MedPAC Will Weigh in on Whether 340B Causes Hospitals to Use More Expensive Drugs

MedPAC Will Weigh in on Whether 340B Causes Hospitals to Use More Expensive Drugs

The Medicare Payment Advisory Commission (MedPAC) will hear from its staff on Jan. 17 about whether the 340B program gives participating hospitals an incentive to use more expensive drugs. MedPAC, which advises Congress on Medicare policy, will spend an hour and a half on the 340B matter on Day 2 of its Jan. 16-17 public meeting in Washington. 340B Report plans to be there and fill you in later on what happened.

Republican Reps. Greg Walden (Ore.) and Michael Burgess (Texas) asked MedPAC for a report about hospital mergers and hospital-physician practice consolidation in an August 2018 letter, when Walden chaired the House Energy & Commerce Committee and Burgess chaired its Subcommittee on Health. The House switched to Democratic control in 2019. Walden and Burgess specifically asked MedPAC the following about 340B in their letter:

“Under the 340B program, hospitals can acquire outpatient drugs at a substantial discount, leading to high profit margins on drugs for 340B hospitals, which has contributed to hospitals acquiring physician practices. Can the availability of 340B drug discounts create incentives for hospitals to choose more expensive products in some cases? If so, what would be the impact on Medicare patients’ cost-sharing for such drugs in such cases?”

MedPAC could issue a stand-alone report in response to Walden and Burgess’s letter. Or it could respond in one of its next two regularly scheduled reports to Congress, due in March and June.

A June 2015 Government Accountability Office (GAO) report found that in 2008 and 2012, per beneficiary Medicare Part B drug spending was substantially higher at 340B DSH hospitals than at non-340B hospitals. GAO said this indicates that, on average, “beneficiaries at 340B DSH hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other hospitals.” Hospital group 340B Health countered that a higher volume of drugs could lead to better outcomes; that GAO did not fully account for differences in the patient populations between 340B and non-340B hospitals; that it did not fully account for differences in hospital characteristics between 340B and other hospitals; that it improperly concluded that the health status of 340B hospital patients does not explain the spending differences between 340B and other hospitals; and that its finding is at odds with the fact that 340B DSH hospitals have lower overall financial margins.

Newsom Wants to Shield Calif. 340B Clinics from Fallout of His Order to Move Medicaid MCO Rx Benefit to FFS

California Gov. Gavin Newsom’s proposed fiscal 2020-21 state budget calls for a new $105 million “supplemental payment pool for non-hospital 340B clinics” to “mitigate the impact” of Newsom’s 2019 executive order to shift all pharmacy benefits from Medi-Cal managed care (MCO) to Medi-Cal fee for service (FFS) effective January 2021. The state’s safety-net providers warn that transferring drug benefits from Medi-Cal MCO to FFS would significantly reduce their prescription drug revenues.

In a budget document, the state Department of Health Care Services (DHCS) notes that, under the present arrangement, non-hospital 340B clinics have been receiving about $105 million annually in reimbursement from Medi-Cal in excess of their 340B pharmacy costs. “Payments from this pool will continue to support the overall safety net services that these non-hospital 340B clinics have historically provided through the use of their additional pharmacy revenue through managed care,” DHCS said.

The term “non-hospital 340B clinics” is undefined, so it is unclear which non-hospital covered entities could draw from the supplemental payment pool.

In connection with the budget release, the Newsom administration also announced plans to begin contracting with one or more drug manufacturers to become “the first state to create its own generic drug label and making the state’s generic prescription drugs available for sale to all Californians.”

Federal Circuit Court Rules Against Health Center in 340B Discriminatory Reimbursement Lawsuit

The federal Medicare statute does not require the U.S. Department of Health and Human Services (HHS) to require a private Medicare Advantage prescription drug plan to reimburse a federal qualified health center (FQHC) for 340B discounted drugs at a rate “not less than” the insurance plan pays other providers for the same drugs, a federal appeals court ruled last month.

Law firm K&L Gates looks at the U.S. Court of Appeals for the District of Columbia Circuit’s Dec. 20 opinion in Cares Community Health v. HHS in a new policy brief on its website.

Cares, a Washington, D.C., 340B-enrolled health center, sued HHS claiming it unlawfully allowed Humana Health Plan to reimburse Cares for drugs provided to Medicare beneficiaries at roughly two-thirds the rate Humana pays other providers for retail pharmacy services. Cares claimed HHS failed to enforce the Medicare statute’s “not less than” provision, which requires that private Medicare insurance plans’ reimbursements to an FQHC for government-subsidized medical services be “not less than” what the insurers pay other healthcare providers not receiving such subsidies.

