UPDATE Jan. 5, 2021 2:30 p.m. EST—Shortly after we published today’s issue, Pharmaceutical Research and Manufacturers of America (PhRMA) responded to our request for comment on the U.S. Health and Human Services (HHS) General Counsel’s Dec. 30 advisory opinion on 340B contract pharmacy.

PhRMA said:

PhRMA continues to have concerns with the growing role of contact pharmacies in the 340B program and the lack of evidence that patients are benefiting from contract pharmacy participation in 340B. It is alarming that outdated guidance that has no basis in the law has enabled for-profit corporations to profit from a program meant to support safety-net facilities and needy patients. PhRMA remains committed to pursuing changes in the program that ensure our discounts help low income and uninsured patients, not contract pharmacies.

Chicago Tribune, one of the nation’s largest daily newspapers, yesterday published a front-page, nearly 2,000-word article about drug manufacturers’ denials of 340B pricing on medications dispensed by contract pharmacies.

Reporter Madeline Buckley wrote that “the 340B program is in danger after Indianapolis-based pharmaceutical giant Eli Lilly announced in 2020 that it would not provide drugs to clinics unless they administer them on-site or through a single contract pharmacy—a hurdle that makes it more difficult for patients to receive the discounted Eli Lilly drugs, according to doctors, pharmacists and clinic administrators.”

“Other manufacturers, including AstraZeneca, Novartis, Sanofi-Aventis, Novo Nordisk and United Therapeutics, have since followed, according to a recent federal lawsuit, and doctors now worry about a further cascading effect,” Buckley said.

U.S. Sen. *** Durbin (D-Ill.)—the second-highest ranking Senate Democrat—tweeted yesterday in response to the article:

It’s more important than ever that safety-net clinics and hospitals are able to provide care to low-income and underserved communities. Threatening the 340B program is another egregious example of Big Pharma profiteering off patients and jeopardizing their care.

Illinois Gov. J.B. Pritzker (D) tweeted, “Unbelievable.” He said Illinois Pharmacists Association President J. Cody Sandusky, who was quoted in the article, “said it best: ‘Of all the times to take these actions, that really blows my mind. Our health system is already stretched to its limits right now.’” To make sure Lilly, AstraZeneca, Novartis, Sanofi, and Novo Nordisk saw his message, Pritzker included their Twitter account names in a “CC” line at the bottom of his tweet.

The Tribune article comes on the heels of the U.S. Health and Human Services Department’s (HHS) Dec. 30 advisory opinion rejecting the manufacturers’ legal arguments in support of their actions. “We conclude that to the extent contract pharmacies are acting as agents of a covered entity, a drug manufacturer in the 340B Program is obligated to deliver its covered outpatient drugs to those contract pharmacies and to charge the covered entity no more than the 340B ceiling price for those drugs,” HHS General Counsel Robert Charrow wrote.

Connecticut Attorney General William Tong (D) on Dec. 31 called the advisory opinion “a powerful statement from HHS that puts a tremendous amount of pressure on drug companies to do the right thing.”

“It is very encouraging to see HHS affirm Congress’s plain intent for the 340B Drug Pricing Program, and is consistent with the continuing efforts of this office to protect vulnerable patients from the unlawful and unacceptable actions of these drug manufacturers,” Tong said.

Tong last month co-led a bipartisan group of 29 state attorneys general (including the District of Columbia’s) in sending a letter to HHS Secretary Alex Azar urging HHS to address drug companies’ denials of 340B contract pharmacy pricing. California AG Xavier Becerra (D), President-elect Biden’s choice to succeed Azar at HHS, was another co-leader. Illinois AG Kwame Raoul (D) was one of the signers.

Pharmaceutical Research and Manufacturers of America (PhRMA) yesterday told us it is reviewing the advisory opinion.

Drug manufacturer Novartis late last week responded to our Dec. 30 request for comment on the advisory opinion. (We included manufacturer’s Sanofi’s response in the second of our two Dec. 30 articles, and are still awaiting comment from other drug companies involved.)

Novartis said:

We are still assessing the US Health and Human Services advisory opinion issued on Dec 30 and its implications.

Novartis firmly supports the core mission of the 340B program to increase access to outpatient drugs among uninsured and other vulnerable patients.

Contract pharmacies have expanded exponentially over the past decade without strong controls or oversight in place. The unfortunate reality is that the overwhelming majority of discounts from medicines dispensed at pharmacies are not shared with patients.  These discounts benefit for-profit pharmacies, third-party administrators, other midddlemen and hospitals with no requirement that those funds be used for charitable care at hospitals.

We believe 340B program reform is needed, and we look forward to continuing to work with Congress, the Department of Health and Human Services, and other stakeholders to ensure that the program operates within its intended framework and thereby address the long-standing concerns that threaten the sustainability of the program.

The Tribune article focuses on the effect the manufacturers’ actions are having on Erie Family Health Centers, a Chicago-area consolidated health center program with seven primary care centers, a teen health center, and five school-based centers. According to data on 340B OPAIS, the federal 340B program database, Erie has 170 340B contract pharmacy arrangements, the majority with national chain drug stores Walgreens and CVS.

Hannah Rowell, Erie’s 340B program manager, told the Tribune it is impractical for low-income patients, many of the dependent on public transportation, to get their 340B-discounted prescriptions filled at clinic sites.

“Many people are working two jobs, with long hours,” Rowell said. “We need to be able to provide them with pharmacy access where they live.”

“Our view is simply that the 340B program is broken. Congress had great intentions,” Derek Asay, Lilly’s Senior Director for government strategy, federal accounts, and quality told the Chicago newspaper. “But it’s quite frankly a profit engine for hospitals rather than passing along” the discount to patients.

The Tribune article is the second in recent weeks by a major U.S. daily newspaper about manufacturers’ denials of 340B pricing on contract pharmacy drugs. On Dec. 15, Washington correspondent Sheryl Gay Stolberg of The New York Times wrote about the manufacturers’ clampdown on 340B contract pharmacy and its fallout.

View From Capitol Hill: An Inside Look at the Latest Developments Shaping the 340B Program

As 340B covered entities continue to feel the financial impact of Medicare Part B reimbursement cuts and drug manufacturer actions that limit access to 340B pricing, a new Administration and new Congress will soon be in place. What will this mean for the future of the 340B program?

Join Omnicell for a live virtual event, “View from Capitol Hill: An Inside Look at the Latest Developments Shaping the 340B Program,” to hear from multiple 340B stakeholders in a lively discussion of the latest industry and legislative developments in 340B—just as the 2021 legislative season gets underway. The session will address:

• The status of proposed and pending legislative and legal actions
• Financial implications
• A covered entity’s perspective around strategies for optimizing program performance amidst the ever-changing 340B landscape
• The future of the 340B program

This live session takes place on Wednesday, Jan. 27 from 10:00 AM–11:00 AM PT | 1:00 PM–2:00 PM ET, and will feature Omnicell 340B’s Jeff Spencer; Ted Slafsky, publisher and CEO of 340B Report; Shrujal Patel, co-founder and managing director of Alinea Group, LLC; and a covered entity guest.

Spots are limited, so register today. 

Pfizer’s Top GR Official: Patients, not Providers, Should Get 340B Price

“A simple solution for the 340B program would be for the discounted price to follow the individual and not the institution,” Robert Popovian, drug manufacturer Pfizer’s vice president for U.S. government relations, tweeted this morning.

What prompted Popovian’s tweet is unclear, and he did not spell out the problem that he believes needs to be solved. We’ve reached out to him to find out. Pfizer is the world’s largest pharmaceutical company in terms of revenue ($51.75 billion in 2019).

