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Covered entities are studying how a new drug pricing bill would affect access to 340B pricing on drugs subject to Medicare price negotiation.


Analysts Still Digesting Senate Democratic Drug Pricing Bill’s 340B Changes

If Congress votes to gives Medicare the power to negotiate some drug prices, drug manufacturers would not have to provide price concessions that exceed the lower of a drug’s 340B price or the Medicare negotiated price, according to a summary of draft drug pricing legislation that U.S. Senate Democrats released Wednesday.

Congressional Democrats have been trying since late 2019 to pass a bill to authorize Medicare to negotiate some drug prices, make manufacturers pay the government rebates when drug prices rise faster than inflation, make insulin more affordable, and make drugs more affordable for Part D beneficiaries. The new draft that Senate Democrats released July 6 would be folded into a slimmed down version of what the party used to call its Build Back Better domestic and climate change policy bill. Democrats hope to get it to the Senate floor prior to August recess and pass it before the November elections. 

Some 340B covered entity representatives said yesterday they are still studying a section of the draft drug pricing legislation titled “Nonduplication With 340B Ceiling Price.” It is a single 173-word sentence that reads:

Under an agreement entered into under this section, the manufacturer of a selected drug shall not be required to provide access to the maximum fair price under subsection (a)(3), with respect to such selected drug and maximum fair price eligible individuals who are eligible to be furnished, administered, or dispensed such selected drug at a covered entity described in section 340B(a)(4) of the Public Health Service Act, to such covered entity if such selected drug is subject to an agreement described in section 340B(a)(1) of such Act and the ceiling price (defined in section 340B(a)(1) of such Act) is lower than the maximum fair price for such selected drug, except that the manufacturer shall provide for the maximum fair price to such covered entity with respect to maximum fair price eligible individuals who are eligible to be furnished, administered, or dispensed such selected drug at such entity at such ceiling price in a nonduplicated amount to the ceiling price if the maximum fair price is below the ceiling price for such selected drug.

A two-page summary of the new draft drug pricing legislation says this language clarifies “that manufacturers are not required to provide price concessions that exceed the lower of a drug’s 340B price or the Medicare negotiated price.” 340B hospital representatives reportedly asked for language clarifying that entities could pay the 340B price or Medicare negotiated price, whichever is lower. They apparently are pleased with the revised language which they believe makes it clear that 340B covered entities will be able to access the lower of the 340B price or the negotiated Medicare rate.

Nonetheless, some covered entity representatives say the new 340B language raises questions including:

  • What is its applicability to manufacturers that refuse to offer 340B pricing to covered entities, such as the 18 that restrict 340B pricing when entities use contract pharmacies? 
  • How will “maximum fair price eligible individuals” be identifiable to parties in 340B transactions?
  • Will Medicare limit 340B entities’ reimbursement to maximum fair price?
  • How will Medicare pay for maximum fair price drugs that are reimbursed using a bundled payment model?

Other Provisions

In addition to letting Medicare negotiate prices for a small number of high-priced single source drugs, the Senate Democrats’ draft legislation would make drug manufacturers pay Medicare rebates for many Part B and D drugs if their prices rise faster than inflation.

The 340B program has a comparable provision that can cause a drug’s 340B ceiling price to fall to $0.01 if the drug’s average manufacturer price rises high enough relative to inflation. If the new Medicare rebates work as planned and tame drug price inflation, 340B ceiling prices on affected drugs might not fall as low as they otherwise would have, which would diminish covered entities’ 340B program upfront savings and downstream income from billing above acquisition cost.

Last September, when the Democrats’ Build Back Better plan was approaching a vote, six hospital groups sent a letter to Democratic and Republican congressional leaders asking them “to provide certainty for hospitals that the 340B program will remain intact and that their program savings will not be limited in any way under the drug pricing policies currently being discussed.”

The Senate Democrats’ draft legislation continues to exclude language present in earlier versions that would have required Medicaid managed care organizations to reimburse all retail drugs, including 340B-purchased drugs, at actual acquisition cost.

The draft legislation’s Part D language would cap beneficiary total out-of-pocket spending at $2,000 per year, cap premium growth at 6% per year through 2029, eliminate cost sharing for vaccines, and expand eligibility for low-income subsidies.

The draft legislation is silent about the high cost of insulin. Senate Democratic leaders reportedly decided to leave it out due to parliamentary concerns. Late last month, Senate Majority Leader Chuck Schumer (D-N.Y.) said he intended to bring a new bipartisan bill to make insulin more affordable for patients to the Senate floor for a vote very soon.

Tough Path Ahead

The drug industry criticized the Senate Democrats’ draft almost as soon as it began circulating.

“The prescription drug bill released today went from bad to worse for patients,” PhRMA Executive Vice President of Public Affairs Debra DeShong tweeted the morning of July 6.

“Democrats weakened protections for patient costs included in previous versions, while doubling down on sweeping government price-setting policies that will threaten patient access and future innovations,” DeShong said. “Patients deserve better.” 

The Senate is divided 50-50 between Democrats and Republicans, with Democrats in control due to Vice President Kamala Harris’s tie-breaking vote. It takes 60 votes to end Senate debate on a bill. Democrats want to enact drug pricing legislation and other party priorities before the November elections using a procedure called budget reconciliation that needs just a simple majority vote to pass.

Senate Republican Leader Mitch McConnell (Ky.) warned preemptively on June 30 that if Democrats tried to ram their priorities through the Senate on a party-line vote on a reconciliation bill, his party would block consideration of a popular trade bill.

House Democrats passed a budget reconciliation package with drug pricing language in November. It died in the Senate in December when Sen. Joe Manchin (D-W.Va.) withheld his support due to concerns over the size and scope of the wide ranging social welfare package. Senate Democratic leaders have been seeking a way forward ever since. It is unknown if Manchin ultimately will support passing a reconciliation bill that contains the leadership’s revised drug pricing, social welfare, and economic growth proposals. Several news outlets have reported that Democratic leaders negotiated the new drug pricing draft legislation with Manchin and the influential senator has indicated his support for the drug pricing provisions.

“Senator Manchin has long advocated for proposals that would lower prescription drug costs for seniors, and his support for this proposal has never been in question,” Sam Runyon, the Senator’s spokeswoman told The New York Times on July 6. “He’s glad that all 50 Democrats agree.”

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