Note from Publisher and CEO Ted Slafsky: I encourage you to read today’s sponsored content article from 340B Report sponsor Trellis Rx about a Sept. 22 panel discussion on recent manufacturer actions in the contract pharmacy space as well as mitigation strategies. I will provide an update on the latest policy developments and discuss what might happen next. Trellis Rx CEO Andy Maurer and Chief Pharmacy Officer Jerry Buller will discuss its potential impact on patients and providers and how to address these challenges. You can learn more and register below.
BREAKING: Hospital Groups Ask Full U.S. Appeals Court to Rehear 340B Lawsuit
The American Hospital Association, the Association of American Medical Colleges, America’s Essential Hospitals, and three health systems have asked a federal appeals court in Washington, D.C., to reconsider a three-judge appellate panel’s July 31 decision upholding the Trump administration’s nearly 30 percent cut since 2018 in 340B hospitals’ drug reimbursement under the hospital outpatient prospective payment system (OPPS). We will report in greater depth soon about the request for a rehearing.
In Partisan U.S. House, Consensus Emerges Over Manufacturer 340B Actions
Three out of four Democratic members (174 members or 75 percent) and just over one out of every three Republican members of the U.S. House (69 members or 34.8 percent) signed yesterday’s bipartisan House letter to U.S. Health and Human Services (HHS) Secretary Alex Azar demanding “immediate action to stop [drug] companies from either denying or limiting access to 340B pricing to hospitals, health centers, and clinics participating in 340B.” Click here for a PDF that breaks down the letter’s 243 signers by party affiliation.
The strong support for the letter, especially by Republicans, will raise pressure on Azar and the Trump administration either to persuade the manufacturers to retreat or sanction them if they remain on their current course.
“Protecting access to prescription drugs for underserved communities should be a top priority,” said Rep. David McKinley (R-W.Va.), one of the six House members who led the drive to collect signatures for the letter. “Unfortunately, the big pharmaceutical companies’ recent actions to restrict 340B drug discounts could jeopardize the ability of hospitals to provide vital services to vulnerable populations. Our letter shows strong bipartisan opposition to this action, and hopefully will convince HHS to intervene.”
McKinley is a senior member of House Energy & Commerce committee and is the third ranking Republican member on the Oversight and Investigations (O&I) subcommittee. The committee has direct jurisdiction over the 340B program. His colleague, Rep. Diana DeGette (D-Colo.), who spearheaded the letter with McKinley, chairs the O&I Subcommittee. The subcommittee can hold investigations as well as subpoena witnesses.
How Health Systems Can Mitigate the Impact of Drug Manufacturers’ Recent 340B Contract Pharmacy Policies
In recent weeks, drug manufacturers announced policies limiting covered entities from accessing 340B pricing for drugs dispensed through contract pharmacies. These policies threaten an established and relied-upon source of funding for many health systems as they deliver essential services to their communities.
The impact is particularly acute for health systems using contract pharmacies to provide specialty medications to their patients, and many health systems are looking for answers as they try to understand how to mitigate this escalating issue.
On Tuesday, Sept. 22, Trellis Rx is hosting a virtual panel discussion to provide information and insights. Speakers include:
- Ted Slafsky, MPP, Publisher and CEO of 340B Report, Founder and Principal of Wexford Solutions
- Andy Maurer, MBA, Chief Executive Officer of Trellis Rx
- Jerry Buller, DPh, MMHC, Chief Pharmacy Officer of Trellis Rx
Slafsky will focus on key industry and policy developments and will provide his insights on where we are headed. Maurer and Buller will provide an “on the ground” perspective on the potential impact on patient care and how to mitigate these challenges.
Interested in attending? Sign up today on Trellis Rx’s website.
HRSA Speech to Pharma Stakeholders Was Notable for What Wasn’t Said
The head of the federal 340B drug pricing program gave a speech yesterday to drug industry stakeholders that omitted that her office is considering whether five drug manufacturers recently violated the 340B statute and should face civil monetary penalties or other sanctions.
