbursement in 2021. | Source: Wikipedia

340B Hospitals Face Another Year of Deeply Reduced Medicare Drug Reimbursement

The Trump administration last night announced that, in 2021, many hospitals’ Medicare Part B reimbursement for drugs bought through the 340B program will stay at the same deeply reduced rate it has been at since 2018—average sales price (ASP) minus 22.5 percent.

The U.S. Centers for Medicare & Medicaid Services (CMS) decided not to use an alternative reimbursement methodology that would have deepened the cut next year to an effective rate of ASP minus 28.7 percent. That rate would have been based on CMS’s controversial survey of hospitals this spring for their net costs for 340B-purchased drugs billed to Part B.

“Although we are continuing the current 340B payment policy, we will continue to consider and evaluate the appropriateness of using 340B hospital survey data to set future payment rates for 340B drugs,” it said.

If CMS has opted to set hospitals’ 340B drug reimbursement at the lower ASP minus 28.7 percent effective rate, hospital groups might have sued CMS, arguing that the survey it used to arrive at the rate was flawed.

CMS said continuing to base disproportionate share, free-standing cancer, and non-rural sole community hospitals’ Part B payments for 340B drugs at the existing rate—which is almost 30 percent below where the rate stood in 2017—”is appropriate in order to maintain consistent and reliable payment” during the COVID-19 pandemic.

Next year’s Medicare payment rate for hospitals’ 340B physician-administered drugs is contained in CMS’s 2021 hospital Outpatient Prospective Payment System (OPPS) final rule. CMS apparently missed its Dec. 2, 4:15 p.m. Eastern deadline for posting the OPPS rule for public inspection on the Federal Register website. It released the text of the rule instead at about 7:30 p.m. Eastern on its own website. Yesterday was 30 days before Jan. 1, the day the rule takes effect. When CMS published its OPPS proposed rule in August, it said it would give hospitals 30 days’ notice before the rule’s effective date—half the lead time it customarily gives.

The OPPS rule establishes policies and payment rates for a multitude of hospital outpatient matters other than 340B-purchased drugs. By the time Joe Biden is sworn in as president, it will have been in effect for three weeks. Pausing its implementation and replacing it would be highly impractical.

A federal appeals court has rejected the American Hospital Association (AHA), America’s Essential Hospitals, the Association of American Medical Colleges (AAMC) and three health systems’ legal challenge to CMS’s 340B hospital payment cuts. They can take their case to the U.S. Supreme Court, but the odds of it being accepted are not good—especially after all 16 judges on the bench in October rejected a motion to reconsider a three-judge panel’s late July 2-1 decision upholding CMS’s reimbursement cuts for 340B hospitals.

Adding another layer of complexity to the situation, CMS last month published a “most favored nation” (MFN) interim final rule that, beginning Jan. 1, will base Part B reimbursement for 50 expensive drugs on “the lowest price that drug manufacturers receive in other similar countries,” plus a flat add-on, phased in over four years. The 50 drugs are expected to represent about 75 percent of total Medicare Part B drug spending. CMS acknowledged in the rule that, “to the extent [340B covered] entities receive payment under the model that is lower than their current Medicare payment, “there may be fewer resources available for their 340B program activities.” CMS also said 340B covered entities might have to contract directly with drug manufacturers to get the 50 drugs at the new payment rate.

CMS estimates that, beginning in 2022, drug reimbursement under the MFN payment policy will dip below the current 340B reimbursement rate of ASP minus 22.5 percent. Under the MNF rule, 340B hospitals get whichever rate is lower—the normal Part B rate, or the MFN rate.

Pharmaceutical Research and Manufacturing of America (PhRMA) opposes the MFN rule and has indicated it might sue to stop its implementation. The rule has also been widely criticized by hospitals and oncology groups. It is likely the Biden administration will withdraw the MNF rule. In any case, it is possible the rule will be active for some portion of 2021.

AHA Executive Vice President Tom Nickels yesterday said the 2021 OPPS final rule’s “continuation of deep cuts in payments for 340B drugs undermines the effectiveness of the 340B program and exacerbates the strain placed on hospitals serving vulnerable communities.”

“These cuts conflict with Congress’ clear intent, perpetuate the Administration’s inaccurate interpretation of the law, as well as its failure to protect the program from continued assaults by drug companies,” Nickels  said. “Continued cuts will result in the further loss of resources for 340B hospitals at the very worst possible time as COVID-19 cases and hospitalizations continue to climb across the country.”

