The U.S. Senate Finance Committee’s latest drug pricing legislation includes language, not seen before in earlier House and Senate versions, about denying 340B covered entities’ access to government-negotiated lower prices on drugs covered under Medicare.
The committee released the 1,180-page text of its changes to the House-passed Build Back Better Act on Saturday. Groups and law firms that represent 340B entities said yesterday they were still studying the Finance Committee text and seeking more information before reaching conclusions about its implications for 340B program participants.
The new Finance Committee language about 340B says the U.S. Health and Human Services (HHS) Secretary shall “establish procedures to ensure” that 340B covered entities “do not request access to a maximum fair price” that the government negotiates with a manufacturer “with respect to a selected drug that is subject to payment of a rebate to such entities under an agreement described” in section 1927(a)(5)(A) of the Social Security Act (SSA).
Section 1927 of the SSA requires drug manufacturers to have Medicaid drug rebate agreements with states if they want their drugs covered under Medicaid and Medicare Part B. Subsection (a)(5)(A) refers to the 340B pharmaceutical pricing agreement that these manufacturers also must sign.
One veteran 340B stakeholder said the new language likely is intended to mirror the current 340B duplicate discount prohibition, in this case in the new context of government negotiated prices on a handful of expensive drugs. The Finance Committee appears to be saying it would be unfair to manufacturers if entities were to get both maximum fair price (MFP) under government price negotiation and a 340B discount on the same drug, the stakeholder said.
Another veteran 340B stakeholder reached yesterday provided a different take. “I don’t read it that they can’t get a discount twice,” the stakeholder said. “I read it that they can’t participate in the maximum fair price language for lowering prices.”
A third veteran 340B stakeholder said the bill language’s reference to “a selected drug that is subject to payment of a rebate to such entities” might mean that procedures to ensure that 340B entities do not get MFP on a drug would apply only to state AIDS drug assistance programs (ADAPs), the only entities that can opt to receive 340B pricing as a rebate rather than as a discount. A fourth 340B veteran, William von Oehsen, principal at Powers Law, agreed this morning it is possible that that the only covered entities at risk under the committee’s 340B non-duplication provision are ADAPs.
The new Senate Finance language on 340B is silent about which HHS agency would establish the procedures to ensure that 340B covered entities do not have access to MFP, or what form the procedures would take. The U.S. Health Resources and Services Administration (HRSA) maintains the Medicaid exclusion file for preventing duplicate 340B discounts and Medicaid fee for service rebates on the same drugs. There is no comparable single process for preventing duplicate 340B discounts and Medicaid rebates in Medicaid managed care. The Centers for Medicare & Medicaid Services (CMS) published a final rule in 2016 requiring states to include a provision in all Medicaid managed care contracts requiring managed care plans to have procedures to ensure that manufacturers are not billed for rebates on 340B-purchased drugs.
H.R. 4390, the PROTECT 340B Act, calls for a new independent national drug claims clearinghouse to ensure that states do not get duplicate Medicaid rebates on 340B-purchased drugs.
New CHIP Rebates and 340B Duplicate Discounts
Like the House bill, the Senate Finance text would extend Medicaid drug rebates to drugs provided under states’ stand-alone Children’s Health Insurance Programs (CHIP) and extend the existing prohibition on 340B discounts and Medicaid rebates on the same drugs to the new CHIP drug rebates.
Powers Law partner von Oehsen said this morning that he fears that the committee’s approach to duplicate discount prevention “will make it virtually impossible for covered entities to continue receiving discounts on state-run CHIP drugs.”
Rather than parrot the 340B duplicate discount language from the 340B statute, which places the burden on covered entities to avoid duplicate discounts, it would be better if Congress stated that the expansion of Medicaid rebates to state-run CHIP applied to non-340B drugs only, he said. Congress adopted a similar approach in 2010 when it expanded Medicaid rebates to Medicaid managed care drugs, von Oehsen noted.
Other provisions
The Senate Finance text includes a section requiring manufacturers to pay the federal government new rebates on Medicare Part B and Part D drugs when the drugs’ prices increase faster than inflation. Generic drugs at risk of shortage and biosimilar drugs would be excluded.
Manufacturers already pay the federal and state Medicaid programs an additional rebate and 340B covered entities an additional discount when the companies’ drug prices rise faster than inflation. The committee text is silent about manufacturers being required to pay both the new Medicare inflation rebates and the existing Medicaid inflation rebates and 340B inflation discounts on the same drugs.
The Senate Finance text excludes language from previous House and Senate drug pricing bills that would end covered entities’ ability to earn revenue by billing Medicaid managed care organizations at a markup over 340B acquisition cost. The same “spread pricing” language also was excluded from the House-passed version of the Build Back Better bill.
The Senate committee text excludes Medicaid disproportionate share hospital cuts that were included the House-passed version of the BBB bill. States that have yet to expand their Medicaid program faced reductions in federal Medicaid DSH allotments and federal funding for uncompensated care pools in the House bill. Hospital groups pushed back hard against the cuts.