Restructuring the 340B program so that the value of statutory 340B price reductions would go to patients, not to hospitals, health centers, and clinics, would fundamentally change the program’s purpose, which is widely understood to be to enable covered entities to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Pharmaceutical Research and Manufacturers of America has described 340B’s purpose as being “to help uninsured or vulnerable patients access prescription medicines through safety net facilities.”

Much of the fight over the 340B program boils down to disagreement between providers and manufacturers over what the program should do.

Critical Assess Hospitals That Grab New Lifeline Might Lose 340B Discounts

The $1.4 trillion federal appropriations and pandemic-relief bill signed into law Dec. 27 includes language to keep some financially distressed rural hospitals afloat in a reduced capacity. It is unclear, though, whether the hospitals would lose their 340B eligibility in the process.

The U.S. Health Resources and Services Administration (HRSA) told 340B Report on Dec. 29 it is reviewing the provision “and will be working with our departmental colleagues to determine their impact on 340B program participants.”

According to a U.S. House Ways and Means Committee fact sheet, the language in the appropriations/COVID bill lets critical access hospitals (CAHs) that can no longer afford to offer inpatient services reclassify themselves for Medicaid payment purposes under a new category—rural emergency hospital (REH). These can offer emergency care, observation care, outpatient hospital services, telehealth services, ambulance services, and skilled nursing facility services. REHs will be reimbursed under Medicare prospective payment systems, plus an additional monthly facility payment and an add-on payment for hospital outpatient services.

In a Dec. 21 news release about the appropriations/COVID bill, the American Hospital Association indicated that the REH language came from the Rural Emergency Acute Care Hospital (REACH) Act, which AHA backed. The appropriations/COVID bill and the REACH Act both are silent about what happens to a CAH’s 340B eligibility if one becomes an REH. Neither expressly adds REHs in the 340B statute as covered entities.

The appropriations/COVID bill also will let financially strapped rural prospective payment system (PPS) hospitals—which aren’t 340B-eligible—with 50 or fewer bed to convert into REHs.

The National Rural Health Association (NRHA) said yesterday it “is committed to working with the administration to ensure that those who wish to take advantage of this new model will be able to continue utilizing the critical 340B Drug Pricing Program.”

Josh Jorgensen, NRHA government affairs and policy manager, said, “While there is a lot of optimism surrounding the creation of the REH model, there are still a lot of unknowns. At this time, we don’t know how many providers will take advantage of this new designation, nor do we know yet how this will impact the 340B Drug Pricing Program.”

“We believe the REH gives rural communities an additional tool to provide efficient care in rural communities as we move forward,” he said. “Innovative models that enable rural providers to meet the needs of their communities are needed to ensure these communities prosper.”

South Dakota-based Sanford Health, the nation’s largest rural nonprofit health system, told 340B Report yesterday the CAH-to-REH conversion option “would not be a good match for our CAHs at this time.”

“There are too many implications, both operational and financial, that are unknown at this time, in addition to possible 340B impacts,” Sanford Senior Vice President Martha Leclerc said. She said after regulations implementing the conversion option are finalized, Sanford would “assess our facilities for a change in status from both an operational and from a financial/reimbursement  perspective.”

“We tend to be a little cautious in making status changes for our facilities until we know all the possible consequences,” Leclerc said. “It is not an easy transition both from a regulatory and from an operational standpoint.”

First Quarterly 340B Registration Period of 2021 Ends Jan. 15

The first of four 15-day periods this year for eligible health care providers to register to participate in 340B program began Jan. 1 and ends Jan. 15. Providers that enroll this month can start buying and using 340B-priced drugs on April 1.

The other three scheduled registration periods in 2021 are:

• April 1-15 for an effective start date of July 1
• July 1-15 for an effective start date of Oct. 1
• Oct. 1-15 for an effective start date of Jan. 1, 2022.