A federal district court held that Cares had failed to state a claim because the “not less than” provision does not apply to prescription drug plans’ reimbursement of pharmacy services. The federal circuit court affirmed the lower court’s ruling on appeal, holding that “the Medicare statute does not preclude HHS from approving prescription drug plans that lower reimbursements for FQHC pharmacy services based on whether the FQHC obtained the pharmaceuticals at a discount under Section 340B.”

In addition to recapping the Cares’ lawsuit, the K&L Gates policy brief also describes recent legislative action in Oregon, Minnesota, South Dakota, and West Virginia prohibiting PBMs from setting lower reimbursement rates for drugs provided by 340B covered entities.

In related news, The Columbus (Ohio) Dispatch ran a story on Jan. 13 about 340B health centers and others serving uninsured and underinsured Ohioans seeing their 340B program savings being gobbled up by PBMs “reducing the rates they pay to pharmacies for the drugs they get at a discount.” “What we’re seeing in Ohio and in other states across the country (is) that the PBMs are diverting those pharmacy savings from the 340B program intended to provide care to underserved patients and communities and using those dollars for themselves to increase their profit margins,” said Julie DiRossi King, chief operating officer for the Ohio Association of Community Health Centers. “Ohio legislators will soon introduce bipartisan bills in the House and Senate aimed at ending the practice by PBMs,” the article says.

Groups Respond to GAO’s Findings About Nongovernmental Hospitals’ 340B Eligibility

340B Health and the American Hospital Association (AHA) issued statements late on Jan. 10 responding to the Governmental Accountability Office’s (GAO) recommendation earlier that day that oversight of 340B private, nonprofit hospitals should be significantly strengthened.

“The systems in place to identify and verify hospitals that are eligible to participate in the 340B drug pricing program work, and they work well,” 340B Health President and CEO Maureen Testoni said. “GAO has identified a handful of hospital contracts for which they have some questions. Hospitals are always ready and willing to answer such questions. The fact is, 340B hospitals provide 60 percent of all uncompensated care in the U.S. while representing only 38 percent of acute care hospitals. Patients served include those who have no insurance and those with public or private coverage, including Medicaid.”

AHA Executive Vice President Tom Nickels said, “We look forward to reviewing this report closely. Most important is that tax-exempt hospitals are accountable to the government and their communities in a variety of important ways. For example, they publicly report annually the benefits they provide. In the most recent year for which comprehensive data is available, 340B tax-exempt hospitals provided more than $56 billion in total benefits to their communities.”

Modern Healthcare (subscription required) wrote about the GAO’s findings late Friday afternoon. The report was requested by Senate health committee Chair Lamar Alexander (R-Tenn.), House Energy & Commerce Chair Greg Walden (R-Ore.), Energy & Commerce health subcommittee Chair Michael Burgess (R-Texas) and Energy & Commerce oversight and investigations subcommittee Chair Brett Guthrie (R-Ky.).

PhRMA Says Its Percentage of What’s Paid for Brand-Name Drugs Is Down, Blames 340B

The percentage of payments for brand-name medicine that drugmakers retain has fallen to 54.3 percent while the share kept by “supply chain and other entities” including 340B providers has risen to 45.7 percent, a new update to a PhRMA-funded 2017 white paper finds.

An appendix to the paper, however, shows that while the percentage retained by manufacturers is down, the actual amount of money pharma keeps is up significantly—$238.8 billion in 2018, up from $177.5 billion in 2013.

The paper by Berkeley Research Group says expansion in the 340B program, including 340B contract pharmacy, was the “primary driver” of growth in the amount that hospitals, pharmacies, and other providers retained on the sale of brand medicines—rising from $24.7 billion in 2013 to $48.6 billion in 2018. “As a result of this growth, total margin on 340B purchased brand drugs was nine times greater in 2018 than in 2013,” rising from $3.5 billion in 2013 to $30.6 billion in 2018.

“The amount hospitals & other 340B entities took in from the sale of 340B brand medicines was 9x larger in 2018 than in 2013,” PhRMA President and CEO Stephen Ubl tweeted about the report. “To fix patient affordability challenges, we need to look at the whole supply chain.”

Prosecutors Want Ex-Rep. Collins To Serve Five Years for Insider Trading

Former Rep. Chris Collins (R-N.Y.), should serve nearly five years in prison for insider trading and lying to the FBI, federal prosecutors recommended to a judge Monday, The Washington Post reports.

On Oct. 1, 2019, Collins pled guilty in federal district court in Manhattan to federal charges in an insider trading case related to his board membership on and stock ownership in a biotech company. Collins resigned from Congress the day before. Before his indictment, Collins led House Republican efforts to curb the 340B program. U.S. District Judge Vernon Broderick is scheduled to sentence Collins on Friday.