U.S. Office of Pharmacy Affairs (OPA) Director Adm. Krista Pedley’s remarks were made available on demand yesterday to registrants for the Medicaid Drug Rebate Program 2020 Summit, a major annual gathering of drug company officials who oversee compliance with the Medicaid drug rebate and 340B drug discount programs. The event also draws drug industry attorneys and consultants. It is being held virtually this year. The U.S. Health Resources and Services Administration (HRSA) provided 340B Report with a copy of Pedley’s prepared remarks.
This year’s MDRP Summit is occurring during one of the most tense periods in recent 340B program history.
On policing drug manufacturer compliance with 340B program requirements, Pedley told MDRP Summit attendees, as she has told others before: “HRSA reviews and follows up on all allegations brought to its attention regarding manufacturer compliance; particularly that manufacturers are not charging covered entities at or below the 340B ceiling prices, and ensuring that manufacturers are treating 340B entities as they do other customers. HRSA works with all parties involved to resolve the matters and ensure compliance.”
Early this summer, manufacturers Eli Lilly and AstraZeneca announced they would stop providing reduced 340B pricing to contract pharmacies. Sanofi and Novartis began forcing covered entities to submit claims data to keep getting 340B pricing at their contract pharmacies. Merck said entities that don’t provide the data could face unspecified adverse actions. Other manufacturers, meanwhile, are soon expected to announce they will provide 340B pricing in the form of rebates, not discounts. Health centers and other 340B providers and organizations are considering filing lawsuits in response to the manufacturers’ actions.
In early July, in response to questions about Lilly’s preliminary decision to stop providing 340B pricing to contract pharmacies on a single product, HRSA told 340B Report that although its 2010 contract pharmacy guidance is not legally enforceable, manufacturers’ refusal to honor contract pharmacy orders would “significantly [limit] access to 340B discounted drugs for many underserved and vulnerable populations who may reside in geographically isolated areas and rely on a contract pharmacy as a critical point of access for obtaining their prescriptions.”
“HRSA strongly encourages all manufacturers to sell 340B priced drugs to covered entities through contract pharmacy arrangements,” the agency said.
On Sept. 2, HRSA told 340B Report it was investigating whether recent steps by Lilly and other drug manufacturers to curtail or impose conditions on 340B pricing for drugs dispensed by contract pharmacies violated the 340B statute, and whether sanctions should apply, including imposition of civil monetary penalties.
Members of Congress, meanwhile, have been pushing the U.S. Department of Health and Human Services (HHS) and HRSA to take a harder line against the manufacturers.
On Sept. 3, the Democratic chair of U.S. House Energy & Commerce Committee, which has primary jurisdiction over the 340B program, and the Democratic chairs of its Health and Oversight and Investigations subcommittees told HHS Secretary Alex Azar in a letter that the manufacturers’ actions “are not oversight or compliance measures authorized by law, and could represent a failure of manufacturers to meet their requirements under the 340B statute.”
Late yesterday afternoon, a bipartisan majority of the U.S. House told Azar in a letter that the manufacturers’ actions “violate the 340B statute and must be rejected.” They asked Azar “to address these troubling actions and require these companies to comply with the law” immediately.
Asked why Pedley’s prepared remarks yesterday did not address such matters, a HRSA spokesperson said: “HRSA has responded to numerous media inquiries on this issue from 340B Report and other media outlets. When we have updated information to convey to our stakeholders we will do so.”
In her speech yesterday, Pedley said HRSA places “the highest priority on the integrity of the 340B program and continues to enforce the statute to the greatest extent possible.” She noted, as she has before, that HRSA’s ability to enforce and require corrective action is limited because the 340B program is administered primarily by guidance, which “does not provide HRSA appropriate enforcement capability.” She repeated that HRSA is seeking authority from Congress to issue binding and enforceable 340B program regulations.