In a coup for 340B hospitals last June, the U.S. Health Resources and Services Administration (HRSA) began letting them use 340B drugs in certain unregistered offsite outpatient facilities, to the extent that the facilities’ patients also are patients of the hospital. Hospitals long complained about delays of up to 22 months accessing 340B pricing at otherwise qualified offsite locations due to HRSA’s policy that such locations first must be listed as reimbursable on the hospital’s most recently filed Medicare cost report. During the COVID-19 pandemic’s first wave, hospitals asked if there was some way that they could start using 340B drugs at such locations sooner.

HRSA hasn’t changed its policy about offsite locations needing to be listed on the cost report before they can be registered. It simply noted in June, on its COVID-19 resources webpage, that for such locations, “the patients of the new site may still be 340B eligible to the extent that they are patients of the covered entity.”

“These situations should be clearly documented in the covered entity’s policies and procedures,” HRSA said. “In addition, a covered entity is responsible for demonstrating compliance with all 340B Program requirements and ensure that auditable records are maintained for each patient dispensed a 340B drug.” HRSA a short time later told 340B Report this wasn’t just a temporary change for the duration of the pandemic, but permanent.

Once covered entities are registered in 340B, they have to recertify their eligibility annually to stay in the program. HRSA told 340B Report said last week that its Office of Pharmacy Affairs (OPA) has not yet set the dates for grantee and hospital recertification in 2021.

Federal Courts Put the Brakes on Most-Favored-Nation Drug Pricing Rule

Two federal district judges, in separate lawsuits filed by the drug and biotech industries, late last month stopped the Trump administration from implementing its “most favored nation” (MFN) drug payment model that will base federal reimbursement for 50 expensive, physician-administered drugs on the lowest price that drug manufacturers get in similar countries. Implementation was scheduled to start Jan. 1.

Participation in the MFN payment model is mandatory for 340B hospital outpatient departments reimbursed by Medicare. The model would force 340B hospitals, and other providers, either to get manufacturers somehow to agree to charge them less for the drugs, or to absorb financial losses from lower Medicare reimbursement.

340B hospitals already are being paid almost 30 percent less than they were in 2017 for the drugs included in the MFN model, under the Trump administration’s broader Medicare Part B drug reimbursement cuts for 340B hospitals through the hospital outpatient prospective payment system. The Nov. 27 MFN final rule said 340B hospital reimbursement for the 50 drugs in the demonstration program would be whichever is less—the payment rate under MFN, or the rate under the OPPS cuts.

“To the extent these 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,” the MFN rule says.

Hospitals groups joined drug manufacturers and physician groups in panning the MFN rule. The incoming Biden administration has not yet said what it plans to do with the MFN rule but it is likely to withdraw it.

CMS Says Value-Based Purchasing Rule Won’t Significantly Affect 340B

The U.S. Centers for Medicare and Medicaid Services (CMS) on Dec. 31 published a final rule giving state Medicaid agencies more flexibility to negotiate value-based purchasing arrangements (VBPs) with drug manufacturers.

VBP arrangements base payments to manufacturers on patient outcomes. Consider the hypothetical example of an expensive, bio-engineered, one-time treatment that cures some but not all sufferers of a debilitating, expensive-to-manage, lifelong condition. Under a VBP arrangement, a state Medicaid office might pay the manufacturer $1 million for a treatment that completely cured the condition, $0 for one that did nothing, and something in between for an improved patient outcome.

Under a VBP scheme, a drug manufacturer could report multiple best prices for the treatment to CMS for Medicaid drug rebate program (MDRP) purposes. Because Medicaid best price (BP) and average manufacturer price (AMP) affect 340B ceiling price, commenters on CMS’s proposed rule asked it to clarify how VBP arrangements would affect 340B pricing.

“While this regulation allows manufacturers to report multiple best prices associated with their VBP arrangements, manufacturers will continue to be required to report a best price for each dosage form and strength of a drug paid for outside of the VBP arrangement (non-VBP best price),” CMS pointed out in the final rule’s preamble. “Therefore, the 340B ceiling price will continue to reflect a Medicaid drug rebate based upon the non-VBP best price.”

