Is Novartis Backing Off its Oct. 1 Deadline for 340B Covered Entities? (Update 2)

Note from 340B Report Publisher and CEO Ted Slafsky: I look forward to moderating a panel on the latest 340B developments, President Trump’s drug pricing executive orders, as well as the upcoming elections this Tuesday, Sept. 29 at 12:00 p.m. Eastern. Panelists include Peggy Tighe of 340B Report sponsor Powers Law and Michael McCaughan, Editor of RPM Report. The session will be part of World Congress’s 340B Webinar Series for Covered Entities and Manufacturers. There are four sessions in total. Join for one or all sessions. Registration is free. Click here to register.

Is Novartis Backing Off its Oct. 1 Deadline for 340B Covered Entities? (Update 2)

(Update 1, Sept. 24, 2020, 8:40 p.m. EDT—Novartis told 340B Report, “We still expect covered entities to provide the requested data by October 1.” It did not address whether covered entities that do not provide their contract pharmacy claims data for Novartis products will, or will not, continue to receive 340B pricing on Novartis products dispensed by contract pharmacies.)

(Update 2, Sept. 24, 2020, 9:40 p.m. EDT—We asked Novartis, if on Oct. 1, a covered entity does not register with 340B ESP and provide 340B contract pharmacy claims data, will it no longer receive 340B reimbursements from Novartis? The company said: “We will evaluate next steps as needed.”)

A Cardinal Health representative informed a community health center executive yesterday that drug manufacturer Novartis has paused its plan, effective Oct. 1, to cease providing 340B-priced products to the contract pharmacies of covered entities that do not register with 340B ESP and upload their contract pharmacy claims data, 340B Report has learned.

A second community health center was informed by a Cardinal Health representative that Novartis sent a letter to Cardinal asking the wholesaler not to block Novartis NDCs for products shipped to the contract pharmacies of covered entities that do not provide Novartis with 340B contract pharmacy claims data, 340B Report was told.

We have reached out to Novartis and Cardinal Health for confirmation.

Novartis informed covered entities in August that it would no longer offer 340B pricing to the entities’ contract pharmacies unless the entities agreed to provide their contract pharmacy claims data.

Reports that Novartis has reconsidered its Oct. 1 deadline come a day after the U.S. Health and Human Services Department (HHS) disclosed that it told drug manufacturer Eli Lilly and Co. on Monday that Lilly should not have assumed HHS endorsed its decision to dramatically scale back 340B pricing on Lilly products. It also comes after U.S. House and Senate members sent bipartisan letters to HHS Secretary Azar asking him to halt drug manufacturers’ recent moves against 340B contract pharmacy.

This is a developing story.

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In Win for Health Centers, Rule Implementing 340B Executive Order Will Have Public Comment Period

Community health centers are celebrating a win in their fight against a Trump administration executive order that will condition centers’ future federal grants on making insulin and injectable epinephrine available at the 340B discounted price to low-income uninsured or underinsured patients. Health centers say the order is unnecessary because, by law, the terms of their grants, and their mission, they already provide free or inexpensive insulin and EpiPens to those who can’t pay.

On Monday, the White House Office of Management and Budget (OMB) completed its review of U.S. Health and Human Services Department (HHS) regulations to implement the executive order. HHS sent the regulations to OMB as an interim final rule—a type of regulation normally reserved for emergencies that does not require notice and comment to take effect.

When OMB was done, the regulation had been changed from an interim final rule to a proposed rule. That strongly suggests there will be time for the public to submit comments, generally 30 to 60 days. HHS would then review the comments, write a final rule, and submit it to OMB again for review and clearance to be published.

That likely would push the process past the November election. If President Trump wins, the rule will probably be finalized. If Democratic candidate Joe Biden wins, his administration probably would likely block the rule from being implemented.

The National Association of Community Health Centers (NACHC) credits lobbying on the matter for the change, including 11 virtual meetings between health center and administration representatives between Sept. 9 and 18. Eleven more were booked for Sept. 21, 22, and 23 but OMB cancelled them.

Last week, more than 100 Democratic U.S. House members asked HHS Secretary Alex Azar to rescind or not implement the executive order.

“We are deeply grateful that there seems to be growing recognition among leaders in the administration that this rule will do more harm than good at a time when too many people are suffering,” said Tom Van Coverden, President and CEO of NACHC. “We hope that this is further acknowledgment 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.”

The rule implementing the executive order will come out of the U.S. Health Resources and Services Administration, which oversees the health center program in addition to 340B. A HRSA spokesperson said this morning that neither HHS not HRSA had an announcement about the rule at this time.

President Trump is scheduled to speak in Charlotte, N.C., late this afternoon about his plans for health care during a second term. He is expected to tout his four executive orders to lower drug prices, including the one about health centers, 340B, and insulin.