HRSA Announces 340B Enrollment Flexibility in Puerto Rico During Public Health Emergency

A series of earthquakes and aftershocks in Puerto Rico prompted Health and Human Services Secretary Alex Azar on Jan. 8 to declare a public health emergency for the U.S. territory.

In response, on Jan. 14 the Health Resources and Services Administration (HRSA) announced on the Office of Pharmacy Affairs (OPA) homepage that eligible entities in Puerto Rico may immediately enroll for the 340B program during the emergency, rather than having to wait for the normal quarterly registration period. Tomorrow, Jan. 15, is the last day of the first quarterly 340B registration period of 2020. The next is April 1-15 for a July 1 start date.

Hospital Groups Sue HHS Over 2020 Outpatient Payment Cuts

The American Hospital Association (AHA), the Association of American Medical Colleges (AAMC), and several individual hospitals sued the Department of Health and Human Services on Jan. 13 for continuing payment reductions this year for hospital outpatient services provided in off-campus provider-based departments grandfathered under the Bipartisan Budget Act of 2015. The groups and hospitals successfully sued HHS over the same cuts for calendar year 2019. AHA, AAMC, and America’s Essential Hospitals are separately suing HHS over its nearly 30 percent reduction in Medicare Part B reimbursement for many 340B hospitals in 2018 and 2019. That lawsuit is now before a federal appeals court and a decision could be handed down at any time.

Recent News and Commentary About 340B: Part 2

Last week, we reported on recent news articles and commentary across the country reflecting the belief that the 340B program is working and should be protected. In this edition, we’ll review recent news and opinion articles that reflect the other side of the 340B debate—the belief that 340B is broken and should be fixed.

On Dec. 27, BenefitsPro magazine reported on a new PhRMA-funded study that concluded that hospitals in the 340B program “are getting reimbursed by payers three times the amount they initially paid for brand medicines.” The study found that “while 340B hospitals on average pay $1,591 per claim for a brand medicine, on average they get reimbursed $4,673 by a commercial insurer.” (As we report above, PhRMA has just released a separate paper that finds that drugmakers’ percentage share of payments on brand medicine is declining while the percentage kept by 340B hospitals and others in the supply chain is rising.) In a Dec. 19 post in the American Hospital Association blog, AHA Executive Vice President Tom Nickels dismissed the PhRMA-funded study about 340B hospital reimbursement for medicine as “an obvious attempt to divert attention away from a problem of [the pharmaceutical industry’s] own making: skyrocketing drug prices.”

In a Jan. 10 commentary in Morning Consult, former Rep. Bob Dold (R-Ill.), cites recent research funded by the drug industry-led group AIR 340B finding that the average amount of charity care provided by 340B hospitals has declined since 2011, with nearly two out of three 340B hospitals providing below average rates of charity care. Dold, who is now an AIR 340B spokesman, says “our leaders in Washington, D.C., should ask themselves: Who is truly benefiting from the program? If the answer is hospitals, and not patients, then improving 340B needs to be part of the broader health care debate.”

In a Jan. 4 guest column in Nashville’s daily newspaper The Tennessean, oncologist Jeffrey Patton, M.D., a Board Member of the Community Oncology Alliance (COA), writes that independent oncology practices “can’t compete with the big hospitals eligible for 340B.” Hospitals enrolled in 340B, he says, are “increasing the pressure on oncology community clinics to close by aggressively pursuing acquisitions. I firmly believe that fixing the 340B program will be the right step into protecting our community oncology clinics and ultimately those battling cancer in Tennessee.” Tennessee, of course, is the home state of Sen. Lamar Alexander (R), the chairman of the powerful Health, Education, Labor, and Pensions Committee with jurisdiction over 340B.

In a Dec. 31 guest column in the Baton Rouge, La., newspaper The Advocate, two state leaders of the patient advocacy group Epilepsy Alliance America write that, “at 27 years old, the 340B program is past due for re-evaluation.” Baton Rouge is the hometown of Sen. Bill Cassidy (R), who has previously introduced legislation to impose a moratorium on DSH hospitals and their outpatient facilities enrolling in 340B and set new 340B eligibility requirements for DSH, children’s, and cancer hospitals. “While this program was designed with honorable intentions, like any program, it can easily have negative outcomes if not monitored properly,” write Karen Basha Egozi, President & CEO of Epilepsy Florida, and Julie Martin, Executive Director of Epilepsy Alliance Louisiana. “What started as a way for low-income patients to receive less expensive health care has turned into entities, such as Disproportionate Share Hospitals and contract pharmacies, taking advantage of the benefits of the program at the cost of vulnerable patients.” Epilepsy Alliance America comprises six former affiliates of the Epilepsy Foundation of America that broke off in 2018 to form their own national organization.

