White House Clears 340B Dispute Resolution Final Rule for Publication

The White House yesterday gave the final go-ahead for a rule establishing and implementing a binding administrative dispute resolution process for the 340B program. It could be published in the Federal Register at any time. | Source: Shutterstock

White House Clears 340B Dispute Resolution Final Rule for Publication

This is a developing story.

The White House Office of Management and Budget (OMB) yesterday gave the U.S. Health Resources and Services Administration (HRSA) permission to publish a final rule establishing a binding administrative dispute resolution (ADR) process for the 340B program.

The 340B ADR final rule was not among the government documents posted for public inspection this morning on the Federal Register website, but it could appear there at any time. (The Federal Register customarily posts new material for public inspection at 8:45 a.m., 11:15 a.m., and 4: 15 p.m. Eastern.)

The final rule’s contents are unknown. HRSA’s 2016 proposed rule covered subjects including the composition of the 340B ADR panel, permissible covered entity and manufacturer claims, deadlines and procedures for filing a claim, covered entity requests for information from manufacturers and third parties related to alleged overcharging, and the finality of 340B ADR panel decisions.

Two trade groups, Ryan White Clinics for 340B Access (RWC-340B) and the National Association of Community Health Centers (NACHC), have sued the U.S. Health and Human Services Department (HHS) to require it to finalize the ADR rule. Nonetheless, some attorneys for covered entities are concerned that HRSA might require entities that are being denied 340B pricing on drugs shipped to contract pharmacies to use the new dispute process, as a means of short-circuiting lawsuits to force HRSA to impose sanctions against drug manufacturers withholding 340B discounts. They say it would be unfair to make covered entities wait until the ADR system is fully functioning, which could take months, when they are being denied statutorily required 340B discounts now.

Congress ordered the HHS secretary to create the 340B ADR process in 2010 in the Affordable Care Act. Regulations to create and implement the process were supposed to have been published by Sept. 18, 2010.

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Protecting Our Patients and Safety Net in the Short and Long Term

Michael Gonzalez, President and Lead Consultant, FQHC 340B Compliance Services

So much has changed in the past few months, especially in the 340B space. Pharmaceutical manufacturers are not only putting a stress on the safety net system but are also hindering our patients lives. There are many groups advocating on behalf of the covered entities to protect 340B, but even if they are successful, we expect it will take at least a few months to get things back in order. So, the question is what should your health center do today to stay afloat?

One of the thriving services that we provide is our contract 340B coordinator service for community health centers. This service provides the health center with their own remote 340B department. This includes performing monthly audits, presenting journal entries, updating P&Ps, handling contracting, maximizing the program, preparing a monthly board report, and really handling all 340B matters. Using our expertise, we have compiled the following tips on how to navigate the current environment.

Focus extra attention on the uninsured to ensure continuity of care

We are very concerned with how the changes implemented by the manufacturers are affecting our low-income and other vulnerable patients. We have already seen this impact the lives of those patients who rely on 340B to afford their medications. I believe one of the most important things is to educate our providers on what medications are no longer available on 340B at our contract pharmacies. This gives the provider the ability to look for possible substitutions for a patient who cannot afford their medications, due to being removed from 340B pricing. If you need help with this, just reach out and I will send you a copy of the document we have utilized with our providers.

Crunch the numbers

It is more important than ever to analyze your data! If you look at e-prescription data from the EHR and 340B processed claims from your TPA, you can really understand how to maximize your program. You can also use the information to run an estimated loss analysis on claims that will no longer be processed as 340B. We have used this information to make sure we are selecting the right contracted pharmacies for those manufacturers that are requiring designations, providing management with key information needed to make decisions in these difficult times.

Look at an entity-owned pharmacy

One of my top recommendations is that management and the board of directors start discussing the possibility of opening an entity-owned pharmacy. Many health centers have relied on contract pharmacies to handle all of their 340B needs, but now we can see that it comes with the risk of losing the program. I believe that opening an entity owned pharmacy is a great hedge against the current threats. Even if contract pharmacy goes back to the way it was, it allows us to provide better care for the patient and reduce the dispensing fees for the claims captured inhouse. Many thriving health centers currently utilize both contract and entity owned pharmacies to maximize their programs.

Opening an entity owned pharmacy does come with many hurdles, including finding space to set it up, it requires a large investment, and in many cases, management does not really understand how to “manage” a pharmacy. I have partnered up with David Christian to develop a solution to combat these very common issues. Over the past few years, David and I have contracted with many centers to review the operations of their entity-owned pharmacies and provide recommendations that maximize efficiency.

We have now developed a solution to help centers pool together (saving each entity hundreds of thousands in just the initial investment) and open a remote, entity owned pharmacy. By using economies of scale, we were able to negotiate rates with vendors and provide a turnkey solution that will allow centers to own their own pharmacy. Utilizing alternative delivery sites and mail order prescriptions, this solution allows us to ensure that we take care of our patients.