Late yesterday, OMB completed its review of a U.S. Food and Drug Administration final rule and guidelines on importation of drugs from Canada and other developed nations—the subject of one of the other executive orders.

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340B Provider Camp Cheers HHS Letter to Lilly, Pharma Camp Says the Fight Isn’t Over

Groups and attorneys representing 340B covered entities yesterday applauded the U.S. Health and Human Services Department (HHS) for rebuking drug manufacturer Eli Lilly and Co. over the company’s decision to end practically all 340B pricing on its products dispensed by 340B contract pharmacies. The groups say they will keep fighting in federal agencies, Congress, and possibly the courts to stop Lilly and other companies that follow Lilly’s lead.

Lilly has not responded to a request for comment. Pharmaceutical Research and Manufacturers of America referred questions about the matter to Lilly. Attorneys who represent drug manufacturers pointed out that, while HHS appears to sympathize with covered entities, it still hasn’t said whether what Lilly has done—and what three other manufacturers similarly plan to do beginning Oct. 1—is legal or not. Until such time, it is possible the companies will forge ahead.

In a Sept. 21 letter released yesterday, HHS told Lilly it was wrong to give the department a unilateral deadline to decide whether the company’s actions were legal, and wrong again to assume that HHS answered in the affirmative when it failed to reply by Lilly’s deadline. The U.S. Health Resources and Services Administration (HRSA) “has significant concerns with Lilly’s new policy, it continues to review that policy and has yet to make a final determination as to any potential action,” HHS said.

HHS suggested Lilly potentially could be sued by a private individual under the False Claims Act “in the event that the company knowingly violates a material condition of the program that results in over-charges to grantees and contractors.”

Drug manufacturer Astra Zeneca is currently scheduled to implement a policy similar to Lilly’s on Oct. 1. The same day, Sanofi and Novartis are scheduled to end 340B pricing on drugs dispensed by contract pharmacies for covered entities that decline to give their contract pharmacy claims data to the drug makers. Novartis reportedly might be backing off the Oct. 1 date.

Here is how groups and attorneys reacted to HHS’s letter to Lilly:

American Hospital Association

We welcome this week’s letter from HHS and will continue to press HHS and drug companies to put an end to these abusive practices which threaten care for vulnerable patients and communities.

National Association of Community Health Centers

We are encouraged that the HHS General Counsel publicly issued a letter that raises concerns about Eli Lilly’s 340B pricing refusals. As we have noted in the past, the drug manufacturer’s actions will have a devastating impact on Community Health Centers and the nearly 30 million patients they serve. While the HHS letter stands as a significant rebuke to Eli Lilly for seeking to boost their profits on the backs of millions of low-income health center patients, we do not believe we are out of the woods. Our position, and that of many Members of Congress, is that such actions are unlawful. The community of community health centers will continue to voice their opposition about Eli Lilly’s actions and that of other drug makers who choose profits over patients, particularly  at a time when health centers are struggling to keep their doors open while serving on the front lines of the COVID pandemic.

Barbara Straub Williams, Principal, Powers Law (a 340B Report sponsor)

Although it is disappointing that HHS has not yet reached the conclusion that Lilly’s actions are unlawful, HHS should be commended for pointing out that Lilly is denying 340B pricing to covered entities while covered entities struggle to fight the COVID-19 pandemic with limited resources and Lilly enjoys significant profits. It is also interesting that HHS noted that Lilly could be subject to False Claims Act liability for violating its statutory obligations to offer 340B pricing to grantees and contractors.

Regina Boyle, Attorney, Sacramento, Calif.

It’s extremely heartening to see such a strong response from HHS’s General Counsel regarding potential false claims liability arising from the manufacturers’ threatened non-compliance with the 340B program requirements. California’s FQHCs are facing financial challenges as a result of the COVID pandemic that threaten the collapse of a system that has been painstakingly built over more than five decades. Continued access to 340B savings seems to be the only thing holding many key safety net providers together. So, to say that the manufacturers’ actions are unconscionable would be a gross understatement.

Alan Arville, Member, Epstein Becker Green

The practical effect of HHS’s letter may be that other drug manufacturers pause and wait for HRSA’s response before implementing a policy similar to Eli Lilly’s.

John Shakow, Partner, King & Spalding

Ultimately, it doesn’t matter whether HHS “endorses” Lilly’s approach. Nothing in Lilly’s program limits a covered entity’s ability to itself purchase Lilly drugs at the statutory discount. The question is whether Lilly has any legal obligation—either by statute or regulation—to sell or ship 340B drugs to commercial contract pharmacies. If there were such an obligation, HHS’s letter would have identified it. For years, HHS has been asked to address abuses of the 340B program, particularly with regard to the burgeoning and suspect contract pharmacy scheme. It is unsurprising that companies like Lilly are now taking steps on their own to stop abuses that benefit commercial pharmacies, often to the detriment of 340B patients.