A Jan. 7 article in the online medical news publication Medscape covered a talk given by Scott Huntington, M.D., M.P.H., of Yale School of Medicine at the recent annual meeting of the American Society of Hematology. Huntington used the case of a patient of his to illustrate the hard choices physicians must make between prescribing established, lower cost drugs with relatively lower cost-sharing burdens for patients or prescribing newer, more expensive drugs that provide slight gains in survival but impose staggering cost-sharing burdens. Huntington said spending on cancer drugs is being partially driven by the 340B program, which he said is driving “vertical integration of community oncology practices into the hospital setting.” Hospitals, he said, are incentivized to give expensive chemotherapy, and pharmaceutical companies have an obligation to maximize profit. These are strong forces acting as barriers to a reduction in ever-rising cancer drug prices. Patients, Huntington said, are increasingly facing the dilemma of choosing new therapies at the cost of financial toxicity or forgoing new therapy altogether.

Tweets of Note

@NatLawHealthLaw: 2020 Starts Off With Two Government Publications Critical Of 340B Program Oversight #CMS #HealthCare #Medicaid

@OurHospitals: Info bulletin from @CMSGov to state #Medicaid agencies offers various policy options states can use to prevent duplicate discounts on drugs purchased through #340B.

@MaureenTestoni: The 2.2 percent decline in the #cancer mortality rate is great news to read about. I know #340B hospitals are playing a crucial role in providing the innovative cancer care that has helped contribute to this progress.

@CCandisky: Pharmacy middlemen benefit from drug discount program intended to help poor Ohioans

@RandiClites: (Responding to @CCandisky) We can’t stand by and let PBMs divert money meant to help underserved people access health services. That’s why I’m introducing legislation to promote fair access and reimbursement to community health centers and other 340B providers

@darreldrowland: Pharmacy middlemen lining pockets from drug discount program intended to help poor Ohioans, community health clinic operators say New legislation is coming to stop the practice by pharmacy benefit managers

@vkoganosu: (Replying to @darreldrowland) I’m sorry, but this is a terrible story. 340B is designed to reduce cost of serving uninsured patients, not increase profit (difference between acquisition cost and reimbursement) for insured patients. If a PBM is paying, the patient is insured!

@vkoganosu: (Replying to @darreldrowland and @ccandisky) PBMs *should* be reimbursing lower for 340B drugs! The purpose of the program is to provide discount for pharmacies serving *uninsured* patients. If a PBM is paying, they have insurance! If costs are lower, so should be reimbursement.

@CommunitySolsED: Ohio legislators @bobdhackett @SusanManchester @RandiClites

plan to introduce legislation next month reforming the way PBMs reimburse Ohio pharmacies for drugs purchased via 340B discount program

@Ohiochc: Thank you to @SusanManchester @RandiClites and @bobdhackett for your leadership in protecting 340B pharmacy savings for Ohio patients and communities. #ValueCHCs

@mcbridetd: GAO report hits lax oversight of 340B drug program

@AIR340B: RECENT REPORT: AIR340B partnered with @avalerehealth to analyze charity care levels at #340B DSH hospitals. The report found 340B DSH hospitals continually provide below-average charity care rates, raising questions about hospital eligibility requirements

@Apexus340B: Pleased to announce Apexus has been selected by @HRSAgov to continue as the 340B Prime Vendor. We look forward to continuing to collaborate with partners to deliver lower drug pricing, training & education, and support to all 340B stakeholders. Learn more:

@TedOkonCOA: Bottom line is that this new @USGAO report shows that the #340B drug discount program does not have sufficient oversight and that the fox is guarding the chicken coup.

@TedOkonCOA: Pretty amazing. #340B advocates resist EVERY attempt to fix the program in any way and have ZERO proactive ideas. It’s simply fight, fight, fight. The #340B bubble will burst and will be? ugly when it does.

@RepKatiePorter: Did your prescription get more expensive this week? That’s because Big Pharma’s executives decided your life was worth less than their profits. #NewYearSameGreed

@rsmkjh: (Replying to @RepKatiePorter) No mention from you on how the government compels Pharma to subsidize their own drugs.  Fix the 340B Drug Pricing Program.

@JaredSHopkins: Breaking: Gov. Gavin Newsom Looks to Have California Launch Its Own Generic Prescription-Drug Label, The Latest Response From States To Address Rising Healthcare Costs

@ScottGottliebMD: Details scant but this sounds like a white label formulation of sort of bulk purchase contracts many states already enter into. Doesn’t seem too novel. Nor does it seem like something drug makers would oppose. Distributors already do similar arrangements for large pharmacy chains

@contirena1: Agreed. ‘Private label’ generic drugs are common. It also won’t increase competition or reduce prices. Wonder if the state is actually trying to better leverage 340b prices for drugs under this arrangement.

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