For more information, please email me at mgonzalez@fqhc340b.com.


Blumenthal Says HRSA Immediately Must Stop Pharma Denials of 340B Pricing

U.S. Sen. Richard Blumenthal (D-Conn.) yesterday told the head of the U.S. Health Resources and Services Administration (HRSA) in a letter that the agency “must intervene immediately” to stop drug manufacturers’ “illegal and deeply troubling restrictions and barriers” to 340B drug discounts on medicines shipped to contract pharmacies.

Blumenthal, citing a 340B Report article, observed that Novo Nordisk just announced “that will no longer distribute certain 340B drugs to hospital contract pharmacies.”

“Such refusals to provide 340B pricing for use in contract pharmacies are likely a violation of the law,” Blumenthal wrote. “By improperly limiting access to 340B drugs, manufacturers will sever a lifeline to treatment for those who are overwhelmingly underserved, low-income, and vulnerable,” the senator said. “Further, these moves by pharmaceutical companies are especially troubling during the COVID-19 pandemic.” Blumenthal said that, according to an unidentified provider in his home state, drugs to treat respiratory diseases are among those most affected by the manufacturers’ 340B pricing denials. COVID-19, he pointed out, “preys on individuals with pre-existing respiratory conditions.”

“It is clear that HRSA agrees it is now more important than ever that 340B providers are able to flexibly provide treatment and care to the individuals they serve without undue burdens,” Blumenthal wrote. “However, the pharmaceutical industry’s recent actions are particularly troubling and detrimental to the goals of the 340B Program. It is essential that HRSA take clear, concrete actions to put a stop to these illegal actions by the pharmaceutical industry that cause lower income patients significant harm, and to protect health care providers and the patients that they serve.”

In September, Blumenthal led a group of 22 Senate Democrats in writing a letter to Pharmaceutical Research and Manufacturers of America (PhRMA) about manufacturers’ denials of 340B pricing for drugs dispensed through contract pharmacies. The senators said the denials “are likely a violation of the law,” and they asked PhRMA to respond by Sept. 29 about what manufacturers were doing to end the 340B pricing denials and related requests for covered entities’ 340B contract pharmacy claims data.

Blumenthal’s office this morning provided 340B Report with a copy of PhRMA’s Oct. 1 response. PhRMA President and CEO Stephen Ubl wrote:

With regard to the legal issues your letter mentions, the 340B statute does not require that manufacturers ship 340B medicines to covered entities’ contract pharmacies. In fact, the statute does not even mention contract pharmacies. Rather, the statute describes 15 types of covered entities that may participate in the 340B program, states that the 340B agreement between HHS and participating manufacturers shall require that participating manufacturers offer 340B-priced covered outpatient medicines for purchase to “each covered entity” if made available to other purchasers at any price, and prohibits covered entities from reselling or “otherwise transferring” these medicines to any person but their own 340B patients, as well as prohibiting duplicate discounts. Thus, there is no requirement that manufacturers ship 340B-priced medicines to “contract pharmacies” and HRSA is not authorized to impose such a requirement. Accordingly, a manufacturer would not violate the statute by not shipping 340B-priced medicines to some or all contract pharmacies. The concept of contract pharmacies only comes from HRSA sub-regulatory guidance, which by law may not impose binding obligations on the public.

Ubl continued:

We share your commitment to ensuring that the 340B program delivers benefit to vulnerable patients, and we welcome Congress’s increasing scrutiny of the contract pharmacy program. The 340B program should support true safety-net providers that put patients first, not for-profit chain pharmacies. Unfortunately, well-documented failures to ensure compliance with the law by covered entities threaten the integrity of the program. The 340B program must be fixed, and we stand ready to work with Congress to address the concerns identified by independent government watchdogs and to ensure the program operates within the statute and benefits uninsured and vulnerable patients as Congress intended.

Blumenthal spoke to reporters yesterday at a federal qualified health center in East Hartford, Conn., about drug manufacturers’ recent denials of 340B pricing on drugs shipped to contract pharmacies.

“What the pharmaceutical drug companies are doing here is absolutely unconscionable and unacceptable,” Blumenthal said. “They are required by law to provide discounted drugs not out of the goodness of their heart, but because they participate in the Medicaid program that yields them tons of profit. They are making money from the Medicaid program, and one of the conditions for those profits is that they provide discounted drugs to federally qualified health care centers, to clinics, and hospitals, and others that serve the most vulnerable people in our society.”

“These drug companies simply apparently know no bounds in terms of their desire for profits or simple greed,” Blumenthal said. “That’s why I’m writing to the federal authorities who have responsibility for administering this program. I’m saying to these federal authorities, crack down on the drug companies, make these drugs affordable to the clinics and hospitals and health centers so they can provide them at discounted prices to the people who need them most to avoid the deadly effects of the pandemic.”

