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BREAKING: Drugmaker Xspire Owes 340B Refunds


Welcome to the pilot issue of 340B Report. We’re so glad to have you aboard! And now, let’s get to the news.

BREAKING: Drugmaker Xspire Owes 340B Refunds

Xspire Pharma, a privately held, specialty pharmaceutical company, owes refunds for overcharges to 340B covered entities for covered outpatient drugs sold from Nov. 1, 2012 to Aug. 1, 2019, according to a public notice the company posted either late late Jan. 6 or early Jan. 7 on the Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA) website.

The notice states:

During a recently completed HRSA audit of Xspire’ s participation in the 340B program, it was determined mutually by Xspire and HRSA that Xspire did not offer statutory 340B ceiling prices for its covered outpatient drugs during the period 11/1/2012 to 8/1/2019. A list of affected Xspire products is attached to this letter.

Xspire is committed to correcting any overcharges that resulted from this noncompliance, and to ensuring that Xspire is compliant with all 340B requirements going forward.

To that end, Xspire requests that any covered entity that purchased Xspire products during the period please submit appropriate requests for refund as described below by March 31, 2020. Xspire will promptly issue refunds of the difference between the wholesale acquisition cost (“WAC”) of the product as of the purchase date and the then-prevailing 340B ceiling price.

The notice provides instructions for completing and returning an attached reform form and lists the 13 products on which refunds are owed.

This appears to mark the second time HRSA has audited a drug manufacturer, found it did not offer covered outpatient drugs to eligible entities at the statutory 340B ceiling price, and required repayments for 340B overcharges. A 2018 HRSA audit disclosed that Belcher Pharmaceuticals had overcharged 340B covered entities.

Also late yesterday or early today, HRSA posted a notice from drug manufacturer astellas announcing it is lifting its limited distribution system on all strengths of capsules of the immunosuppressant Prograf. Limited distribution systems will remain in effect for ampules and granules of Prograf and capsules of Astagraf, another immunosuppressant it makes.

340B in the States

Colorado Medicaid Recommends 340B Payment Limits

Colorado should consider “setting an upper payment limit on the prices charged to health plans by hospitals who are able to access lower 340B prices,” a new state government report recommends. In addition, the report by the Colorado Department of Health Care Policy & Financing (HCPF) says insurers, employers, and other payers should redirect drug therapy administration away from hospitals and toward more cost-effective site of care such as physician offices and home infusion sites. HCPF administers Medicaid, the Child Health Insurance Program, and other services for low-income families in the state.

HCPF issued the 50-page report last month. While it examines drug pricing broadly, the report is another example of heightened state interest and involvement in the 340B program.

HCPF said the state should consider the 340B hospital payment limit in conjunction with creating a Prescription Drug Affordability Board similar to Maryland’s, which has authority to evaluate expensive drugs and recommend methods for addressing such costs, including setting upper payment limits. The Maryland legislature created the state board last year. It has appointed its members to the panel, but Gov. Larry Hogan has not appointed his members.

The Colorado report also recommends leveraging the size of Children’s Hospital Colorado and UCHealth University of Colorado Hospital “to negotiate prices on high cost specialty drugs, as well as value-based contracts with manufacturers” and “to also ensure that the savings negotiated are passed along to the ultimate payers – employers, municipalities, Medicaid and the like.”

Calif. Drug Pricing Executive Order Criticized

One year ago to the day, California Gov. Gavin Newsom issued a controversial executive order directing Medi-Cal (the state Medicaid agency) and other state agencies to negotiate drug prices as a single payer. Among its multiple provisions, the order directs Medi-Cal, effective Jan. 1, 2021, to transfer all pharmacy benefits from Medi-Cal managed care (MCO) to Medi-Cal fee for service (FFS)—a move that would significantly reduce prescription drug revenues for many California 340B safety-net providers.

The governor’s order is widely seen as a potential bellwether for other states. 340B providers nationwide are monitoring the situation in California closely.

As Jason Reddish and Michael Glomb of the law firm Feldesman Tucker have explained, existing state law requires California 340B providers to carve-in Medi-Cal FFS and bill for reimbursement at actual acquisition cost (AAC) plus a $7.25 dispensing fee. With respect to Medi-Cal MCO, in general providers can bill managed care organizations at their contracted reimbursement and “enjoy some reimbursement margin on drugs covered by Medicaid MCOs that can be used to subsidize care provided to uninsured and underserved patients.”

In a Dec. 21 op-ed in the San Francisco Examiner, community health center leader Eddie Chan warned that, as written, the governor’s order “would jeopardize programs essential to the health of California’s most needy individuals and families.” Chan is President and CEO of North East Medical Services (NEMS), a San Francisco-based health center.

“We strongly believe a loss of 340B savings will have a detrimental impact on health centers like NEMS, hindering us from fully serving California’s most vulnerable populations,” Chan wrote. “We ask that the Governor find a way to keep the 340B program intact for health centers or help us close the funding gap so that we may continue championing health care innovations, programs, and services that make our communities healthier, stronger.”

