HRSA Releases 340B Insulin Final Rule Over Health Centers’ Strong Objections

Health centers say the Trump administration’s final rule, released today, requiring them to pass their 340B saving on insulin and epinephrine auto-injectors to low-income patients will do more harm than good. | Source: Shutterstock

HRSA Releases 340B Insulin Final Rule Over Health Centers’ Strong Objections

The U.S. Health Resources and Services Administration (HRSA) this morning released a final rule to implement the Trump administration’s controversial executive order requiring community health centers to pass their 340B program savings on insulin and epinephrine autoinjectors to low-income, uninsured, and underinsured patients.

Health centers argued, but could not persuade the administration, that the rule should have been withdrawn. They said Trump’s order and the rule fundamentally misunderstand how health centers and the 340B program work, and would do more harm than good if implemented.

“We remain troubled by the Administration’s continued insistence on a rule that will make it harder for health centers to provide life-saving and affordable medications and services for patients in the midst of a pandemic,” National Association of Community Health Centers (NACHC) Vice President, Media Relations Amy Simmons Farber said.

“Even members of Congress recognize that this rule will do more harm than good at a time when too many people are suffering,” Simmons Farber continued. “Health centers have a long history of utilizing the 340B program to deliver low-cost medications to America’s most vulnerable, as Congress intended—and we remain committed to ensuring that all patients receive the medication prescribed to them, regardless of their ability to pay. Our hope is that policymakers will recognize that a pandemic is no time to destabilize the safety net. Certainly, the high cost of prescriptions remains a national crisis—but health centers are the solution—not the problem.”

In September, 104 U.S. House Democrats asked U.S. Health and Human Services (HHS) Secretary Alex Azar to rescind or not implement Trump’s executive order.

“The rule implementing the Executive Order adds bureaucracy and burden to the existing Health Center mandate to ensure that all patients can access health care and medication regardless of ability to pay,” said attorney Jason Reddish, Partner at Feldesman Tucker, whose clients include NACHC, state primary care associations, and individual health centers. “We would have much preferred to see the White House and HHS address a real and ongoing danger to patients’ ability to access affordable medication—drug manufacturers that are illegally refusing to ship 340B program drugs to community pharmacies contracted with safety net providers to dispense the discounted drugs to health center patients.”

The regulation will be formally published in the Federal Register tomorrow Dec. 23 and is scheduled to take effect on Jan. 22—two days after Joe Biden is sworn in as President. We asked Biden’s transition office yesterday, but have not heard back from it, if the rule is on the incoming administration’s radar, and if it is, whether Biden’s team has decided what, if anything, to do about it.

The new administration, for example, could push back the rule’s effective date, as the Trump administration did for nearly two years with the 340B ceiling price and manufacturer civil monetary penalties final rule issued during the Obama administration’s final days. Biden’s administration would likely be receptive to an appeal from health centers to stop the rule from taking effect altogether.

Health centers might also ask the new Congress to use its power under a 1996 law to pass a joint resolution disapproving the insulin rule, which would then go to Biden for his signature. The law was passed to give Congress a check on “midnight regulations” issued by outgoing presidential administrations during their last days.

HRSA’s final rule is largely the same as the proposed rule it published for notice and comment in late September. If it takes effect, 340B health centers and their subgrantees would have to have written policies and procedures to make insulin and injectable epinephrine available at or below 340B acquisition cost plus a minimal administration fee to patients with low incomes who (a) have a high cost sharing requirement for either insulin or injectable epinephrine, (b) have a high unmet deductible, or (c) have no health insurance. Centers would have to be able to show to HRSA they have such P&Ps to get federal health center program grants under section 330 of the Public Health Service Act.

HRSA in the rule defines “low income” as being at or below 350 percent of the federal poverty line. It said centers should refer “to the Medicaid dispensing fee in their state as a comparison for what may be considered a minimal administration fee.” HRSA said “a cost sharing requirement that exceeds twenty percent of the amount the health center is charging its patients for the drug would be considered a high cost sharing requirement.” It based its definition of “high deductible” on the definition the Internal Revenue Service uses to set annual contribution limits to health savings accounts. And it defined “high unmet deductible” as “the amount a patient owes toward their high deductible at any time during a plan year in which the portion of the patient’s high deductible for the plan year that has not yet been met exceeds 20 percent of the deductible.”