“We don’t need a new law,” he said. “We don’t need a new statute on the books. We need simple enforcement of the law as it’s written right now.”

The U.S. Health Resources and Services Administration said in early September it is considering whether the manufacturers’ policies violate the 340B statute and whether sanctions may apply. In late September, U.S. Health and Human Services (HHS) General Counsel Robert Charrow told one of the manufacturers, Eli Lilly and Co., it should not interpret the absence of a final HRSA determination about the legality of Lilly’s actions “as somehow endorsing Lilly’s policy.”

Neither Charrow, a Trump administration appointee, nor HHS Secretary Azar, has taken any further public action, however.

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Biden Taps Antitrust Crusader Becerra to Lead HHS

California Attorney General Xavier Becerra (D), President-elect Joe Biden’s nominee to lead the U.S. Health and Human Services Department (HHS), has been tough on big drug manufacturers during his three years on the job. Becerra also has been tough on his state’s second-biggest health system, and on big pharmacy benefit managers (PBMs) too.

Health care providers—especially big and powerful ones—might need to adjust expectations about how health care policy will tilt under Biden if the U.S. Senate approves Becerra’s nomination to be the next HHS Secretary. During Becerra’s stint as California’s top law enforcement official, he earned a reputation as a fighter against any actor in health care that uses size and strength to get an edge over others—even health care providers, which often have warmer relationships with Democrats than with Republicans.

Biden yesterday announced Becerra as his choice to run HHS. Biden was expected to ask New Mexico Gov. Michelle Lujan-Grisham (D), a former state health secretary, to take the job. COVID-19 is surging in New Mexico, however, and the state might implement health care crisis standards soon letting caregivers ration limited resources. Some news agencies reported that Lujan-Grisham did not want to leave her state during the crisis. Rhode Island Gov. Gina Raimondo’s (D) name was floated next. But she took herself out of the running, saying her focus was on her state, where COVID-19 also is surging.

Becerra served more than two decades in the U.S. House before being appointed state attorney general in January 2017. He succeeded Kamala Harris, who was elected to the U.S. Senate in 2016, was Biden’s running mate, and will be the next Vice President. Becerra was a member of the House Ways and Means Committee, which has primary jurisdiction over Medicare, and was a senior member of its Health subcommittee.

Health care attorney Richard Church, Partner at K&L Gates, said Becerra “will bring an experienced litigator’s eye to what agencies can and cannot accomplish without congressional action—such as in regard to the 340B program.”

Also, “given the need for congressional support in many areas that Biden/Becerra may want to progress HHS’s agenda, it is important to note his more than 25 years in the House and the many allies and colleagues he still has in Congress,” Church pointed out.

Ways and Means Chairman Richard Neal (D-Mass.) yesterday called Becerra “a strong pick” to lead HHS, noting his role in crafting and passing the Affordable Care Act (he was an original co-sponsor) and, later as state attorney general, in leading a coalition of 20 states defending the law’s constitutionality in a case now before the U.S. Supreme Court. Neal said his committee is ready to work closely with HHS under Becerra’s leadership to “lower the costs of prescription drugs” and on other health issues.

Becerra also led a coalition of 46 states in filing a friend of the court brief in another case now before the Supreme Court, supporting states’ right to pass laws regulating PBMs. The brief argues that states need the power to regulate PBMs and the broader prescription drug market in order for them to ensure that prescription drugs are affordable and accessible. The high court heard arguments in both cases this fall and could hand down decisions at any time between now and late June.

As attorney general, Becerra secured major anti-trust settlements from drug manufacturers and hospitals. In October, he joined 19 other state attorney generals in filing a friend of the court brief in a federal appeals court challenging drug maker AbbVie’s pay-for-delay agreements blocking introduction of generic competition in the U.S. for Humira, the world’s largest selling drug, until 2023. In September, he announced an $11.8 million settlement against Novartis related to allegations that the company offered payments to healthcare practitioners to encourage them to prescribe certain Novartis drug products. In July 2019, he secured settlements with four brand drug companies totaling nearly $70 million in cases alleging they paid off generic drug manufacturers to not bring competing generic products to market.

In March 2018, Becerra sued Sutter Health, the largest health system in Northern California, for “throwing its weight around in the healthcare market, engaging in illegal, anticompetitive pricing that hurts California families.” Sutter agreed to a $575 million settlement in December 2019. Becerra opposed Sutter’s motion in June to delay the settlement’s final approval. A state court sided with Becerra in July.

