Providers Are Pleased, PhRMA Isn’t, With Becerra and State AGs’ 340B Letter to Azar

Editor’s note—A cascade of breaking 340B news developments over the past seven days—Amgen’s orphan drug action, HRSA’s dispute resolution final rule, the hospital lawsuit against HHS, the state attorneys general letter to HHS and the new GAO report—forced us to sideline articles we otherwise would have reported immediately. We’re catching up on some of those today.


California Attorney General Xavier Becerra, President-elect Biden’s choice to be the next HHS Secretary, helped lead the bipartisan coalition of state attorneys general who wrote to current HHS Secretary Alex Azar yesterday about the 340B program. | Source: Shutterstock

Providers Are Pleased, PhRMA Isn’t, With Becerra and State AGs’ 340B Letter to Azar

Health care providers are applauding a bipartisan group of 29 state attorneys general (including the District of Columbia’s) for their letter yesterday to HHS Secretary Alex Azar urging him “to address drug manufacturers’ unlawful refusal to provide critical drug discounts to covered entities, such as community health centers, under the 340B Drug Pricing Program.”

California Attorney General Xavier Becerra (D), President-elect Biden’s nominee to succeed Azar at HHS, was one of four attorneys general who led the joint effort.

The American Hospital Association (AHA) this morning tweeted its thanks to Becerra and his three co-leaders—Connecticut AG William Tong (D), Kansas AG Derek Schmidt (R), and Nebraska AG Doug Peterson (R)—”for leading a bipartisan effort of 28 state attorneys general urging @HHSGov to enforce laws on #340B drug pricing to protect vulnerable patients & communities”.

The National Association of Community Health Centers (NACHC) told 340B Report this morning that it and its state members “are deeply grateful for the support and leadership from the state Attorneys General to combat these attacks.”

AIDS Healthcare Foundation President Michael Weinstein praised the state AGs for their letter.

“This bipartisan group of elected officials from every region of the United States in no uncertain terms have said to these companies that their actions are unlawful,” he said in a statement this morning. “We are particularly encouraged that California Attorney General Xavier Becerra, U.S. President-elect Joe Biden’s nominee to be the next U.S. Secretary of Health and Human Services, signed the letter to put these greedy companies on notice that he will defend the program. AHF is grateful to each of them for standing up for a program that costs taxpayers nothing and strengthens the country’s health care safety net when it is under unprecedented stress.”

Shannon Stephenson, President of Ryan White Clinics for 340B Access (RWC-340B) said this afternoon, “We applaud these Attorneys General for recognizing that the 340B program is indeed now more important than ever and that HHS should act immediately to ensure that safety net providers can continue to care for their communities, rather than allowing these ‘brazen’ actions by manufacturers to remain unaddressed.”

Pharmaceutical Research and Manufacturers of America (PhRMA) gave 340B Report the following statement last night:

Contract pharmacy arrangements were born out of guidance issued by the Health Resources and Services Administration, despite contract pharmacies not being mentioned in the 340B law or in any regulations. Unlike laws and regulations, agency guidance cannot impose any binding requirements on the public and lack the force and effect of law. In fact, HHS recently posted its Guidance Repository database, which includes the 2010 340B Contract Pharmacy Guidance, and the website states: “The contents of this database lack the force and effect of law.”

As we reported in an update late yesterday afternoon to our Dec. 14 breaking news alert (as well as in our Twitter feed) Becerra issued a news release about the AGs’ letter to Azar. In his first known public statement on the 340B program since being nominated, Becerra said:

While Americans grapple with COVID-19, it is critical that we protect access to affordable care. Discounts afforded under the 340B Drug Pricing Program are more critical now than ever. They ensure that low-income and uninsured patients have access to affordable medication as they deal with the substantial impact of the pandemic. We call on HHS to hold these non-compliant drug manufacturers accountable and provide immediate relief for healthcare centers and the Americans they serve.

We reached out last night to some of our frequent legal commentators for their takes on the AGs’ letter and Becerra’s statement. Here’s what Andrew Ruskin, Principal at K&L Gates, told us:

It is an unusual development, given the timing. One can presume that this letter had been in the works long before Becerra was nominated, and that it had to be issued to close out this pending commitment to his fellow AGs. While this may also indicate which way Becerra’s allegiances lie, he will be accountable once he takes office to both Biden and HHS OGC (Office of General Counsel). Thus, it is not a foregone conclusion that he will take the steps that he is currently requesting after he takes over that role. Accordingly, the letter should be viewed as an important “data point,” rather than a dispositive statement of the new administration’s position on what must be done to resolve the current contract pharmacy tensions.