HRSA said it received 226 comments on its proposed rule. Only 23 commenters expressed support, it said, mainly individuals or family members of those who rely on insulin or injectable epinephrine.

“Many commenters (175), including many health centers, strongly urged that the proposed rule either not be finalized or be delayed in implementation, although most of these comments shared in the Administration’s goal of ensuring access to these two life-saving medications,” HRSA said in the rule’s preamble.

HRSA disagreed with one commenter’s argument that its proposed rule was arbitrary and capricious and contrary to the Administrative Procedure Act because HRSA did not provide a legal justification for the rule.

HRSA declined to change the final rule in response to comments that, due to insulin price fluctuations from quarter to quarter, many patients would face dramatic changes in how much they pay from insulin, or could be shifted from one insulin to another, creating clinical complications for the patient and administrative burden for the center.

HRSA also declined to:

  • change the final rule’s definition of low-income “to better align with definitions used by other federal programs and private entities”

  • clarify the rule’s definitions of minimal administration fee, high cost sharing requirement, high deductible, and high unmet deductible.

  • clarify that health centers are obliged to charge the 340B price or less only to patients who are eligible to receive 340B-priced drugs from the center.

HRSA did agree to a commenter’s request to add language to the rule ensuring that health centers are not forced to provide discounts to underinsured patients if doing so would violate the terms of their insurance contracts.

Lilly Changes its One-Contract-Pharmacy 340B Policy Again, This Time in Hospital’s Favor

Drug manufacturer Eli Lilly and Co. has, for the second time, changed its exception to its ban on 340B pricing for drugs dispensed by contract pharmacies. Lilly now will let hospitals that lack an in-house retail outpatient pharmacy designate one contract pharmacy as a ship-to location for Lilly products.

Lilly and manufacturer AstraZeneca both have stopped providing 340B pricing on products shipped to contract pharmacies. They separately said they would let covered entities without an in-house pharmacy apply to designate a single contract pharmacy to dispense the companies’ products. (Other manufacturers are making entities turn over their contract pharmacy claims data to keep getting 340B pricing.)

Last month, we reported that Lilly was rejecting hospitals’ applications on the grounds that the hospitals had pharmacies registered as ship-to sites in 340B OPAIS, the federal 340B program database. Hospitals tried to explain these were institutional, non-retail pharmacies that served infusion centers and the like, not retail outpatient pharmacies. Lilly held firm, pointing to language in its revised application form stating:

Lilly does not make any distinctions related to the dispensing practices of the in-house pharmacies. If the pharmacy is eligible as a shipping location to receive 340B price product and is not a contract pharmacy, it is considered an in-house pharmacy.

Late last week, a hospital that Lilly would not let have a contract pharmacy on these grounds told us Lilly relented and will now let it designate a contract pharmacy. Lilly asked the hospital to fill out its application form, which has been revised again and no longer has the language above about being disqualified for having an in-house, 340B-eligible pharmacy.

Florida Medicaid Sent 340B Letters to Four Other Drug Companies

Earlier this month, we reported that Florida’s Medicaid director sent a letter in late November to Eli Lilly and Co. CEO David Ricks asking him to suspend Lilly’s cutoff of 340B pricing on its products shipped to covered entities’ contract pharmacies, saying Lilly’s actions “threaten to negatively impact the health of Florida residents.”

The Florida Agency for Health Care Administration (AHCA), the state Medicaid department’s parent, confirmed last week that Deputy Secretary for Medicaid Beth Kidder at the same time sent identical letters to the CEOs of AstraZeneca, Novartis, Sanofi, and Merck. AstraZeneca’s policy is similar to Lilly’s. Sanofi is conditioning continued 340B pricing on entities’ provision of their contract pharmacy claims data. Novartis is honoring hospital contract pharmacy arrangements for contract pharmacies located within a 40 mile radius of the covered entity hospital. Merck said it might take “less collaborative, and substantially more burdensome” action against entities that do not give it their contract pharmacy claims data.