Helen Pfister, Partner, Manatt Health

Not a particularly strong response [by HHS], in my view. While it expresses sympathy for 340B covered entities, noting that they’re struggling financially, particularly in light of the COVID pandemic, it doesn’t take the further step of suggesting that Lilly suspend this new policy until HRSA has had time to evaluate whether or not its permissible. I can’t speak for the pharmaceutical industry, of course, but I don’t see  anything in this letter that seems likely to cause them to reverse course.

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Pharma Consulting and Research Firm Forecasts 340B “Perfect Storm”

More hospitals getting 340B drug discounts linked to “COVID-19 disruption,” 340B specialty pharmacy growth, 340B contract pharmacy growth, and providers getting better at maximizing 340B cash flow are “creating a perfect storm for [drug] manufacturers,” a drug industry consulting and contract research firm says in the first in a series of white papers on the 340B program.

The paper by IQVIA’s Market Access Center of Excellence claims 340B sales (brand and generic) in 2019 represented “about 11 percent of the entire pharmaceutical market.” IQVIA’s figure is more than double that of the U.S. Health Resources and Services Administration’s (HRSA) 5 percent estimate for 2018, the most recent year HRSA has reported on.

IQVIA has a proprietary system for classifying drugs by therapeutic purpose. In its new 340B paper, it gave figures for the top five (of out 100) therapeutic areas. Among the top five (cancer, diabetes, arthritis, antiviral, and respiratory), drug sales through 340B were above average relative to the rest of the market only for cancer drugs (26.9 percent) and antiviral drugs (according to a chart, about 25 percent). The same chart shows that, for all 100 disease areas, the average percentage of drug sales through 340B is about 12 percent. For diabetes, arthritis, and respiratory drugs—the three other therapeutic groups in the top five—sales through 340B were below average, with respiratory drugs the lowest at 7.2 percent.

IQVIA said drug sales through 340B in 2019 were 17.1 percent greater than in 2018, compared with 3.2 percent year-to-year drug sales growth for the overall pharma market. “Higher productivity (i.e. sales per outlet) and strategic targeting of contracting partners is driving the [340B] volume increase,” it said

The consulting and research firm said, “In 2019, 73 percent of 340B product was delivered through hospital outpatient pharmacies or clinics, the traditional drug delivery model for 340B. The remainder was dispensed through retail pharmacies (15 percent) and mail order pharmacies (10 percent) contracted to the covered entity.” It said mail order 340B pharmacy sales grew over 44 percent in 2019, compared to 18 percent for retail pharmacy 340B sales and 14 percent for outpatient pharmacies and clinics.

Other findings:

  • More hospitals will qualify for 340B due to COVID-19 related economic disruption that raises hospitals’ shares of low-income and uninsured patients. A recent 340B program policy clarification that lets hospital start using 340B drugs in offsite outpatient clinics earlier than before also will lead to more hospitals buying more 340B-priced drugs.
  • “Specialty markets with their attractive 340B financials are already growing 340B about 25 percent faster than non-specialty markets.”
  • “340B growth is being fueled by the vertical integration of PBMs, payers, and pharmacies and the rise of mail and specialty contract pharmacies as covered entities seek to expand and optimize 340B use. Not only are contract pharmacies the fastest growing 340B delivery model, they’re also the most complex which increases the likelihood of duplicate discounts.”
  • “Covered entities are using increasingly sophisticated 340B strategies aided by third-party solutions designed to optimize contract pharmacy networks and maximize 340B cash flow.”

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U.S. House Holding Two Days of Hearings Next Week on Pharma Pricing Practices

The U.S. House Oversight and Reform Committee will grill six drug industry CEOs about their companies’ pricing practices during a two-day hearing Sept. 30 and Oct. 1. The 340B program isn’t expected to be a focus of the hearings, but it could come up.

Thomas Kendris, U.S. Country President of Novartis, is scheduled to testify and be questioned on Oct. 1. That’s the same day that Novartis had set as a deadline for 340B covered entities to register with its vendor 340B ESP “and provide 340B contract pharmacy claims data originating from CP utilization in order to receive 340B reimbursements from Novartis.” There are reports that Novartis may have backed off its Oct. 1 deadline.

Kendris is expected to be asked mostly about what Novartis charges for its cancer drug Gleevec. The committee will also hear from Celgene former CEO Mark Alles, Bristol Myers Squibb CEO Giovanni Caforio, Teva Pharmaceuticals CEO Kare Schultz, Amgen CEO Robert Bradway, and Mallinckrodt Pharmaceuticals CEO Mark Trudeau.

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