America’s Essential Hospitals Senior Vice President Beth Feldpush said, “There is no policy justification for the agency’s damaging Part B drug payment cuts to hospitals in the 340B Drug Pricing Program. These cuts flout congressional intent for the 340B program and undermine the savings it was designed to create for hospitals that care for underserved people and communities.”

Feldpush said CMS “must reverse course on this damaging policy and restore support essential hospitals need to meet their safety-net mission.”

Neither hospital association official mentioned their organizations’ lawsuit against CMS over the 340B drug reimbursement cuts.

Hospital group 340B Health, which isn’t one of the plaintiffs in the lawsuit, said the cuts “undermine the 340B program’s purpose and do nothing to lower overall costs for Medicare patients.”

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McMorris Rodgers Will Be the Top Republican on the House E&C Committee

The U.S. House Republican Steering Committee yesterday chose Rep. Cathy McMorris Rodgers (Wash.) to succeed retiring Rep. Greg Walden (Ore.) as the GOP leader on the Energy and Commerce (E&C) Committee, which has primary jurisdiction over the 340B program.

McMorris Rodgers was quite active on 340B issues about a decade ago. In 2011 and 2012, she introduced bipartisan legislation to expand the 340B program to cover inpatient drugs, and to strike Affordable Care Act language that stops critical access hospitals, sole community hospitals, and rural referral centers from accessing 340B pricing on drugs designated for orphan diseases or conditions. McMorris Rodgers lowered her profile on 340B matters in 2013, when she became Chair of the House Republican Conference, the third-highest position in the House GOP hierarchy. During that time, she played no active role on 340B matters. She held the post for three sessions of Congress, relinquishing it to Rep. Liz Cheney (Wyo.) in 2019.

Rep. Michael Burgess (Texas), ranking Republican on the E&C Health Subcommittee, and Rep. Bob Latta (Ohio) also were in contention to replace Walden as E&C’s top Republican. Under Republican control of the E&C Committee, there were numerous efforts to place restrictions on the 340B program. These efforts, which have included multiple hearings and legislation, have been strongly opposed by 340B provider groups, but embraced by the drug industry.

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Stakeholders React to Novo Nordisk’s New 340B Contract Pharmacy Policy

Drug manufacturer Novo Nordisk’s announcement Tuesday—reported first by 340B Report—that, on Jan. 1, it will stop providing 340B pricing on its products shipped to hospital contract pharmacies “is unconscionable,” hospital group 340B Health said yesterday.

U.S. Health and Human Services (HHS) Secretary Alex Azar, 340B Health said, “has the authority and the responsibility to block pharmaceutical manufacturers from sidestepping their requirements under federal law, and we urge him to act now.” The U.S. Health Resources and Services Administration (HRSA) told 340B Report Tuesday it “is aware of Novo Nordisk’s plan and is in the process of reviewing and determining next steps.”

The American Hospital Association (AHA) did not issue a statement directly in response to Novo Nordisk’s action. But, in a letter yesterday to Azar requesting additional flexibilities for providers responding to the COVID-19 pandemic, it said “HHS should end drug manufacturer actions that pull critical resources from 340B hospitals in the form of illegal and unconscionable restrictions on access to 340B discounts on some drugs dispensed through contract pharmacies.”

“As a lifeline for hospitals serving the most vulnerable communities, financial resources protected by the 340B Drug Pricing Program often are the difference between caring for patients and closing hospital doors,” it said.

Novo Nordisk exempted from its new 340B pricing policy community health centers and other covered entities that qualify for 340B discounts based on their receipt of federal grants.

“It seems clear that Novo Nordisk recognizes the critical role that contract pharmacies play in providing medically underserved health center patients with life-saving medications and services,” the National Association of Community Health Centers told 340B Report. “We cannot underscore enough that health centers are required by law, regulation and mission to invest every penny of 340B savings into activities that expand access to care for their patients.”

Pharmaceutical Research and Manufacturers of America (PhRMA) said it cannot comment on individual members’ business decisions. It did say, however, that “exponential growth in the number of contract pharmacies participating in 340B,” including large for-profit chain pharmacies, exemplifies “how the program has evolved away from what Congress originally envisioned.” It added that there is “little to no evidence that contract pharmacy participation in 340B has improved patients’ access to medicines.”