Shortly before Kidder wrote to the five manufacturers, United Therapeutics informed entities that, effective Nov. 20, it would accept 340B contract pharmacy orders only if the entity used the pharmacy “for a valid 340B purchase” of a company covered outpatient drug “during the first three full quarters” of 2020. It is letting entities without an on-site pharmacy designate a single contract pharmacy. Beginning May 13, United Therapeutics will accept 340B contract pharmacy orders from entities only if the entity provides, on an ongoing basis, contract pharmacy claims data for the company’s products.

On Dec. 1, manufacturer Novo Nordisk announced that, beginning Jan. 1, it will stop facilitating bill-to/ship-to distribution of 340B-priced products to hospital contract pharmacies. It said it will let hospitals that do not have an on-site pharmacy at either a parent or child location to designate a single contract pharmacy location to accept bill-to/ship-to orders.

Three manufacturers—Lilly, Novartis, and Sanofi—responded to Kidder by email.

Lilly’s Dec. 4 reply email was to notify Kidder of an attached letter to her from Lilly Senior Vice President and General Counsel Anat Hakim. We’ve asked AHCA for a copy of Hakim’s letter.

Kidder copied Novartis’ Director of Medicaid Business Sean Pascoe on her Nov. 23 letter to company CEO Vasant Narasimhan. The next day, Pascoe emailed back to assure Kidder he would pass her letter along, and offered “to put you in touch with someone who can provide additional information about our new policy.”

“We are firmly committed to the mission of 340B to serve underinsured and other vulnerable patients,” Pascoe wrote. “The policy is designed to take a reasonable, focused approach to reaffirm the program’s intent, while preserving the sustainability of this vital program.”

“Patients with a prescription will still be able to acquire the same medicines from their pharmacy and we will continue to provide 340B discounts to hospitals,” Pascoe said. “This policy only affects hospital contract pharmacy arrangements outside a 40-mile radius.”

Kidder copied Sanofi Genzyme Associate Director Medical Managed Care Manuel Nunez on her letter to Sanofi US CEO Paul Hudson. Nunez wrote back to thank her for the letter and to say he would “forward accordingly.”

AHF Blasts Kalderos and Holds Demonstration Against Amgen

AIDS Healthcare Foundation (AHF) on Monday urged the U.S. Health Resources and Services Administration (HRSA) “to assert its authority as enforcer of the 340B program and reject” drug manufacturer reimbursement vendor Kalderos’ 340B Pay software platform that lets drug companies provide back-end 340B rebates instead of up-front 340B discounts.

AHF today is protesting in front of Amgen’s headquarters near Los Angeles over the biotech company’s announcement that effective Jan. 1 it is ending voluntary 340B pricing on orphan-designated drugs for free-standing cancer hospitals, critical access hospitals (CAHs), sole community hospitals (SCHs), and rural referral centers (RRCs), which are precluded from getting 340B discounts on orphan drugs.

Regarding Kalderos’ 340B rebate model, AHF Chief of Public Affairs and General Counsel Tom Myers said:

Anyone who shops knows the difference between getting a discount at the time of purchase and a rebate at some unspecified date. At best, rebates mean long delays. At worst, they are illusory—denied when a manufacturer finds fault with your application or your receipt or determines that someone else has already claimed the rebate. Under the 340B statute, drug manufacturers are required to sell drugs to safety net providers at or below the discount price. It is not for drug manufacturers or their agents to determine when or who or on what conditions covered entities get that price.

Regarding Amgen’s decision to end voluntary price reductions on its orphan-designated drugs for 340B rural and cancer hospitals, AHF National Director of Advocacy John Hassell said:

At a time when the U.S. health system is under tremendous stress from the COVID-19 pandemic, this enormously wealthy drug company has decided to make it worse. The rapacious greed of Amgen is limitless.

AHF called on the U.S. Health and Human Services Department (HHS) “stop this callous drug industry attack on the U.S. healthcare safety net.” There might be little HHS can do, however. In 2013, HHS’s Health Resources and Services Administration (HRSA) published a final rule that would have let 340B rural and cancer hospitals get 340B pricing on orphan drugs when they were used “for any medically-accepted indication other than treating the rare disease or condition for which the drug” received its orphan designation. A federal district judge, however, ruled in 2014 that HRSA did not have authority from Congress to issue the rule.