CMS also said in the preamble, “while we do not anticipate that this rule will reduce a drug’s AMP, manufacturers should also consider the effects of their VBP arrangements on payment amounts that are determined for use in other parts of Medicare, for example the effects of VBP arrangements on AMP if AMP is used to determine payment allowance for a drug” covered under Medicare Part B.

At least one commenter suggested that CMS acted arbitrarily and capriciously by failing to analyze adequately the rule’s impact on Medicare prices and the 340B program.

“This rule makes no changes to either the pricing program under 340B of the PHSA [Public Health Service Act] or Medicare Part B payment policies,” CMS responded. “Furthermore, we do not believe we have failed to consider the impacts on these programs because we believe the changes made by this final rule will not have a significant impact on best price, AMP or Medicaid drug rebates that would impact either Medicare Part B payment allowances or 340B pricing. That is, because manufacturers will continue to be required to report a non-VBP best price when reporting multiple best prices generated from a VBP arrangement, and that non-VBP best price will be used to calculate the 340B ceiling price.”

CMS said it was revising its definition of Medicaid best price “to state that if a manufacturer offers a value based purchasing arrangement” as defined in the Social Security Act “to all states, the lowest price available from a manufacturer may include varying best price points for a single dosage form and strength as a result of that value based purchasing arrangement.” To address operational and administrative challenges adjusting to the new definition, it delayed the effective date of permissible multiple best price reporting to Jan. 1, 2022.

The final rule also requires drug manufacturers, for Medicaid best price reporting purposes, to ensure that the benefits of their patient copay assistance programs, drug discount cards, coupons, and other patient assistance programs (PAPs) for privately insured patients flow entirely to consumers.

Manufacturers previously could exclude such patient assistance from Medicaid best price calculations to the extent the full value was passed on to the consumer “and the pharmacy, agent, or other entity does not receive any price concession.” CMS said in the final rule’s preamble that some pharmacy benefit managers (PBMs) require or encourage health plans to capture the value of PAPs for themselves, and not pass the value to the patient.

Pharmaceutical Research and Manufacturers of America (PhRMA) and others objected strongly to CMS’s plan to require manufacturers to ensure that patients get the full value of patient assistance. They said it was unlawful to hold manufacturers accountable for PBMs and health plans’ actions, and that the rule could result in manufacturers setting higher prices or withdrawing patient assistance.

Pharma Hikes Prices on 645 Drugs Since Jan. 1, More Hikes Expected

Drug manufacturers raised U.S. prices on 645 drugs in the first four days of 2021 (wholesale acquisition cost increases net of WAC decreases), the nonprofit drug pricing think tank 46brooklyn reports, with more price increases expected as the month goes on.

In response to pressure from the Trump administration, in 2018 a number of major drug manufacturers pledged to keep their drug price increases below 10 percent annually. Many others followed suit. Since then, January has become the month that many drug companies announce new, higher prices for the year.

So far, the median percentage WAC increase on brand name drugs has been 4.8 percent, 46brooklyn said. “Brand name drugs with price increases” in the first four days of the year “represent 40 percent of prior year Medicaid spending on all brand name drugs,” it said. These drugs “had a weighted average cost per claim of $809 in Medicaid in 2020.”

The following are selected percentage WAC changes among top brand name drugs in terms of Medicaid gross spending:

• Humira (Abbvie) +7.4 percent
• Biktarvy (Gilead) +4.8 percent
• Vyvanse (Takeda) +5.0 percent
• Flovent (GSK) +3 percent
• Latuda (Dainippon Sumimoto) +4.9 percent
• Equilis (BMS) +6.0 percent
• Trulicity (Lilly) +5.9 percent
• Triumeq (GSK) +4.9 percent
• Symbicort (AstraZeneca) +2.0 percent
• Vraylar (Abbvie) +3.5 percent