In November, Becerra’s office and the U.S. Justice Department announced a $31.5 million settlement with Southern California health system Memorial Health stemming from the system’s voluntary self-disclosure that, for almost three years, it charged the federal and state Medicaid programs higher usual and customary costs for 340B purchased drugs instead of lower actual acquisition costs. The state’s share was $12.6 million.

“Today’s settlement was the result of Memorial Health coming forward, doing the right thing, and alerting the authorities of their error,” Becerra said. “The money from the settlement will go back where it belongs: to California’s residents, particularly low-income families and children who rely on Medi-Cal for their healthcare coverage.”

The American Hospital Association applauded, America’s Essential Hospitals supported, and the Association of American Medical Colleges offered congratulations on Becerra’s nomination in statements yesterday. Pharmaceutical Research and Manufacturers of America (PhRMA) and Biotechnology Innovation Organization (BIO) did not issue statements about Becerra’s selection to run HHS.

Kaiser Health News reported this morning that Republicans on the Senate Health, Education, Labor and Pensions (HELP) and Finance committees—both of which judge the fitness of HHS nominees—plan to delay hearings on Becerra’s nomination until after Georgia’s two Senate runoff elections on Jan. 5.

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PhRMA and BIO Sue to Block Most Favored Nation Drug Pricing Rule

Pharmaceutical Research and Manufacturers of America (PhRMA) and Biotechnology Innovation Organization (BIO) late last week separately sued to stop the Trump administration from implementing a “most favored nation” (MFN) drug payment model that will base federal reimbursement for 50 expensive, physician-administered drugs on the lowest price that drug manufacturers get in similar countries.

Participation in MFN payment model, currently scheduled to begin Jan. 1, will be mandatory for 340B hospital outpatient departments reimbursed by Medicare.

PhRMA and BIO each seeks a preliminary injunction prohibiting the U.S. Health and Human Services Department (HHS) from implementing or enforcing the rule. PhRMA sued in federal district court in Maryland, BIO in Northern California. Both lawsuits claim the rule violates federal law and is unconstitutional.

“By pushing through a nationwide, mandatory policy change, the administration is essentially rewriting the Medicare statute,” PhRMA said. “It is circumventing Congress entirely, ignoring the roles assigned to the executive and legislative branches.” It added that, “By proceeding with an interim final rule, the administration has also deprived the American public of their right to provide input on these drastic changes before they are implemented.”

“We have made clear our intentions to use all tools at our disposal to fight this legally suspect and operationally unworkable policy,” BIO said. “Today we are following through on that promise.”

The American Hospital Association urged the administration in November “to withdraw this rule immediately and replace it with a serious effort at drug pricing reform.”

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HHS Publishes Another Rule on the Limits of Program Guidance

The U.S. Health and Human Services Department (HHS) yesterday published a final rule to “guard against unlawful regulation through guidance” that might influence how HHS responds to drug manufacturer denials of 340B pricing on drugs shipped to contract pharmacies.

The rule is the latest in a series of steps by the Trump administration setting boundaries on the power of federal program policy set forth in sub-regulatory guidance. The dispute over drug manufacturers’ recent 340B actions revolves in large part over the enforceability of the U.S. Health Resources and Services Administration’s (HRSA) 1996 and 2010 contract pharmacy guidelines.

The new HHS rule forbids the department from issuing “any guidance document that establishes a legal obligation that is not reflected in a duly enacted statute or in a regulation lawfully promulgated under a statute.” It also states that HHS “may not use any guidance document for purposes of requiring a person or entity outside the Department to take any action, or refrain from taking any action, beyond what is required by the terms of an applicable statute or regulation.”

The rule’s final section establishes a procedure for interested parties to use to petition HHS “to withdraw or modify any particular guidance document.” It says petitioners can ask HHS to determine whether:

  • A guidance document imposes binding obligations on parties beyond what is required by the terms of applicable statutes and/or regulations

  • A component of HHS is using a guidance document to create additional legal obligations beyond what is required by the terms of applicable statutes and/or regulations

  • HHS is improperly exempting a guidance document “from the requirements set forth in this part.”

HHS has to respond to such requests within 90 days. It can stop the clock to request and obtain additional information from the requestor, or to consult with “other stakeholders.”

“The Department’s written response to petitions must state whether the Department agrees or disagrees with the petition and the Department’s rationale,” the rule says. “The Department must remedy the substance or use of any guidance documents that it determines in a petition response to be inconsistent with this part or otherwise unlawful.”

The rule takes effect Jan. 6.  It is unclear if the Biden administration will withdraw the regulation, but don’t be surprised if it does.

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Kedrion Biopharma Providing Refunds for 340B Overcharges

Kedrion Biopharma has posted a notice to 340B covered entities on the U.S. Health Resources and Services Administration (HRSA) website about refunds for overcharges on seven NDCs from Q3 2018 through Q1 2020. The company said it is working with Apexus, the 340B prime vendor, to issue the repayments.

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