“I want to emphasize the importance of the stakeholders working with each other and the importance of transparency,” Pedley said. “We encourage all stakeholders, especially covered entities and manufacturers, to work in good faith on areas of concern as these efforts create the necessary transparency for the parties to resolve issues.”
RWC-340B Seeks HHS Action Against Drug Manufacturers by Oct. 1
Ryan White Clinics for 340B Access (RWC-340B) asked U.S. Health and Human Services (HHS) Secretary Alex Azar last Friday to impose civil monetary penalties against drug manufacturers Eli Lilly, Sanofi, Novartis, and AstraZeneca for failing to offer 340B pricing on drugs dispensed by contract pharmacies, as required under the 340B program.
In a Sept. 11 letter to Azar, RWC-340B observed that Lilly currently is not honoring contract pharmacy arrangements for most of its products, and that Sanofi, Novartis, and AstraZeneca plan to stop honoring such arrangements by Oct. 1. “We would construe lack of enforcement by HHS prior to October 1, 2020 as an indication that HHS has refused this request,” it wrote.
“Recent actions by manufacturers that refuse to honor contract pharmacy arrangements will have a direct adverse effect on the financial resources of Ryan White clinics and their ability to continue to provide comprehensive services to their vulnerable patients,” RWC-340B said. It noted that the U.S. Health Resources and Services Administration (HRSA) “has expressed concern in response to these recent manufacturer actions, has encouraged manufacturers to continue to honor contract pharmacy arrangements, and has most recently indicated that it is considering whether the manufacturers’ actions violate the 340B statute.”
RWC-340B told Azar that HRSA’s decision not to publish regulations implementing a binding dispute-resolution process for 340B—something Congress ordered more than 10 years ago—has left covered entities without means to bring claims against manufacturers. “By both failing to provide such a process and failing to enforce the 340B statute in light of the manufacturers’ noncompliance, your department places covered entities in the position of having a ‘right without a remedy,’ which raises serious constitutional and procedural concerns,” it said.
340B’s Inflation Penalty Works, Researcher Says
The 340B program’s financial penalty on drug makers who push their price increases past the inflation rate puts a damper on price hikes that go beyond inflation, according to research published last Friday in JAMA Network Open.
The study by Sean Dickson, Director, Health Policy at West Health Policy Center, looked at brand-name drugs bought by 340B covered entities and reimbursed by Medicare Part D between 2013 and 2017. Under 340B program, when a covered outpatient drug’s price rises at a rate faster than inflation, the manufacturer pays an additional discount. If a drug’s price rises steeply enough relative to inflation, the 340B inflation penalty can lower the drug’s 340B price all the way to a floor of $0.01.
Dickson analyzed 583 drugs, which he said accounted for 85.1 percent of all drug pharmacy expenditures and 90.4 percent of drug use during the years studied. He looked at whether the increase in the share of annual sales of a drug through the 340B program, and thus subject to the 340B inflation penalty, was associated with lower annual price increases.
“The takeaway? Inflation penalties work,” Dickson said in a tweet. Drugs with a higher mean sales percentage subject to 340B inflation penalties over the study period were associated with lower mean annual price increases, the study found. Part D pharmacy expenditures were $7.1 billion lower between 2013 and 2017 than they otherwise would have been due to 340B inflation penalties.
The study additionally found no data “to indicate that inflation penalties or discounts in the 340B program were associated with higher price increases, suggesting that mandatory inflation-based price concessions are not associated with higher list-price increases,” Dickson said. He noted that some health care economists and Pharmaceutical Research and Manufacturers of America “have suggested that the inflation penalty discount in the 340B program may encourage drug manufacturers to implement higher price increases than they would in the absence of such a discount.”
“Broader application of inflation penalties may help to reduce drug price increases and decrease overall drug spending,” Dickson concluded.