PhRMA also pointed out that contract pharmacies are not mentioned in the 340B law or in any regulations. “We agree with this Administration’s recent statements regarding the rule of law and status of agency guidance. Unlike laws and regulations, agency guidance cannot impose any binding requirements on the public and lack the force and effect of law.”

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AHA’s Top Lobbyist Tom Nickels Is Retiring, Lobbyist Stacey Hughes Tapped to Succeed Him

The American Hospital Association announced this morning that Tom Nickels, AHA’s long-serving head of government relations and public policy, will retire at the end of this year. He is being succeeded by Stacey Hughes, President and founding partner of The Nickels Group, the government affairs consulting firm established by former U.S. Sen. Don Nickels (R-Okla.).

“Hughes currently works as an outside political consultant for the AHA,” the hospital group said in a news release. “She will join the association in January and overlap with Nickels to ensure a smooth transition.”

According to her bio on The Nickels Group website, Hughes previously

held multiple positions as leadership staff in the Senate, immersing herself in health care policy, managing major legislation on the Senate floor, coordinating with various members and offices on both sides of the aisle and running House-Senate conference committees. She served as Deputy Staff Director for the Senate Budget Committee, Senior Policy Advisor in the Assistant Republican Leader’s Office and lead staff on the Committee on Aging for Senator William Cohen.

Tom Nickels began working for the AHA in April 1994. Prior to that, he was Director of the Washington Office of the American College of Emergency Physicians for five years, and prior to that was the Acting Director of the Washington Office of the American Nurses Association. In addition, he served as a legislative assistant to Rep. Edward Biester (R-Pa.).

“Through his work, Tom has put his stamp on many of the most important health policy issues in the past quarter century,” AHA President and CEO Rick Pollack said. “He is a brilliant strategist and a fierce advocate for our members.”

“Having worked very closely with Stacey for years, I’m pleased to have her join the AHA team,” Pollack continued. “Stacey has strong bipartisan respect that spans all corners of health care—members of Congress and staff, key regulatory departments within the Executive branch, as well as the private sector. She knows health policy inside-out and has an ability to tackle complex challenges strategically and creatively.”

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California Delays Medicaid Rx Drug Benefit Transfer Until April

California Gov. Gavin Newsom’s (D) administration has delayed until April 1 its controversial transfer of Medicaid (Medi-Cal) managed care prescription drug benefits to Medi-Cal fee for service.

The switch, which was set to occur on Jan. 1, is expected to cost 340B providers hundreds of millions of dollars in lost revenues on 340B drugs billed to Medi-Cal. A group of California health centers in late October sued the state Department of Health Care Services (DHCS) in federal district court to stop the transfer, saying it will “strike a major financial blow” to centers already reeling from the impact of the COVID-19 pandemic. They asked the court for a temporary restraining order blocking the transfer.

The state health department announced the new April 1 effective date for the benefit transfer on Nov. 16, in a provider notice and a news release. The provider notice cited “the ongoing challenges and constantly evolving health care landscape associated with the unprecedented COVID-19 public health emergency.” The news release said during the delay “prescription drugs services will continue to be delivered under the current system for both fee-for-service beneficiaries and those served by Medi-Cal managed care plans (MCP).” DHCS has named the pharmacy benefit program consolidated under fee for service Medi-Cal Rx.

On Nov. 25, U.S. District Judge John Mendez denied the health centers’ motion for a temporary restraining order to block DHCS from launching Medi-Cal Rx on Jan. 1, citing the state’s new, later start date. He said the plaintiffs “failed to adequately prove they face an immediate risk of irreparable harm as Defendants have publicly stated the transition to Medi-Cal Rx will not be effective until April 1, 2021.” The judge also said “it would be inappropriate to grant the ultimate relief sought at the earliest stage in the proceeding, prior to a more deliberative investigation of the claims’ merits.”

The California Primary Care Association (CPCA), which is not a party to the lawsuit, told 340B Report yesterday it “is very supportive of this delay and have been asking for this since the onset of the COVID-19 pandemic.”

“We applaud the Administration’s decision to delay the pharmacy transition to ensure patients don’t lose needed pharmacy access, especially now as we are seeing another surge in COVID-19 cases here in California,” CPCA said.

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HIV/AIDS Activists Slam N.Y. Governor’s 340B Comment on World AIDS Day

New York HIV/AIDS activists this week denounced a statement Gov. Andrew Cuomo (D) issued on Dec. 1, World AIDS Day, that touched on the 340B program. The activists said Cuomo is minimizing the harm an upcoming state Medicaid prescription drug policy change will cause to HIV/AIDS clinics, other safety-net health care providers enrolled in 340B, and their patients.