Washington Update

Drug Pricing Legislation

Congress returned to work on Jan. 5 following its winter holiday break. None of the major bills under consideration to lower prescription drug costs have provisions that would affect the 340B program significantly. But that could change as pressure builds in Congress to do something about rising drug prices before the November elections.

Multiple news sources report that drugmakers raised prices on more than 450 drugs since the start of the new year, with more hikes expected this month. The drugs include widely used treatments for cancer, arthritis, multiple sclerosis, HIV, and pain. (Modern Healthcare, subscription required; Axios Vitals).

News like that—and the need to placate voters about it—is keeping Members of Congress’s feet to the fire. How does 340B figure in the mix? 340B potentially could come into play as a bargaining chip in negotiations to pass a bipartisan drug pricing bill that President Trump could support. Legislation to shed more light on how much money providers save on medicine by participating in 340B and how those providers use those savings is one option that has been floated.

Medicare Part B Cuts for 340B Hospitals

Last November, the Trump administration finalized a regulation to continue a nearly 30 percent reduction in Medicare Part B drug reimbursement for many 340B hospitals in 2020. The cuts began in 2018. Three major hospital associations and three health systems sued to reverse the cuts, and a federal district judge has sided with them twice. The case is now before a federal appeals court in Washington. It heard oral arguments last fall and its decision could come at any time. Meanwhile, in mid-December, 135 hospitals filed a separate suit against Secretary of Health and Human Services Alex Azar to block the Medicare Part B cuts for 340B hospitals this year. (National Law Review.)

The Centers for Medicare & Medicaid Services (CMS) indicated in its 2020 hospital outpatient prospective payment final rule that if it ultimately loses the court fight over the 340B cuts, it might reduce the cuts, from the current average sales price (ASP) minus 22.5 percent to ASP plus 3 percent, all relative to the original baseline of ASP plus 6 percent. CMS has another fallback position should it lose in the courts: It is taking steps toward collecting drug acquisition data from 340B hospitals in order to set Medicare Part B payments rates on drugs bought by those hospitals. Public comments on its proposal to collect the data were due in late November. A Federal Register announcement about next steps could come at any time.

340B First Quarter Enrollment Period

The first of four two-week periods this year for eligible health care providers to register themselves, their outpatient facilities, and their contract pharmacies in the 340B program (with an April 1 start date) began on Jan. 1 and will end on Jan. 15.

The three other quarterly registration periods are:

  • April 1-15 for an effective start date of July 1;
  • July 1-15 for an effective start date of Oct. 1; and
  • Oct. 1-15 for an effective start date of Jan. 1.

In situations where the 15th falls on a Saturday, Sunday, or federal holiday, the deadline is the next business day.

Inventory Sharing for Non-Health Center Grantees

The Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA) devoted its December 2019 Program Update column to “tips and tools” for “non-health center grantees who do not share a 340B ID but wish to share inventory.”

“HRSA recognizes that these covered entities may want to purchase under one account and share inventories due to various organizational structures and relationships,” OPA writes. A HRSA-approved combined purchasing and distribution model “may assist with meeting an entity’s specific organization needs.”

OIG Semiannual Report to Congress

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently reminded Congress that tens of millions of dollars in drug rebates could have been generated had pharmaceutical manufacturers and Medicare Part D prescription drug plan sponsors agreed that prescriptions filled at 340B contract pharmacies would generate rebates for those sponsors.

OIG first informed Congress about the potential rebates on prescriptions filled at 340B contract pharmacies in a report last July. It included those findings in its April-September 2019 semiannual report to Congress, issued in early December.

Coming Up in 340B Report

California health center executive health center Eddie Chan (see item above) was not the only 340B stakeholder to recently write an op-ed about the program or to be featured in an article about 340B. We will take a closer look at recent commentary and news about 340B across the country in our next edition.

Tweets of Note

@AhfSouth: Over 100 HIV providers from Ryan White Clinics from across the country were inspired during the keynote address by Jeanne White Ginder, mother of Ryan White, during the second Ryan White Clinics for 340B national convening in Fort Lauderdale!

@340BHealth: It’s a new decade but #pharma still raised #drugprices on 445 drugs in the first few days of 2020, reports @mikeerman1. #340B will continue to be critical to help low-income patients and the safety-net hospitals who serve them afford care. #Protect340B

@DarylSchiller: How does a federal judge say #CMS cuts to reimbursement for #340B drugs is unlawful but bc HHS says it‘s too complicated to reverse, they not only continue with lower reimbursement but further reduce payment for off-campus services as part of a site-neutral policy? #pharmacy

@UIHealth: The 340B drug-pricing program ensures hospitals that serve low-income, Medicaid, & uninsured/under-insured patients can continue to provide care regardless of ability to pay.

@BeckersHR looks at how UI Health is using its 340B savings to improve outcomes:

@LawNewsAmerica: 340B Reimbursement Cut Update: 135 Hospitals File Suit To Block Rate Cuts Previously Ruled Unlawful

@Tennessean: Community Oncology Clinics continue to suffer due to 340B Drug Discount Program | Opinion

@AIR340B: While grantees face strict reporting requirements, no such accountability measures exist for #340B hospitals. Read more about how we can improve 340B to address bad actors and ensure patients benefit here:

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