The House-passed prescription drug pricing bill H.R. 3 and Senate Finance Chairman Chuck Grassley’s (R-Iowa) drug pricing bill S. 4199 both would require drug manufacturers to issue rebates to Medicare for drugs reimbursed under Part D for which prices rise faster than inflation. The Trump administration in mid 2017 floated the idea of supporting manufacturer rebates to the federal government on Part D drugs, including an inflation penalty, but appeared to drop the idea. Senate Majority Leader Mitch McConnell (R-Ky.) has expressed concerns with Grassley’s bill and has not agreed to bring the bill to a vote.
Trump’s Most-Favored-Nation Drug Executive Order Raises 340B Concerns
President Trump on Sept. 13 issued an executive order directing U.S. Health and Human Services (HHS) Secretary Alex Azar to test models to base Medicare drug payments on the lowest prices paid in other developed nations. It is one of several recent regulatory steps by the administration that seem to be partly driven by election year considerations.
Trump’s so-called “most favored nation” order covers both Medicare Parts B and D. It supersedes his earlier, unpublished July 24 order that covered Part B only. The president held off on publishing the first order to try to get drug manufacturers to negotiate a deal to lower drug prices. The meeting never happened. The administration raised the stakes by extending the order to cover Part D drugs.
The American Hospital Association (AHA) yesterday said the administration’s new most-favored-nation order could “undermine the important discounts that drug companies are currently required to provide under the 340B drug savings program to certain health care providers.” In late 2018, the administration proposed a similar international pricing index model for Medicare Part B drugs, but never followed through. Under the model, vendors would negotiate prices with manufacturers and bill Medicare. Because Medicare would reimburse the vendors, not hospitals, for Part B drugs, hospitals would have lost all prospect of billing Medicare at above cost for drug purchased through 340B. (Medicare currently reimburses hospitals at average sales price minus 22.5 percent, and has proposed setting reimbursement even lower at ASP minus 28.7 percent starting next year.)
“While the AHA will review the specifics of any international pricing index model closely, our primary concern with the previously proposed model was its potential to undermine the important discounts that drug companies are currently required to provide under the 340B drug savings program to certain health care providers,” said AHA President and CEO Rick Pollack. “This change could potentially put vulnerable communities and patients at risk, especially those hospitals and health systems that serve vulnerable populations. Instead, we continue to ask the administration and [the U.S. Centers for Medicare and Medicaid Services] CMS to hold harmless those who benefit from reduced drug costs through the 340B program from any adverse impact resulting from this new initiative.”
Pharmaceutical Research and Manufacturers of America (PhRMA) yesterday blasted the new executive order as “an irresponsible and unworkable policy that will give foreign governments a say in how America provides access to treatments and cures for seniors and people struggling with devastating diseases….Rather than emulating countries that allow politicians to arbitrarily decide what medicines are worth and what diseases are worth investing in, we should use existing trade enforcement tools to prevent them from freeloading off American innovation.”
HHS has to publish regulations first to implement Trump’s most-favored-nation order. It might publish an interim final rule, which bypasses the normal notice and comment process.
HHS on Sept. 1 sent the White House’s Office of Management and Budget (OMB), for pre-publication clearance, an interim final rule to implement the president’s executive order requiring community health centers to pass along all 340B savings on insulin and injectable epinephrine to patients. The National Association of Community Health Centers (NACHC) officials tried to persuade the administration to drop the order during a meeting last week Wednesday.
Health Centers Briefing Media Tomorrow About Threats to 340B
The National Association of Community Health Centers (NACHC) is briefing members of the media tomorrow about how recent “broadside attacks from manufacturers” on the 340B program “will dismantle the program and force patients to pay higher costs and reduce access to prescriptions.” Speakers include:
- Lathran Woodard, NACHC board chair and CEO of the South Carolina Primary Health Care Association
- Sue Veer, President and CEO of South Carolina-based Carolina Health Centers
- Gina Moore, a patient of PrimaryOne Health in Columbus, Ohio
- Jangus Whitner, Clinical Pharmacist and 340B Program Manager at PrimaryOne Health
- Kimberly Chen, Director of Pharmacy at North Country HealthCare in Flagstaff, Ariz.
340B Report plans to cover the briefing.