Todd Nova, Shareholder at Hall Render, had this to say:

This statement is obviously encouraging for 340B Covered Entities impacted by recent unilateral manufacturer actions. In many respects this is unsurprising. Given the current administration’s inaction if not tacit support of these steps terminating access to contract pharmacy 340B pricing, we expected a more favorable regulatory environment for 340B Covered Entities and this statement supports that assumption. For these reasons, if financially feasible, Covered Entities should work to preserve appeal rights and await onboarding of HHS staff that we anticipate will be more receptive to 340B Covered Entity arguments.

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AHA Ranks 340B as a High Priority for Biden’s First 100 Days

The American Hospital Association (AHA) has asked the incoming Biden administration to place a high priority on protecting the 340B program, “especially as it relates to contract pharmacy arrangements,” during President-elect Biden’s first 100 days in office.

On Dec. 11, the AHA sent Biden a list of “priority recommendations that we urge you to implement” during his administration’s earliest days. Ending the COVID-19 pandemic “must be our nation’s highest priority,” the hospital group said. Its seven recommendations on COVID-19 relief included

Protect the 340B drug savings program to ensure vulnerable communities have access to more affordable drug therapies by reversing harmful policies and holding drug manufacturers accountable to the rules of the program, especially as it relates to contract pharmacy arrangements.

Yesterday, California Attorney General Xavier Becerra, Biden’s pick to run the U.S. Health and Human Services Department (HHS), and 28 other state attorneys general (including the District of Columbia’s) sent a letter to current HHS Secretary Alex Azar urging him “to address drug manufacturers’ unlawful refusal to provide critical drug discounts to covered entities, such as community health centers, under the 340B Drug Pricing Program.”

On Sunday night, the CBS news program 60 Minutes included a segment on Becerra’s antitrust lawsuit against Sutter Health, Northern California’s largest health system. At least two of the system’s hospitals—Sutter Medical Center and Sutter Amador Hospital—participate in 340B, according to the system’s 340B “impact profile.”

The AHA said in a Dec. 14 blog post that the 60 Minutes story “was not a balanced view of the current health care landscape as it relates to hospital prices and provider and insurer consolidation.” It pointed out that Sutter Health “provided $830 million in 2019, far more than their fair share in community benefit in return for their tax-exempt status.”

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HRSA Audits Find Two Manufacturers Overcharged for 340B Drugs

Generic drug manufacturer Westminster Pharmaceuticals is providing refunds to 340B covered entities on five NDCs following a U.S. Health Resources and Services Administration (HRSA) audit.

“During a recently completed HRSA audit of Westminster Pharmaceuticals participation in the 340B program, it was determined mutually by Westminster and HRSA that Westminster did not offer statutory 340B ceiling prices for its covered outpatient drugs for labeler code 69367 during the period 04/1/2019 to 09/30/2019,” the company said in a public notice posted last week on the HRSA website. The notice includes a refund request form.

The refunds covers two dosages of the anticonvulsant/pain relief medication gabapentin, a muscle relaxer, a vitamin (thiamine), and a cancer chemotherapy drug.

HRSA also recently posted on its fiscal year 2020 Manufacturer Audits Results webpage that Pharmaceutical Associates, Inc. (PAI), a South Carolina-based generic drug manufacturer, charged more than the 340B ceiling price for unspecified products and will be required to make repayments to covered entities. HRSA has not yet approved PAI’s corrective action plan (CAP).

In fiscal 2019, HRSA auditors found that four manufacturers—Gavis Pharmaceuticals, Lupin Pharmaceuticals, Paddock Laboratories, and Xspire Pharma—either did not offer covered outpatient drugs to covered entities at the statutory 340B ceiling price, or did not submit quarterly pricing to HRSA and charged more than the 340B ceiling price. All four were required to repay covered entities for overcharges. HRSA still has not approved Paddock’s CAP or finalized its audit.

In fiscal 2018, HRSA auditors found that Belcher Pharmaceuticals LLC did not offer covered outpatient drugs to eligible covered entities and required it to repay entities for overcharges.

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Providers Hope State Medicaid Directors Follow Florida Director’s Lead on 340B

Florida safety net health care providers are applauding their state Medicaid director’s recent letter asking Eli Lilly and Co. to suspend its restrictions on 340B pricing on Lilly’s products shipped to covered entities’ contract pharmacies.

Health care providers in Florida and beyond hope other state Medicaid directors will copy Florida Deputy Secretary for Medicaid Beth Kidder. Some speculate that Florida Medicaid might have signaled it may use its Medicaid preferred drug list as leverage over Lilly and other drug companies that keep denying 340B pricing for contract pharmacy drugs.

Florida’s Agency for Health Care Administration, Florida Medicaid’s parent agency, has so far declined to confirm or deny reports that Kidder sent identical letters to other manufacturers that also have ceased 340B pricing on contract pharmacy drugs or that make covered entities hand over their contract pharmacy claims data to keep getting 340B pricing at their contract pharmacies. 340B Report has requested an interview with Kidder, who also serves as President of the National Association of Medicaid Directors (NAMD).

Florida state health officials, like those across the country, are understandably preoccupied with the COVID-19 pandemic. There have been about 1 million total confirmed cases in Florida since the pandemic began, with a current 6.4 percent week-to-week increase in confirmed and probable cases.

NAMD Executive Director Matt Salo said his association has “not heard a groundswell of activity on this issue specifically, yet.” Salo said this isn’t surprising, because state directors “really only elevate things to the association when they exhaust the avenues/tools immediately available to them, or otherwise know that they’ll need help from their peers in a group strategy.”

“As an association, our efforts are mostly focused around the pandemic, the economic downturn, and the effort to address long standing racial/ethnic disparities and inequities in the health care system,” Salo said.

“340B pricing in general has been on our peripheral radar for a long time, but never a top tier issue,” he added.

The Florida Hospital Association (FHA) in a news release last week thanked Kidder, her boss Secretary Shevaun Harris of the state Agency for Health Care Administration, and Gov. Ron DeSantis (R) “for their support of hospitals and other health care providers in their ongoing challenges to secure drug manufacturers’ compliance with federal law that requires discounted drug pricing for safety net providers.”

“We deeply appreciate AHCA’s support of this program and their efforts to hold drug manufacturers accountable for compliance with this critical safety net program,” FHA president and CEO Mary Mayhew said.

Florida health system leaders also praised the state’s letter to Lilly.

“Hospitals have stretched to meet unprecedented need during the COVID-19 pandemic,” said Broward Health President and CEO Gino Santorio. “Savings from the 340B program are essential to our continued ability to be on the frontlines of pandemic response.”

“Preserving access to 340B pricing is even more critical now for rural hospitals like mine,” said Hendry Regional Medical Center CEO R.D. Williams. “If these 340B program restrictions go unchallenged, we’ll face increased difficulties meeting the health care needs of our community.”

“The 340B program allows those hospitals serving large numbers of low income and uninsured individuals to stretch limited health care resources, ensuring access to critical health care services for all members of the community, regardless of an individual’s ability to pay,” said Tommy Inzina, President and CEO of BayCare Health System.

Florida’s community health centers say they appreciate the attention that Kidder, members of Congress, and other office holders are paying to manufacturers’ denials of 340B pricing.

Nearly every Florida health center “has a contract arrangement to ensure greater access to affordable medications in addition to their in-house pharmacies—with several having only contract arrangements,” said Florida Association of Community Health Centers Vice President Ben Browning. “There is a growing concern about the impacts these decisions are having on the ability for patients to maintain their health, manage their chronic conditions, and continue to afford their medications.”

“As more manufacturers are limiting the safety net’s ability to provide affordable medications to many of the most vulnerable Floridians, the short and long-term impacts will not be good for the entire health care environment,” Browning said. “It is encouraging to see a growing number of key individuals involved in overseeing Florida’s safety net speak up on behalf of the 340B program, from Beth Kidder to Members of Congress.”

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NY State Lawmakers Urge Colleagues, Cuomo to Protect 340B Providers

Four New York State lawmakers, including the Assembly and Senate health committee chairs, yesterday publicly urged their colleagues and Gov. Andrew Cuomo (D) to pass legislation giving 340B health care providers a three-year reprieve from an upcoming state Medicaid prescription drug policy change that they say will cost the providers “hundreds of millions of dollars they now use for patient care.”

In a Dec. 14 op-ed in the New York Daily News, Assembly Members Richard Gottfried and Linda Rosenthal and Sens. Brad Holyman and Gustavo Rivera asked the legislature and Cuomo to delay, for 340B providers only, the effects of budget legislation enacted last spring that will transfer Medicaid prescription drugs from managed care and move them into Medicaid fee for service (FFS) effective April 1, 2021. Under Medicaid FFS, 340B providers would have to bill the state for 340B-purchased drugs at actual acquisition cost plus a dispensing fee.

“If this change goes ahead, the state and the federal government will pocket the savings,” the lawmakers said. “The benefit will no longer help the safety net providers the 340B program was created to help. How the Cuomo administration will use the money is anybody’s guess.”

“Vulnerable health-care providers that serve vulnerable New Yorkers will suffer serious financial harm, and many will not survive,” if lawmakers and Cuomo fail to act, they said. The state health department, legislators, health care providers, and managed care plans need the three-year delay “to develop, evaluate and implement a successful carve-out that does not diminish access and quality for programs and the vulnerable people they serve,” they said.

Gottfried chairs the Assembly Health Committee and Rosenthal chairs the Assembly Committee on Alcoholism and Drug Abuse. Rivera chairs the Senate Health Committee.

Cuomo came under intense criticism from HIV/AIDS activists for boasting in a Dec. 1 World AIDS Day proclamation that $100 million in state savings from the carve-out will be redistributed to affected providers. The activists said the money is for one year only, with no guarantee of future redistributions.

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