Kentucky Health Centers Sue State To Block 340B Claims Requirement
Kentucky health centers filed suit last week to stop state health officials from implementing a 340B claims identification requirement scheduled to take effect on April 1. The centers say the mandate could cause them significant financial harm, hindering their ability to serve vulnerable patients.
Yesterday, the state Department of Medicaid Services (DMS), citing “recent events due to COVID-19,” gave the centers and other providers a temporary reprieve from having to identify 340B-purchased drugs dispensed to Medicaid beneficiaries when the providers submit claims for Medicaid reimbursement. “Once the state of emergency has been lifted, the department will reevaluate an appropriate date of implementation,” DMS told providers in a March 23 email.
In a March 18 complaint and request for an injunction, the Kentucky Primary Care Association (KPCA) told a state circuit court the mandate will stop them from dispensing 340B drugs to Medicaid managed care beneficiaries via contract pharmacies, leading to huge financial losses. KCPA asked the court to declare the requirement unlawful and to enjoin the state from enforcing it.
The state legislature, meanwhile, has given final passage to 340B-related legislation that providers say gives state health officials the discretion to take away their 340B savings from serving Medicaid managed care beneficiaries, as they already do in Medicaid fee for service.
Centers Predict Significant Financial Losses
Kentucky’s health centers will suffer “significant” financial losses if the requirement takes effect and their “ability to serve low-income and uninsured individuals will be significantly hindered—which is particularly alarming given the COVID-19 crisis and the opioid crisis currently facing the Commonwealth,” KPCA said in its complaint. 340B contract pharmacies, it said, “would have to make costly changes to their internal software in order to be able to include the [340B drug] identifier on a claim.” Also, many “are unwilling to take on the potential liability associated with incorrectly assigning the identifier to a claim,” the group said.
Consequently, health centers “will be forced to inform these pharmacies to refrain from dispensing 340B drugs to Medicaid beneficiaries in order to avoid duplicate discounts—even though many of those Medicaid beneficiaries will have been treated at covered entities and therefore would be eligible for 340B,” KPCA said. Health centers “will receive significantly less 340B revenue as they otherwise would have.”
“Without the 340B revenue, [KPCA member health centers] would not be able to provide nearly as many of the services currently provided to underserved populations—which would leave many of our most vulnerable citizens without access to medical care, substance abuse treatment, and mental health treatment,” the group said.
340B Report reached out to the state health department for comment about the lawsuit.
Legislature Sends Controversial Bill to Governor
Also on March 18, the day that KCPA sued the state, state lawmakers passed and sent to Gov. Andy Beshar (D) a bill that providers say would do nothing to stop DMS and its new sole Medicaid managed care pharmacy benefit manager to require providers to bill at actual acquisition cost for 340B drugs dispensed to Medicaid managed care beneficiaries. If that were to happen, providers say, there would be no financial benefit to use the 340B program for the Medicaid population.
As we previously reported, the bill (SB 50) originally would have transferred pharmacy benefits out of Medicaid managed care into Medicaid fee for service, except for 340B providers, which would have continued to submit Medicaid claims to Medicaid managed care contractors. 340B entities said that under that scheme it would have been impossible for pharmacies to determine at point of sale whether a claim was or was not 340B-eligible, in order for the pharmacy to correctly submit the claim either to Medicaid managed care or fee for service. Consequently, it would have become all but impossible to use 340B drugs for Medicaid beneficiaries.
The revised bill preserves the Medicaid managed care pharmacy benefit, under management of a single, new, state-contracted pharmacy benefit manager. For 340B providers, the worry now is what methodology DMS will use to reimburse 340B-purchased drugs used in Medicaid managed care.
CMS Missed March 23 Start for 340B Drug Acquisition Survey. Will COVID-19 Impact Timing?
Yesterday came and went without the White House giving the Centers for Medicare and Medicaid Services (CMS) authority to require hospitals to collect and report their net 340B drug acquisition costs from March 23 through April 10. What happens next? There’s no clear answer.
To recap: Since 2018, CMS has cut 340B hospitals’ Medicare Part B drug reimbursement by almost 30 percent. A federal district court has ruled the cuts illegal. A federal appeals court decision could come down at any time. CMS has said if it loses again, it might start basing 340B hospitals’ Part B drug reimbursement on actual net costs. If that happens, the cuts almost certainly would become much deeper. Last fall, CMS began laying the regulatory groundwork to make 340B hospitals collect their drug acquisition costs, starting yesterday, and report back to CMS April 10. The White House is a big fan of the existing cuts. All that was left for the survey to begin was for the White House to say “go.”
The signal never came.
We’ve asked CMS if it can move forward with forms and instruction sheets that say the survey will begin on a date that has already come and gone, or whether it must start at square one with new Federal Register and Office of Management and Budget notice and comment periods.
