Session #5: 340B Drug Pricing Primer

Joseph Schindler

Saturday, Jan. 12, 2019

11:15 a.m. – 12:15 p.m.

Hennepin 3

Joe Schindler

Joe Schindler is vice president of finance at MHA where he has worked for over 30 years. His

duties include policy impact analysis to support hospital advocacy efforts, financial analysis for

hospital benchmarking, maintaining relationships with key state Health and Human Services

contacts and overseeing finance and information services staff. Additionally, he participates in

the Office of Rural Health’s Flex committee, the Administrative Uniformity Committee, the

Medical Account Managers Association among other groups. Joe started his career at MHA a

financial analyst in 1987. His professional involvement includes the board of Healthcare

Financial Management Association (HFMA).

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340B Drug Pricing Primer

Joe Schindler, Vice President of FinanceMinnesota Hospital Association

MHA Winter Trustee Conference: January 12, 2018

Presentation Overview

340B overview

Affordable Care Act: 5 New Entity Types

Eligibility/Enrollment

Prohibitions / Requirements

Contract Pharmacy Services

340B Partners and Information Resources

Policy & Regulatory Update

Proactive Measures to Demonstrate Value*Special thanks to the Health Resources and Services Administration’s

(HRSA) Office of Pharmacy Affairs (OPA) and the American Hospital

Association (AHA) for much of the content of this presentation

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Program Benefits

Average savings of 25-50% on outpatient drug

purchases for 340B covered entities

Savings may be used to:

Reduce price of pharmaceuticals for patients

Expand services offered to patients

Provide services to more patient

NOTE: OPA does not regulate how savings attained through

participation in this program are to be used

Creation of the Program

Certain safety net covered

entities

Certain safety net covered

entitiesOutpatient drugsOutpatient drugs

Price discountsPrice discountsRequired for all

manufacturers in Medicaid

Required for all

manufacturers in Medicaid

340B

Program

340B

Program

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Intent of the Program

Stretch scarce

federal resources1

Reach more eligible

patients1

Provide more

comprehensive

services1

Stretch scarce

federal resources1

Reach more eligible

patients1

Provide more

comprehensive

services1

Reduce price of pharmaceuticals

for patients

Reduce price of pharmaceuticals

for patients

Expand services offered to patients

Expand services offered to patients

Provide services to more patientsProvide services to more patients

1. HR Rep No. 102–384, pt 2, at 12 (1992).

340B Program Evoluton

1992

340B Statute

1993

1st Guidelines

1996

Contract Pharmacy,

PatientDefinition

2004

Vendors

2010

Affordable Care Act

1st Proposed Regulations

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Health Care Reform

Affordable Care Act – P.L 111-148 (signed into law

March 10, 2010)

• The expansion of and increase in access to the

340B drug discount program (sec. 7101)

Health Care and Education Reconciliation Act

of 2010 – P.L. 111-152 (signed into law March 30, 2010)

• Exclusion of Orphan Drugs for certain Covered

Entities

340B Price

340B Drug Pricing Program

25%–50%of the average wholesale price

Drug Manufacturers

The 340B price is actually considered a “ceiling” price

Can offer sub-

ceiling prices

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340B Pricing Level

340B Covered Drugs

• Outpatient prescription drugs

• Over-the-counter drugs (with prescription)

• Clinic-administered drugs

• Biologics (prescription)

• Insulin

• Inpatient drugs

• Vaccines

Not CoveredCovered

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340B Eligible Hospitals

Disproportionate Share hospitals

Children’s hospitals*

Critical Access Hospitals (CAH)*

Free-standing Cancer hospitals*

Rural Referral Centers*

Sole Community Hospitals*

* 340B eligible through Section 7101 of the ACA

Hospital Outpatient Facilities

In order for outpatient facilities to become eligible for the 340B Program:

• The outpatient facility must be an integral part of the hospital

• The outpatient facility must be included as reimbursable on the covered entity’s most recently filed Medicare Cost Report

• To register additional outpatient facilities, complete the online Register an Outpatient Facility registration at: http://opanet.hrsa.gov/OPA/CERegister.aspx

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340B Enrollment Procedure

Determine Eligibility

Enroll onlineSubmit Forms

to OPA as directed

Await decision from OPA

http://opanet.hrsa.gov/OPA/CERegister.aspx

340B Prohibitions and Requirements

Duplicate DiscountsDuplicate Discounts

DiversionDiversion

ProhibitionsProhibitions

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Duplicate Discount Prohibition

Diversion Prohibition

Diversion occurs when:

• A drug is provided to an individual who is not a patient of that entity

• Required to follow patient definition guidelines1

• A drug is dispensed in an area of a larger facility that is not eligible (e.g., an inpatient service, a non-covered clinic)

• Entities should enroll all eligible outpatient or satellite sites

1. Fed Regist.1996;61(207):55156–8.

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Group Purchasing Organization(GPO) Prohibition

Orphan Drug Exclusion

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Patient Definition

Drug Delivery: Contract Pharmacies

› 340B Program allows entities to have multiple contract pharmacies for increased patient access to cost-effective pharmaceuticals

› Covered entity purchases the drug, but “ship to/bill to” procedure may be used

› Covered entity retains legal title to all drugs purchased under 340B and must pay for all 340B drugs

Fed Regist. 2010;75(43):10272–9.

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340B Program Resources

› Administrates over the 340B Drug-Pricing

Program

› Develops innovative pharmacy service models

and provides technical assistance to help entities

implement effective pharmacy programs

› Serves as a federal resource about pharmacy

› Emphasizes the importance of comprehensive

pharmacy services functioning as integral part of

primary health careIntegrity

Office of Pharmacy Affairs (OPA)

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› Relationships and networking

› Policy analysis

› Education

o340B University

› Technical assistance

oApexus Answers Call center

o340B tools and resources

owww.340bpvp.com

Access

Prime Vendor Program (PVP)

Negotiation of

o340B sub-ceiling pricing

oDiscounts on value-added products, services, and supplies

Overcharge recovery

Pricing transparency

Reports and tools

Technical assistance

Value

Prime Vendor Program

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340B Litigation

340B OPPS LAWSUIT

340B Drug Manufacturer

CMP Final Rule

340B OPPS LAWSUIT: Legal Fight Continues in Federal Court

Court July 17 dismissed case on a procedural

ground: failure of presentment

Decision was NOT made on

the merits of the case

Refiled September 5

And just after Christmas…

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Court Rules HHS’s Payment Cut Was Unlawful!

On 12/27/18 a federal judge ruled in favor of the AHA and hospital plaintiffs saying that the Department of Health and Human Services “adjustment” by nearly 30 percent of 2018 Medicare payment rates for many hospitals in the 340B Drug Pricing Program was unlawful.

In its ruling, the court held that “the Secretary’s rate adjustment at issue here does not affect a single drug or even a handful of drugs, but rather potentially thousands of pharmaceutical products found in the 340B Program … when viewed together, the rate reduction’s magnitude and its wide applicability inexorably lead to the conclusion that the Secretary fundamentally altered the statutory scheme established by Congress for determining ... reimbursement rates, thereby exceeding the Secretary’s authority.”

In addition, the court noted that to the extent the Secretary disagrees with the way in which Congress crafted the 340B program, “he may raise his disagreement with Congress, but he may not end-run Congress’s clear mandate.”

340B Drug Manufacturer CMP Final Rule

ACA provisions developed in response to Office of Inspector General (OIG) reports of drug company overcharges:

• Authorize HHS to issue regulations defining ceiling prices

• Direct that those prices be posted on the internet• Require HHS to issue regulations to impose Civil

Monetary Penalties for noncompliance in 180 days

HRSA Final Rule would: Require drug companies to disclose 340B ceiling price and enforce through civil monetary penalties

Regulations have been delayed 5 times, most recently on June 5

AHA, AAMC, 340B Health and AEH filed lawsuit September 11 challenges HHS for failure to implement final rule citing the most recent delay as unreasonable and arbitrary and capricious

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Regulatory Update

Outpatient PPS CY 2019 340B Provisions

Health & Human Services Blueprint to Lower Drug Pricing (340B Section)

International Pricing Index Model

Mega Guidance Rumors

Outpatient Final Rule for CY 2019340B Policy

Expansion to Non-excepted Off-campus Provider-Based Departments (PBDs)

Expands CY 2018 payment cut for most 340B drugs from Average Sales Price (ASP)+ 6% to ASP-22.5% to non-excepted off-campus PBDs beginning in CY 2019

Rationale: CMS believes the payment differential between excepted and non-excepted PBDs could incentivize hospitals to move drug administration services for 340B drugs to non-excepted PBDs.

Rural sole community hospitals, children’s hospitals and PPS-exempt cancer hospitals would remain exempt.

Estimated Impact: -$48.5 million in CY 2019

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Continuation of Payment Cut for 340B-acquired Drugs

Will continue to pay for 340B-acquired separately payable drugs and biologicals at ASP minus 22.5%

• Clarifies that 340B payment cut also applies to drugs that are priced using either Wholesale Acquisition Cost (WAC) or Average Wholesale Price (AWP).

Pay for 340B-acquired separately paid biosimilars at ASP minus 22.5% of the biosimilar’s own ASP instead of the biosimilar’s ASP minus 22.5% of the reference product’s ASP.

• Intended to prevent a more significant reduction in payment for 340B-acquired biosimilars than warranted.

HHS Blueprint to Lower Drug Pricing –340B Sections

AHA Comments

• 340B program is working

• Focus on 340B program to lower drug prices is misplaced

• Drug manufacturers responsible for drug prices

• Growth in program related to:

o Growth drug list prices

o Congressional expansion

o Growth in outpatient services

• Changing 340B patient definition problematic

• Should focus on drug manufacturers transparency

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Proposal to Move to International Pricing Index (IPI) Model

Between 2020-2025 half of the country’s providers to participate

• Phasing down the Medicare payment amount for selected Part B drugs to more closely align with international prices

• Allowing private-sector vendors to negotiate prices for drugs, take title and pay for the drugs, and compete for physician and hospital business.

• Changing the drug add-on payment to a fixed amount that physicians and HOPDs would receive instead of Average Sales Price plus 6 percent reimbursement.

Congressional Update

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Senate vs. House Approach to the 340B Program

“There is a difference between defining how they (hospitals) spend the money and our asking them

to tell us how they spend the savings. My inclination would be to say as long as we know what they are doing and it looks to us like it is

within the broad goal of the law that it be unnecessary for us to write a narrow definition

about how hospitals and clinics should spend the money.”

- HELP Chairman Lamar Alexander

“Because the 340B Program

does not specify how program

savings must be utilized by a

covered entity, many have

questioned whether or not all

covered entities are sufficiently

transparent with how their

participation in the program

ultimately benefits patients.”

- E&C Chairman Greg Walden

340B Legislation Discussed

340B PAUSE Act (H.R. 4710) – Reps. Bucshon (R-IN) & Peters (D-CA): Moratorium on new 340B DSH hospitals & child sites for current DSH hospitals and new reporting requirements

340B Optimization Act – Rep. Carter (R-GA): Require 340B to report their low-income utilization rate for outpatient services

Closing Loopholes for Orphan Drugs Act Reps Welch (D-VT) and Harper (R-MS): would allow for the purchase of orphan when the drugs are used to treat another illness

SERV Act (HR 6071) – Rep. Matsui (D-CA) : Overturn Medicare OPPS cuts to 340B hospitals and adds new program integrity requirements for drug manufacturers

H.R. 4392 – Rep. McKinley (R-WV): Reverses a OPPS cut

H.R. 6273 – Rep Walters (R-CA): Require all 340B DSH hospitals to become SAFE ready facilities

User Fees under the 340B Drug Discount Program (H.R. 6240) –Rep Collins (R-NY)

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Key Messages

The 340B program is working as intended.

Any additional regulatory burden would do nothing to enhance access to care for communities and patients, but rather would reduce the size of the program, putting access to care at risk and more dollars in drug manufacturers’ pockets.

The real transparency that is needed is on drug manufacturers, as required by the ACA but never implemented.

The 340B savings are drug manufacturer dollars, not taxpayer dollars.

AHA 340B Good Stewardship Principles

Good Stewardship: 340B hospital structure

policies and practices to demonstrate

commitment

Communicate Value of the 340B Program

Disclose 340B Estimated Savings

Continue to Perform Rigorous

Internal Review

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AHA 340B Stewardship Principles Commitment Campaign

www.AHA.org/340B

Questions / Comments