Massachusetts Medicaid Wants to Stop Covering “High Cost” Drugs Bought Through 340B

(Editor’s note: The Medicare Payment Advisory Commission (MedPAC) tomorrow will consider a staff analysis of “whether the availability of 340B drug discounts creates incentives to choose more expensive products in some cases and the resulting impact on Medicare patients’ cost-share for such drugs in such cases.” 340B Report plans to be there and fill you in later on what happened.)

Massachusetts Medicaid Wants to Stop Covering “High Cost” Drugs Bought Through 340B

MassHealth, the Massachusetts Medicaid agency, should exercise “great caution” as it decides whether to stop covering unspecified “high cost” drugs bought through the 340B program, the state hospital association warns.

In what is thought to be a nationally unprecedented move, MassHealth late last year proposed adding a new condition to its regulations governing 340B hospital participation in Medicaid. Such hospitals may provide drugs to MassHealth members, the proposal states, “except for any high cost drugs that are designated as excluded from coverage.” Thomas Barker, former General Counsel of both the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS), says in a blog post “the clear implication of the MassHealth policy is that the state wants to claim rebates for these drugs….The effect of the proposed policy is that hospitals will no longer be able to acquire the drugs at a significant discount and then bill MassHealth at a mark-up. Moreover, hospitals will likely be required to keep separate inventories for ‘high cost drugs’ and ‘low cost drugs’ – a significant record-keeping burden.”

“Other states will likely be watching to see if Massachusetts moves forward with its policy given the likely favorable impact on state Medicaid programs,” says Baker, a partner at Foley Hoag.

MassHealth held a public hearing on the proposed rule on Dec. 20. It could take effect as soon as Feb. 21.

“The very notion of putting conditions on MassHealth covered drugs in connection to [the 340B program] raises significant alarm given hospital reliance on 340B financing to support the care they provide to MassHealth patients,” the Massachusetts Health & Hospital Association (MHA) said in written comments on the proposal. Given the 340B statute’s prohibition on disproportionate share, children’s, and free-standing cancer hospitals using group purchasing organizations to buy 340B covered outpatient drugs, the proposal rule, if finalized, would force such hospitals to buy the now-excluded high-cost drugs at much more expensive wholesale acquisition cost (WAC).

Boston Medical Center (BMC) said in its written comments that while it supports state efforts to rein in drug spending, “restricting the ability of safety-net hospitals to purchase drugs at a discount through the 340B Program denies safety-net hospitals much needed margin on prescription drugs, in clear violation of the statutory intent. In our case at BMC, loss of that revenue puts the many hospital operations and programs supported by this revenue source at risk, and depending on the scale could pose a threat to the financial sustainability of our health system more generally.”

MHA recommended that the high-cost drug exclusion be limited “to those with an annual cost of no less than $1 million per patient, adjusted for inflation in subsequent years.” It additionally recommends that the state initially exclude only the three drugs it currently carves out of MassHealth coverage due to high cost: Kymriah (which costs about $475,000 WAC annually), Yescarta (about $373,000) and Zolgensma, (about $2.1 million). MHA also expressed concern about its understanding that the state intends to reimburse hospitals at actual acquisition cost for 340B drugs designated for exclusion from MassHealth coverage.

BMC recommended that MassHealth redraft the proposed rule to limit the definition of high costs drugs to those “costing $1 million or more per patient on an annual basis.” It also recommended that no more than 10 drugs in the MassHealth prescription drug benefit and no more than five in the medical benefit be excluded from the 340B program in the aggregate.

Michigan Hospitals and Health Centers Oppose State Plan to Move All Medicaid Rx Coverage to FFS

Michigan’s hospital and health center associations say their members would be financially devastated if the state forges ahead with plans to carve all outpatient prescription drugs out of Medicaid managed care (MCO) coverage, instead billing these drugs at point-of-sale to the state’s pharmacy benefit manager (PBM) contractor under fee-for-service payment.

The state Department of Health and Human Services (DHHS) announced the plan in a recent provider bulletin. It said it is making the change pursuant to a fiscal 2020 state health care appropriations law. Comments on the plan are due Jan. 17. The department said the change would result in cost savings through a combination of increased rebates, lower MCO capitation costs, and the change to a single formulary. The effective date has not been set.

The Michigan Primary Care Association, which represents the state’s health centers, said in written comments to DHHS it estimates Michigan health centers stand to lose nearly $6 million if the change happens. It wrote:

Under this proposed policy, our health centers would no longer be able to benefit from the 340B Drug Program that exists to support critical programs and lower the cost of prohibitively expensive prescription drugs for the health care safety net. The loss of revenue as a result of moving Managed Care Medicaid for pharmacy to the state’s existing fee-for-service program would be devastating — especially to rural communities where alternate care options are few and far between. Patients may have to travel substantial distances to access care. They also may lose access to the affordable care management, substance use disorder treatment, health education, dental services, and more that they’re accustomed to receiving. As a result, these patients will be less likely to have the resources and good health to contribute to work, family, and the local economy — a bad prescription for Michigan. Also, implementing a prescription drug carve-out would subject our patients to prescription drug payments that are typically waived under the current managed care environment.

The Michigan Health & Hospital Association urged DHHS in written comments to withdraw the proposal. “The proposed policy is not well-planned in terms of its potentially devastating financial impact on 340B hospitals, the potential to prevent some 340B hospitals from using their contract pharmacies at the time of implementation (which may be the only pharmacist available to certain hospitals in isolated areas of the state) and the move away from care coordination,” it said.

“If the intention of [the policy change] is to accrue outpatient prescription drug rebates to the state Medicaid program, the MHA believes this is potentially a direct threat to the discounted pricing the 340B hospitals currently access,” the group said. MHA noted that “the Medicaid fee-for-service (FFS) program technically does not allow for the use of contract pharmacies and the MHA is concerned that an unintended consequence of [the policy] would be the inability of 340B hospitals to provide outpatient prescription drugs through its contract pharmacy agreements.” It said, “removing the pharmacy benefit from the managed care system is a step back from the effort to move our healthcare design from volume and encounter-based to patient-centered and value based….Moving the prescription drug benefit out of the managed care program for the purposes of fiscal savings is shortsighted.”

Update: GAO Report on 340B Hospital Eligibility

The Government Accountability Office’s recent finding that some hospitals may get 340B drug discounts for which they are ineligible due to weak federal oversight is “alarming,” Pharmaceutical Research and Manufacturers of America (PhRMA) says in a Jan. 14 blog post.

“There are far too many hospitals participating in 340B simply to abuse the program in order to generate additional revenue, and vulnerable, low-income patients are the ones paying the price,” PhRMA says. “Many of these same hospitals use questionable billing practices that target poor and needy patients….Enough is enough. Lawmakers need to take action and stop patients from getting caught in profit-driven hospital practices. HRSA could start by reviewing the six recommendations GAO made in their new report.”

In a Jan. 13 blog post, McDermott Will & Emery attorneys Emily Cook, Drew Elizabeth McCormick, and Steven Schnelle took a deep dive into both the Jan. 10 GAO report and CMS’s Jan. 8 guidance on avoiding 340B duplicate discounts in Medicaid. “After a relatively quiet 2019, 340B Covered Entities should be prepared for increased scrutiny, oversight and the potential for additional 340B Program compliance requirements in 2020,” they warn.

Inside Health Policy (subscription required) and RevCycle Intelligence covered the GAO report.

Tweets of Note

@340BHealth: Why #Protect340B? For underserved patients and the hospitals who step up to care for them, #340B is an essential part of the health care safety net. Watch this video to learn more.

340B Health @340BHealth

Why #Protect340B? For underserved patients and the hospitals who step up to care for them, #340B is an essential part of the health care safety net. Watch this video to learn more.

@DrugChannels:  More #340B shenanigans: #PBMs allegedly use “discriminatory contracting” to profit from #340B drug discount program in Ohio

@DispatchAlerts @CCandisky The #340B program is an out-of-control mess and needs to be modernized. Why is that controversial?

@jayrgulley: (Reply to @DrugChannels) Adam, sincere question here…What’s more out of control, is it #340B or is it the #PBM ?

@DrugChannels: Ugh. Almost 1,700 #340B #hospitals are supposed to serve low-income individuals … But @USGAO finds that @HRSAgov has lax oversight & can’t ensure compliance 🙄 So, how many ineligible #hospitals profit from #340B?


@340BHealth: .@KFF found that #uninsured patients are the most likely patients to delay or forego care or medication use due to the cost. #340B works to help patients access the care and treatments they need for free or at a significant discount. #Protect340B

@DrugChannels: Via @IncidentalEcon: Critical look #hospitals’ weak and inadequate “community benefit” obligations @joerianatalie #340B BTW, suing indigent and uninsured patients is not an obligation. #justsayin

@340BHealth: Have you heard that academic researchers concluded #340B savings represent less than one percent of net operating revenue for participating safety-net hospitals? The program is small but mighty! #Protect340B

@HIV_Insight: The ABCs of 340B: A 101 Webinar on the 340B Drug Discount Program

@HubertZajicek: Average markup of specialty medicines at hospitals is 500% – up to 1000%? While acquired at a discount (340B)…unsustainable #JPMHC20

@WWFHTX: Per @BRGexpert report, the amount pharmacies and other health care providers retained on the sale of brand #medicines nearly doubled between 2013 and 2018 from $24.7B to $48.6B. This trend was primarily driven by unprecedented expansion in the #340B drug pricing program.

@PopovianPharmD: And there is gambling going on in Las Vegas! New GAO report: Some hospitals participating in 340B may not be eligible for the program

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