We’ve also reached out to several attorneys who specialize in prescription drug pricing policy. They say it’s not clear what CMS’s option are.
If CMS wants to begin basing 340B hospitals’ Part B reimbursement in calendar year 2021 on a survey of hospitals’ 340B ceiling prices minus wholesaler and 340B Prime Vendor discounts, it’s running out of time. CMS announces the forthcoming year’s reimbursement rates in its annual Medicare hospital outpatient prospective payment system rule. Last year it issued its OPPS proposed rule for the current year on July 29.
Last Friday, hospital group 340B Health asked Health and Human Services Secretary Alex Azar to delay implementation of the survey in light of the COVID-19 pandemic. Earlier this month, 340B Health, the American Hospital Association, the Association of American Medical Colleges, and America’s Essential Hospitals all asked CMS to ditch the survey.
Late yesterday, CMS sent OMB a proposed interim final rule entitled “Revisions in Response to the COVID-19 Public Health Emergency” for review prior to publication in the Federal Register. There are no further details.
Update: Federal COVID-19 Legislation
The U.S. House and Senate are still negotiating over a likely $2 trillion-plus COVID-19 emergency response bill. The final compromise bill could be released later today. Neither the Senate or House version addresses the 340B program directly. Both would boost funding for hospitals, community health centers, Ryan White HIV/AIDS Program grantees, and other safety-net health care providers that soon could be overwhelmed with patients infected with the novel coronavirus. Democrat leaders have stalled the legislation, insisting on additional funding for hospitals and health centers.
Inside Health Policy (subscription required) reports that language in the bills to extend funding due to expire soon for health centers, the National Health Service Corps, and other health programs decreases the likelihood that Congress will pass prescription drug pricing legislation this year. These must-pass bills were seen as potential vehicles for drug pricing riders.
Exelixis Moves Kidney and Liver Cancer Drug Into Specialty Distribution Channel
For the second time in recent days, drug manufacturer Exelixis has posted a public notice on the Health Resources and Services Administration website about moving an orphan drug into the specialty distribution channel.
The latest notice says Cabometyx, used to treat advanced kidney cancer and liver cancer, will now be available “through an authorized network of specialty pharmacies and specialty distributors that are equipped to successfully facilitate patient care.”
Last week, Exelixis made a similar announcement about Cometric, used to treat medullary thyroid cancer. Cometric and Cabometyx different brand names for the same drug, cabozantinib.
New Dates for 5th Annual Covered Entities 340B Summit
Due to the COVID-19 pandemic, our sponsor World Congress has rescheduled the Fifth Annual Covered Entities 340B Summit in Philadelphia, Pa., from April 30 – May 1 to Sept. 30 – Oct. 1, 2020. 340B Health Editor Tom Mirga is slated to moderate a panel on 340B policy developments featuring our Publisher and CEO Ted Slafsky and Powers Law Principal Peggy Tighe. The conference also features these speakers:
- Christopher Hatwig of Apexus / 340B Prime Vendor
- William von Oehsen of Powers Law
- Shannon Stephenson of Cempa Community Care
- Christopher Trimbath of Promedica Health System
- Katy Lees of the University of Rochester
- Kaitlin Rosenthal of Thomas Jefferson University and Jefferson Health
- Debbian Fletcher-Blake of VIP Community Services
- Charles Washington and Tess Morgan of Pfizer
- Mujeeb Rafiuddin of Genentech
We hope to see you at the summit in late September.
Tweets of Note
Update: New York is trying to take at least part of the proposed $2.5 billion in Medicaid cuts from a program that supports pharmacies who care for uninsured people.
The change would be to the 340B pharmacy program. That program has funds that allow health centers to do things like have sliding scale fees, subsidize meds, and coordinate home health care.
All essential to support low income and disabled people in the COVID-19 response.
Billions available in the federal system, please loosen spending restrictions for this emergency. Let non-profits spend where they see need. Example, 340B prescription drug dollars have very restricted use but could be temp freed up. Brad Coulter CEO
Gilead’s Remdesivir appears to have received FDA orphan drug status for COVID-19.
Given in 2 scenarios:
Disease affects <200,000 persons in US.
No chance of making profit.
WOW, FDA orphan drug status *can’t be taken away* if the disease later increases in prevalence.
This is like the wildest use of the Orphan Drug Act I could have imagined.
It’s also worth pointing out that a huge benefit to Orphan Designation isn’t the 7 years of exclusivity: It’s the 25% tax credit for the value of all reasonable R&D expenditures on the drug.
(The Tax Cuts and Jobs Act actually reduced this from 50%).
Also valuable is the exemption from mandatory 340b discounts for orphan-designated drugs