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BREAKING: States Can Limit Providers’ Use of 340B Drugs for Medicaid Patients, CMS Says

BREAKING: States Can Limit Providers’ Use of 340B Drugs for Medicaid Patients, CMS Says

The Centers for Medicare & Medicaid Services released policy guidance yesterday outlining “best practices” states should consider for avoiding duplicate Medicaid rebates and 340B discounts on the same covered outpatient drugs.

Hospital group 340B Health said in a statement that while it strongly supports some of the options that CMS described, it is “extremely troubled by the inclusion of language that would allow states to limit the ability of some or all 340B hospitals and contract pharmacies to use 340B purchased drugs for Medicaid beneficiaries. Allowing such an opt-out would undermine the very purpose of 340B and potentially damage safety-net hospitals’ ability to care for patients with low incomes.”

Preventing hospitals that treat high volumes of low-income patients from receiving 340B discounts “would negate the intended purpose of using these savings to provide more care to low-income patients,” the group’s President and CEO Maureen Testoni said. “We call on CMS to reconsider this bulletin language and to engage with the 340B community to discuss several of these options.”

CMS said it developed the guidance in response to HHS Office of Inspector General reports in June 2011 and June 2016 that called on CMS and the Health Resources and Services Administration (HRSA) to do more to prevent 340B duplicate discounts.

In yesterday’s policy guidance, under the heading “Options for Medicaid Reimbursement for 340B Drugs Purchased by Covered Entities,” CMS observed that a state could use the Medicaid state plan amendment process “to limit the ability of some or all of the covered entities and/or contract pharmacies in the state to use 340B purchased drugs for Medicaid beneficiaries. If the covered entity or contract pharmacy is not able to use 340B drugs for Medicaid beneficiaries, the pharmacy can remain a Medicaid provider and drugs can be purchased outside of the 340B program and dispensed to Medicaid patients.”

The 340B statute prohibits disproportionate share hospitals, children’s hospitals, and free-standing cancer hospitals enrolled in 340B from using a group purchasing organization for covered outpatient drugs at any point in time. If a state prevented such hospitals and their contract pharmacies from using 340B purchased drugs for Medicaid patients, the hospitals might have to buy drugs for those patients at significantly higher wholesale acquisition cost (WAC).

The CMS guidance is broken into seven sections. In addition to the section on Medicaid reimbursement for 340B drugs, the others are:

  • Using the 340B Medicaid Exclusion File (MEF)
  • Developing Strategies with Contract Pharmacies
  • Using 340B Claims Identifier Options
  • Including 340B Duplicate Discount Provisions in Medicaid Managed Care Contracts
  • Providing Claims Level Data to Manufacturers
  • Using Specific Medicaid BIN/PCN on Medicaid Managed Care Plan Identification Cards

In a section entitled “Background,” the guidance notes states have the option of requiring “submission of managed care drug claims data from covered entities directly.” Oregon Medicaid follows this practice and 340B Health promotes its adoption.

“CMS understands that preventing billing for duplicate discounts in the 340B Program can present challenges to state Medicaid programs, but there are potential best practices that can be employed requiring commitment from all stakeholders involved,” the guidance concludes. “In working to share and implement these best practices for avoiding duplicate discounts, CMS remains committed to providing access to all Medicaid beneficiaries and recognizes the important role that the 340B Program plays towards that goal.”

CMS directs readers to email questions about the guidance

CMS Administrator Seema Verma tweeted about the new guidance yesterday afternoon. “Through our continued work with state Medicaid programs, @CMSGov

is increasing accountability w/ new measures to avoid duplicate discounts for 340B prescription drugs,” she wrote.

Health Payer Intelligence covered the new guidance.

Recent News and Commentary About 340B: Part 1

There was a surge of news and commentary about the 340B program (and its participants) in December that’s carried over into the first days of 2020. The articles reflect the two sides in the Great Divide over 340B: the belief that 340B is working and should be protected, and the belief that 340B is broken should be fixed. In this edition of 340B Report, we’ll look at the articles in the first bucket. We’ll look at those in the second bucket in our next edition.

The “340B is Working” Bucket

The 340B program “lends a helping hand” to “providing excellent care to the poor” at Sparrow Health System in Lansing, Mich., wrote Sparrow Executive Director of Community Care Darwin Brewster in the Dec. 4 edition of the Lansing State Journal. He said Sparrow uses 340B savings to support clinics and treatments at rural hospitals, allowing patients to get care closer to home. Sparrow also uses 340B savings to build and maintain community health clinics for those experiencing homelessness, “allowing them to stay healthy and prevent costly emergency services.” Providing a strong safety net for people in the region is “a tall order” but “we are happy to do it,” said Brewster. “Without the 340B program, though, those with the greatest need in Lansing and surrounding areas could lose access to critical services, and our efforts to serve all of our patients with the best care possible would be compromised.”

Hospital association 340B Heath published the latest installment in its Faces of 340B series of profiles on Dec. 16. It tells the story of Michael Hutson, a kidney transplant patient at Einstein Medical Center in Philadelphia concerned about his ability to afford the $500 co-payment that came with the $90,000 medication he needed to take to ensure his body would not reject his new kidney. “A social worker at Einstein introduced the patient to the hospital’s 340B program,” says 340B Health. “As a result, Michael didn’t have to pay any additional money to receive the drugs he needed following the transplant surgery. Instead, he has been focused on his recovery, which has included daily walks, taking his medication as directed daily, and attending kidney patient support groups at Einstein.”

