As President Biden and House Democrats prepare to unveil their drug pricing game plans, 340B stakeholders eagerly await word on key provisions that could either be helpful or result in significant lost revenue. While the proposals are going to be more painful for the drug industry, there are areas that bring heartburn to 340B providers.
U.S. Health and Human Services (HHS) Secretary Xavier Becerra met his Aug. 23 deadline to give the White House a plan to fight excessive drug prices, a White House official speaking on background said yesterday. The report will be published publicly in the coming weeks, the official said.
Whether the plan touches on the 340B drug pricing program isn’t known. President Biden called for the report in a July 9 executive order on promoting competition in the U.S. economy. It gave the HHS secretary 45 days “to submit a report to the Assistant to the President for Domestic Policy and Director of the Domestic Policy Council and to the Chair of the White House Competition Council, with a plan to continue the effort to combat excessive pricing of prescription drugs and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the Federal Government for such drugs, and to address the recurrent problem of price gouging.”
340B: Key Part of Trump Drug Pricing Plan
In May 2018, the Trump administration issued a “blueprint to lower drug prices and reduce out-of-pocket costs.” 340B “reform” was a central component of Trump’s blueprint. It said 340B discounts “may have created additional pressure on manufacturers to increase list price.” The document posed a series of questions that suggested the administration favored narrowing the 340B definition of patient, and taking additional steps to prevent duplicate discounts in Medicaid “and other programs.” Former HHS Secretary Alex Azar, who was a long-time Eli Lilly executive, was not shy in calling for a major 340B overhaul throughout his four-year tenure.
Although Trump’s blueprint did not address reducing Medicare Part B reimbursement for hospitals’ 340B-purchased drugs, CMS began doing so in 2018. An HHS report issued 100 days after Trump’s blueprint came out cited CMS’s action as an example of the administration fulfilling its pledge to lower patients’ out-of-pocket costs for medicines.
Last month, the U.S. Supreme Court agreed to review a federal appeals court’s July 2020 ruling upholding the legality of CMS’s nearly 30% reduction in 340B hospitals’ Part B drug reimbursement. Surprisingly, the Biden administration has proposed to retain the cuts. 340B hospitals are pushing the administration to revise its proposal before it becomes finalized.
Inflation Penalty Likely to Be Expanded
One of the key components of both the 340B program and the Medicaid drug rebate program is a provision that penalizes drug manufacturers for raising prices above the inflation rate. This results in lowers drug prices for safety net hospitals, health centers, and clinics, in some cases to a penny as a disincentive for price hikes. The idea of expanding the inflation penalty to the Medicare Part D and possibly the Medicare Part B programs has received strong support from Democrats and is likely to be part of both President Biden’s plan and U.S. House Speaker Nancy Pelosi’s (D-Calif.) drug pricing blueprint.
Manufacturers agree to give 340B discounts in exchange for having all their drugs covered by Medicaid and Medicare Part B. Eight drug companies are suing HHS, arguing that the 340B statute does not force them to give discounts when covered entities use contract pharmacies to dispense drugs to patients on the entities’ behalf. Becerra has said in appearances before Congress that the companies must obey the law, but it is unclear if the administration will address the contract pharmacy matter in its plan.
Pelosi called the House back in session yesterday from its summer recess to begin a series of votes this week leading toward House approval of President Biden’s infrastructure plan and passage of a budget resolution. Passage of the latter would lead to passage later of a budget reconciliation containing a host of Democratic priorities, including steps to lower drug prices.
Pelosi last night postponed a vote on the rule for consideration of the infrastructure and budget resolution bills until today. There is division in Democratic ranks over whether to vote on the two matters separately or concurrently.
“President Biden has proposed to lower prescription drug costs as part of his Build Back Better Agenda, calling on Congress to address this crisis and allow Medicare to negotiate drug prices and significantly reducing costs for millions of Americans,” a White House official said.
While 340B provider groups have generally stayed out of the debate over allowing Medicare to negotiate drug prices, they do not want the 340B program to be eroded. 340B hospitals panned President Trump’s “Most Favored Nation” plan that would have utilized an international pricing index to determine reimbursement. The drug industry and a wide swath of other health care stakeholders also criticized the proposal, and the pharmaceutical industry was successful in blocking the plan in the courts.
340B Providers Worry about Lost Savings from Medicaid
While 340B provider groups are generally supportive of Democratic efforts to reign in drug costs, they are concerned that the budget reconciliation bill that ultimately emerges might include “spread pricing” language requiring Medicaid managed care organizations (MCOs) to reimburse drugs dispensed to enrollees at acquisition cost plus a dispensing fee. Covered entities, especially those that treat high percentages of Medicaid managed care enrollees, would take a huge financial hit from not being able to bill Medicaid MCOs at above 340B acquisition cost for drugs.