Bipartisan bills have been introduced in Congress to let rural and free-standing cancer hospitals buy orphan drugs at 340B prices when they are used to treat common conditions. But they have failed to gain traction.

Congress Bids 2020 Adieu With Massive Appropriations and COVID Relief Bill

Congress last night passed a $1.4 trillion fiscal year 2021 consolidated appropriations bill, including $900 billion in COVID-19 relief. It very likely will be the final act for the 116th Congress. The 117th Congress is scheduled begin on Jan. 3.

The U.S. House Appropriations Committee released the 5,593 page bill around 3:30 p.m. EST yesterday. Highlights include:


$22.4 billion for testing and contact tracing. $3 billion in additional Provider Relief Fund grants for hospital and other health care providers.

Medicare and Medicaid provider payments

Three-month delay, through March 31, of the 2 percent Medicare sequester payment reduction. Eliminated $4 billion cut this fiscal year in Medicaid disproportionate share hospital payments and delayed subsequent reductions for two more years.

No Surprises Act

Includes legislation to ban surprise medical bills. Modern Healthcare (subscription required) reports, “Hospitals and doctors scored a lobbying win by excluding Medicare and Medicaid payment rates from consideration” when insurers and providers submit disagreements over unpaid portions of patients’ bills to arbitration.

Health Resources and Services Administration (HRSA)

$7.5 billion appropriation for fiscal year 2021, up $151 million. Appropriation for HRSA Office of Pharmacy Affairs not yet known.

Health centers

Federal grant funding reauthorized through fiscal year 2023. $1.7 billion appropriation for FY 2021, up $57 million.

HIV/AIDS clinics

$2.4 billion appropriation for Ryan White HIV/AIDS program, up $35 million.

Family planning clinics

$286 million appropriation for Title X family planning.

The massive end-of-year bill came together after days of House-Senate-White House negotiations. At one point, negotiators reportedly considered adding language from House and Senate drug pricing bills fiercely opposed by 340B provider groups. That language would require Medicaid managed care organizations or their pharmacy benefit managers (PBMs) to pay no more than ingredient cost and a dispensing fee for covered outpatient drugs. If that language were to become law, providers’ 340B savings on drugs dispensed to Medicaid managed care beneficiaries would vanish. Congressional negotiators reportedly considered applying the money the federal government would have saved from such a move as a “pay-for” for the reauthorization of health center grants and other federal health programs.

The PBM pass-through pricing language is present in both the House-passed drug pricing bill, H.R. 3, and Senate Finance Committee Chair Chuck Grassley’s (R) drug pricing bill, S. 4199. Both bills will die when this session of Congress ends.

When 2020 began, the odds of Congress passing and President Trump signing legislation to address high drug prices were high. The COVID-19 pandemic put drug pricing on the back burner. During his campaign for office, President-elect Biden called for:

  • “Repealing the outrageous exception allowing drug corporations to avoid negotiating with Medicare over drug prices.”

  • “Limiting launch prices for drugs that face no competition and are being abusively priced by manufacturers.”

  • “Limiting price increases for all brand, biotech, and abusively priced generic drugs to inflation.”

  • “Allowing consumers to buy prescription drugs from other countries.”

  • “Terminating pharmaceutical corporations’ tax break for advertisement spending.”

  • “Improving the supply of quality generics.”

According to findings from the Kaiser Family Foundation Health Tracking Poll published Dec. 18, 89 percent of respondents (97 percent of Democrats and 84 percent of Republicans) support Biden’s proposal to let the federal government negotiate with drug companies to get a lower price on medications that would apply to both Medicare and private insurance. Nonetheless, the chances that a bill will make it to President Biden’s desk that will allow Medicare to negotiate drug prices remains in doubt. Senate Majority Leader Mitch McConnell (R-Ky.) has strongly opposed these efforts, and he will remain a key player regardless of the outcome of the two Georgia U.S. Senate races on Jan. 5.