On Dec. 26, Portland, Ore., station KGW-TV ran a news segment about a year-old pilot project at Legacy Salmon Creek Medical Center north of Vancouver, Wash., that delivers meals to malnourished patients at home at no cost for a full month after they are discharged from the hospital. (Legacy Salmon Creek is enrolled in 340B but this is not mentioned in the segment.) Clinical Nutrition Supervisor Gerry Howick, who developed the pilot program, said some 20 percent to 50 percent of hospital patients nationwide are malnourished. “The typical type of malnutrition we see, it’s because someone has a chronic illness and because of that it affects their appetite,” Howick said. “So we thought this would be a good way to help patients understand the best foods they can eat to help them heal from malnutrition and also get rid of all the barriers they experience, so we just provide these meals ready to go.” Ava Nodell, a discharged patient who received a month of meals and nutrition education after her hospital stay, said the extra help was potentially a lifesaver. “It made a big difference for me.”

A Dec. 28 news segment on Fox News looked at how two safety net hospitals—Denver Health in Colorado and University of Illinois Hospital & Health Sciences System (UI Health) in Chicago—are “getting into real estate” to cut costs and improve patients’ health. (While not mentioned in the segment, both are enrolled in 340B.) “Denver Health has partnered with Denver Housing Authority to renovate and reopen a dormant building on the hospital campus,” Fox News reported. “When complete, it will be low income senior housing, but a floor will be leased back to the hospital. Fifteen units will be dedicated to people occupying beds at Denver Health. After their hospital stay, they will be temporarily placed on the floor, while permanent housing is coordinated.” Similarly, UI Health, in partnership with the Center for Housing and Health, “works to move patients from emergency rooms into housing with ‘intensive case management.’ The pilot started with 26 patients and by next year, it expects to house 75 patients.” “In the end,” Fox News said, “these initiatives can save money for all patients and taxpayers.”

Drug Pricing Legislation Update

“The logjam on drug-pricing legislation in the Senate appears … intact, and it’s unclear if the outlook will change before May,” Modern Healthcare (subscription required) reports. “A comprehensive drug-pricing package authored by [Republican Senate Finance Committee Chair Chuck] Grassley [of Iowa] and Senate Finance Committee ranking Democrat Ron Wyden of Oregon has stalled due to a controversial provision that would require drugmakers to pay back Medicare for price hikes that outpace inflation.”

Politico Pro Pulse, meanwhile, reports that Grassley yesterday “dismissed House Energy and Commerce Republicans’ competing drug legislation as too soft on pharma” and said President Trump needs to be “speaking up more” on drug pricing.

340B Health’s 340B Informed blog, reflecting on news that drug companies have raised prices on 445 products since the new year began, notes that “President Trump and leaders of both parties in Congress are calling to restrain the rate of price growth and offering a plethora of legislative and regulatory proposals to accomplish this. These increases are a reminder of the vital importance of 340B. For patients with low incomes and high deductibles, these increases push some products further and further from their financial reach. Fortunately, the 340B program’s discounts will soften the blow of these price increases for safety-net providers and the patients they treat.”

Tweets of Note

@SeemaCMS: Through our continued work with state Medicaid programs, @CMSGov is increasing accountability w/ new measures to avoid duplicate discounts for 340B prescription drugs.

@ScreamingEag: (Replying to @SeemaCMS) Are these the same 340B discounts that Trump and the Republicans earlier eliminated, hurting rural hospitals?

@singareddynm: The gov’s 340B drug discount program mandates drug manufacturers sell at the lowest Medicaid price to at need hospitals and pharmacies (e.g. 340B entities can buy Humira for $.01 vs $1-5K). 1/2 of all hospitals are 340B entities and STILL charge consumers thousands.

@singareddynm: Every hospital and pharmacy wants to be recognized as a 340B entity. That may mean buying / adding entities into the health system’s alliance to qualify (unjustly IMO). These entities, particularly indie pharmacies, are even owned by insurance companies like Cigna and United.

@mosyednyc: (Replying to @singareddynm) Just let people recognize themselves as 340B entities.

@TedOkonCOA: I don’t condone high drug prices, especially for #cancer drugs, but focusing on high list prices and not realizing how #PBM rebates and hospital #340B discounts inflate and distort prices is simply sensationalism that doesn’t help bring down drug prices for patients.

@AIR340B: Fixes to the #340B drug discount program would help improve overall health outcomes for rural communities served by the safety-net program. Watch this video to see the impact #340B has on patients:

AIR 340B @AIR340B

Fixes to the #340B drug discount program would help improve overall health outcomes for rural communities served by the safety-net program. Watch this video to see the impact #340B has on patients:

@340BHealth: It’s a new year but the same story for #drugpricing increases. In our latest blog post we recap how #340B helps patients and the safety-net hospitals who care for them amid the latest price hikes. #Protect340B

@NVHR1: We get LOTS of questions about how programs can leverage 340B savings to support viral hepatitis testing and linkage to care programs. Do you have questions about #340B? Be sure to sign up for our upcoming webinar!

@Ohiochc: Advocate Alert! Please use the link below to ask your state House & Senate members to co-sponsor legislation protecting the 340B Discount Drug Program for Ohio Health Centers, their patients and communities: