Muted by Litigation, Pedley Avoids Hottest 340B Topics But Provides Some Nuggets

The U.S. Health Resources and Services Administration (HRSA) is “ramping up” its work with the Biden administration “and bringing forth the key issues and concerns of” the 340B program, Rear Adm. Krista Pedley, the program’s director, said today in a speech to program stakeholders attending the online 340B Coalition winter conference.

Beyond that, though, Pedley had little to say about the hottest topics in 340B.

Pedley explained to conference attendees that current litigation kept her from addressing “many aspects of the program” during her talk, normally the most highly anticipated and informative recurring feature of the coalition’s winter and summer events.

Pedley, for example, did not address the six drug manufacturers’ decisions to halt or impose conditions on 340B pricing on drugs dispensed by contract pharmacies. HRSA and/or the U.S. Health and Human Services Department (HHS) are the defendants in seven lawsuits—three brought by health care providers and four by drug manufacturers—involving those manufacturers’ actions.

Pedley also did not speak about HRSA’s new 340B program administrative dispute resolution (ADR) system. Pharmaceutical Research and Manufacturers of America (PhRMA) has asked a federal district court to strike down the federal final rule that established the system. It also wants the court to declare 340B program guidelines governing drug manufacturer audits of 340B covered entities illegal.

Meanwhile, the Biden administration in January withdrew a last-minute Trump administration Federal Register notice announcing the appointment of six voting and two ex-officio non-voting members to the 340B ADR board.

340B Health President and CEO Maureen Testoni, who spoke during the conference immediately before and after Pedley, said during a question-and-answer session after Pedley’s remarks that, since the notice about the appointees was withdrawn, she has not seen or heard any evidence that petitions filed under the ADR process are moving forward. “And that’s a concern for us, with HHS saying their enforcement of the contract pharmacy issue should go through the ADR,” Testoni said. “Our concern is that [the ADR system is] just not set up to handle that any time soon, and we have patients and providers who are feeling real harm right now.” Testoni’s group, 340B Health, is one of the plaintiffs suing HHS and HRSA to try to make the government take enforcement action against the manufacturers withholding 340B pricing on contract pharmacy drugs.

Another 340B-related matter that Pedley did not address, one not barred by litigation, was the major reorganization of HRSA announced in the Federal Register on Jan. 21—the day after Joe Biden was sworn in as President. Former HHS Secretary Alex Azar signed a document on Jan. 14 that made the reorganization effective. Under the reorganization, HRSA’s Healthcare Systems Bureau, which the 340B program came under, was abolished. Pedley and the 340B program were moved into the office of the HRSA administrator. In a Jan. 15 email to HRSA’s staff, Thomas Engels, the Trump administration appointee who ran HRSA, announced that Pedley would serve as the director of a new Office of Special Health Initiatives (OSHI) that included 340B.

Since Jan. 21, however, Engels has resigned, and HRSA is now being run by an acting administrator, Diana Espinosa, a HRSA career civil servant. The Biden administration has not yet announced a successor to Engels. HRSA’s online organizational chart has not been revised to reflect the reorganization that Azar signed into effect. HRSA, under the Biden administration, has not published a new “statement of organization, functions, and delegations of authority” reversing the changes made under Trump.

On paper, the reorganization of HRSA is in effect. In reality, though, where the changes stand is not clear.

These are some the highlights from Pedley’s talk:

  • Last April, HHS charged HRSA with distributing the $178 billion Provider Relief Fund to support health care providers and hospitals responding to COVID-19. “To put that into perspective, this fund is almost 15 times HRSA’s annual budget of $11.9 billion,” Pedley observed. Since last March, HRSA has awarded more than $2.5 billion to its grantees to combat the pandemic, including $2 billion to HRSA-funded health centers and $90 million to Ryan White HIV/AIDS clinics.
  • Pedley noted that, soon after the onset of the pandemic, HRSA developed a webpage that clarifies pandemic-related flexibilities available to all 340B covered entities. “In these unprecedented times, I would encourage entities to document as much as possible—outline your unique situations and how you follow HRSA guidance in your policies and procedures,” she said.
  • Pedley said that, during their annual recertification of their eligibility for the 340B program, “HRSA grantees may have noticed we are focused on ensuring entity records are up to date by working with some grantees to clean up grant numbers. We are also working with Ryan White entities to ensure eligibility through randomized integrity checks. I urge you to pay close attention to Medicaid billing information. Now both the NPI and the State Medicaid number require an associated state.”
  • Pedley said since fiscal year 2012, “HRSA has completed 1,540 covered entity audits, which included the review of 20,856 offsite outpatient facilities and 34,553 contract pharmacies.  In FY 2021, HRSA plans to conduct an additional 200 audits. In addition, HRSA has finalized 26 audits of manufacturers and plans to conduct five audits in FY 2021.”
  • Pedley said HRSA has “instituted program integrity checks on entities registering for the program, whereby additional documentation was obtained to further verify eligibility. In addition, HRSA began collecting contracts from newly registered contract pharmacies to ensure that the contract contained key elements, such as signatures from officials at the contract pharmacy and the covered entity.”

These are some of highlights from 340B Health leader Testoni’s remarks:

  • The harm caused by drug manufacturers’ denials of 340B pricing, especially during a pandemic, cannot be overstated, she said. For hospitals, 25 percent of the financial benefit of participating in the 340B program comes from community pharmacy partnerships, she said. For rural 340B hospitals, she said the figure is more than 50 percent.
  • Testoni said the campaign underway “to unilaterally convert up-front 340B discounts into post-sale rebates” could impose “great operational and financial burdens on covered entities” and could give drug companies “unprecedented control over when, and even whether, they will offer the 340B drug discount which the 340B law mandates.”
  • Manufacturers’ 340B contract pharmacy and rebate-conversion moves “prompted widespread attention, outrage, and pushback” from 340B champions in Congress and among state attorneys general, Testoni said.
  • The HHS General Counsel’s Dec. 30 advisory opinion on 340B contract pharmacy “blasted drug manufacturers for refusing drug discounts in violation of federal law” and made clear that “the law requires the drug companies to provide the discount on drugs purchased by covered entities regardless of where the entity dispenses the drug,” she said.
  • Drug companies have made it clear they will fight the 340B law “even in the face of near-universal opposition,” she said. “And HHS has not moved yet to stop them, instead pointing covered entities to a new 340B administrative dispute resolution process that will delay action and is not the right solution to the contract pharmacy problem.” 340B Health’s lawsuit with other hospital plaintiffs against HHS rejects the ADR process as a suitable remedy for drug manufacturers’ denials of 340B pricing for contract pharmacy drugs.”  The other provider groups that are suing the government—Ryan White Clinics for 340B Access and the National Association of Community Health Centers—have put a pause on their suits on the condition that the ADR process moves forward expeditiously.
  • “Opponents of the program will keep pushing their allies in Congress to pass legislation aimed at restricting 340B,” Testoni said, including “complex data reporting mandates” that “go well beyond the scope of 340B” and are designed to make it harder for entities to participate.
  • Testoni predicted that drug pricing will be a high priority for Congress and the Biden administration. “Although Medicare officials stopped short of making 340B cuts for hospitals worse this year, by tying reimbursement rates directly to drug acquisition costs, they could revisit that proposal for future years,” she warned. Also, the Biden administration needs to decide whether to proceed with the Trump administration final rule affecting how health centers provide insulin and injectable epinephrine to patients under 340B, she said.
  • “We might see more in the way of 340B guidance,” Testoni said, noting that the Biden administration rescinded a Trump administration executive order stating that it was executive branch policy that program guidance is non-enforceable.
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