In April, state lawmakers passed and Cuomo signed state budget legislation that will transfer Medicaid prescription drugs from managed care and move them into Medicaid fee for service effective April 1, 2021. Providers say the change will deprive them of millions of dollars in 340B revenues they can ill afford to lose, and ultimately will cost, not save, the state money. A coalition called Save NY’s Safety Net was launched in October to oppose the transfer. Bills have been introduced in the state Senate and Assembly to delay the transfer until April 2024.

In August, the state Health Department (DOH) projected that the pharmacy benefit transfer would save New York $234 million in its first year, with $101 million set aside for “340B reinvestment” during the transfer’s first year and unspecified smaller amounts in the next two years.

Cuomo’s World AIDS Day statement opened with a list, in large type, of administration  mileposts and achievements in the fight against the disease. Second on the list is, “$100 Million in Medicaid Redesign Savings Secured for 340B Providers.” In the body of the statement, the administration said, “New York will provide more than $100 million in Medicaid Redesign savings directly to 340B providers in the upcoming year to mitigate changes in reimbursement and ensure continuation of critical services. The state is working directly with stakeholders and providers to establish how this funding will be allocated.”

“To anyone not familiar with this issue, this sounds like a good thing—a gift from the State to those of us who are impacted by this ‘change in reimbursement,’” said Jacquelyn Kilmer, CEO of Harlem United, a federally qualified health center, yesterday. “This is a deeply flawed view of the reality to be faced by our most vulnerable neighbors as a result of the Governor’s actions.” The $100 million to which Cuomo referred, she said, is “a fraction of [the] losses” 340B covered entities will suffer, “is only for one year, is subject to legislative and budget action and could be taken away at any time.”

Housing Works, a group that seeks to end homelessness among people living with and affected by HIV/AIDS, yesterday said that Cuomo’s remarks about 340B in his statement were “dishonest.”

“The Governor knows full well that the 340B carve-out will devastate community health centers across the state,” the group said. “Nor is it true that the State is ‘working directly with stakeholders and providers’ on this plan to ‘mitigate’ the loss of 340B savings. The community advisory group formed to provide recommendations has been so ignored that it has informed DOH it refuses to make recommendations.” Housing Works cited “a recent study found that just 15 of the hundreds of HIV/AIDS providers that rely on 340B will lose over $55M annually in critical funding.”

“Make no mistake,” it said, “clinics in medically underserved neighbors will close, critical services will be eliminated, avoidable inpatient and emergency department costs will soar, and people will die.”

Callen-Lourde Community Health Center, which provides primary care and related services to LGBTQ New Yorkers, said yesterday that, “Under the drug carve out, Callen-Lorde stands to lose $12 million annually, approximately 14% of its total budget.”

“Without critical funding provided by 340B program, safety net providers will be all but incapacitated, leaving the communities hardest hit by the pandemic without access to basic health care, and hindering the state’s ability to recover,” Executive Director Wendy Stark said.

Cuomo’s statement, she said, “flew in the face of the task that we have been charged with as safety net providers and goes against what we have been recommending to the administration for months. It will cost jobs and ultimately, cost lives.”

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Ohio Senate OK’s Bill to Stop 340B “Pickpocketing”

Legislation in Ohio to stop private health plans, Medicaid managed care organizations, and their pharmacy benefit managers (PBMs) from preying financially on 340B covered entities took a big step closer to final passage this week.

The state Senate yesterday unanimously passed S.B. 263,which prohibits private insurers, Medicaid MCOs, and their PBMs from including provisions in their contracts with 340B entities that would deny them the financial benefit of participating in 340B. Reimbursement could not be lower than National Average Drug Acquisition Cost (or wholesale acquisition cost if NADAC is unavailable), and payers could not impose fees on 340B entities that are not imposed on other providers or that are higher than those imposed on others.

The state House Health Committee passed an identical companion bill, H.R. 482, on Dec. 1. It was not clear yesterday when it would be scheduled for a vote in the full House. Before passing H.R. 482, the committee rejected an amendment that would have excluded “multi-hospital health systems,” but not children’s hospitals, from the bill’s protections. The amendment’s sponsor said some large health systems and hospitals do not share 340B program savings with low-income patients.

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