State Opportunities under the 340B Drug Discount Program
byBill von Oehsen
CounselPublic Hospital Pharmacy Coalition
Phone: 202-872-6765Email: [email protected]
OVERVIEW OF 340B PROGRAM
• Eligible entities include high Medicaid acute care hospitals owned by or under contract with state or local government; community health centers; ADAPs; family planning clinics; AIDS, TB and STD clinics; and other HRSA grantees
• Use of drugs limited to “patients” of 340B covered entity
• Discounts are calculated using the Medicaid rebate formula; but 340B pricing is better because (1) sales do not involve retail pharmacies thereby avoiding retail mark-ups and (2) 340B providers regularly negotiate sub-ceiling prices
• Medicaid must be billed at acquisition cost to avoid duplicate discounts
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
0.0%
34.6%
47.9%49.0%51.7%
60.5%
80.0%
100.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
BACKGROUND ON U.S. PHARMACEUTICAL MARKET:COMPARISON OF PRICES
Source: Data derived from Prescription Drugs: Expanding Access to Federal Prices Could Cause Other Price Changes, U.S. General Accounting Office, GAO/HEHS-00-118, August 2000 and How the Medicaid Rebate on Prescription Drugs Affects Pricing in the Pharmaceutical Market, Congressional Budget Office Papers, January 1996.
Powers Pyles Sutter & Verville, PC Bill von Oehsen
(202) 466-6550 [email protected]
Private Sector Pricing
“Best Price”
0%
20%
40%
60%
80%
100%
BACKGROUND ON U.S. DRUG MARKET: COMPARISON OF PRICES*
Av
era
ge
Wh
ole
sa
le P
ric
e
Market Share
60%25% 11%1% 1%
100.0%
80.0%
60.5%51.7%
49.0%
44.8%
1%
Medicaid
FSS
340B
VA
PBM and Other Private Insurance
Market Share
CashCustomers
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
* Chart is based on rough estimates
340B OPPORTUNITIES FOR STATES
• Encouraging eligible facilities within the state to enroll in 340B
• Using 340B-discounted drugs for state and county prisoners
• Maximizing use of 340B within state-funded managed care plans
• Including 340B providers in state bulk purchasing initiatives
• Sole source contracts with 340B providers to furnish high-cost chronic care drugs
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
340B OPPORTUNITIES FOR STATES:EXTENSION TO PRISONS
• States and counties may contract with 340B hospitals or other 340B facilities to provide health care services, including pharmacy services, to correctional populations
• Prisoners must be “patients” of the 340B provider to be eligible to receive discounted drugs
• Texas recently implemented this approach as a result of legislation passed last year (S.B. 347)
• Other state agencies, e.g., mental health hospitals?
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
340B OPPORTUNITIES FOR STATES:STATE-FUNDED MANAGED CARE
• Drugs are about 35 percent more costly when purchased through PBMs instead of 340B program
• Shifting drug purchases from PBMs to 340B providers can lower costs for the plan which can be passed on to the state
• For Medicaid programs, this is an alternative to states carving out pharmacy from the plan’s benefits package and returning it to a fee-for-service program in order to collect Medicaid rebates.
• Application to managed care plans for state employees?
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
340B OPPORTUNITIES FOR STATES: ENCOURAGING 340B PARTICIPATION
• 340B program reduces Medicaid reimbursement for outpatient drugs because 340B providers are required to bill Medicaid at acquisition cost in most instances
• For example, according to a recent analysis, 340B hospitals are saving state Medicaid programs an average of almost $300,000 per hospital per year
• Many hospitals, community health centers, and other eligible facilities are not participating in 340B
• By assisting eligible entities with 340B enrollment, states can lower their Medicaid expenses
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
MANAGED CARE DISEASE MANAGEMENT
• 340B providers participating in managed care plans can develop disease management programs for enrollees having high drug costs
• Plans can steer enrollees suffering from chronic diseases to these 340B-based disease management programs (e.g., AIDS, diabetes, asthma, heart disease, etc.)
• 340B providers can use mail order or contracted retail pharmacies to increase access by getting federal approval as an alternative methods demonstration project
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
340B OPPORTUNITIES FOR STATES: BULK PURCHASING
• Volume plus preferred drug list moves market share and creates savings
• By pooling their volumes, 340B providers and states can theoretically negotiate better discounts
• Savings equals subceiling discounts for 340B covered entities and supplemental rebates for state
• Two-tiered pricing to accommodate state purchases that do not qualify for best price exemption
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]
340B Opportunities for States Bulk Purchasing
P R
I C
E S Rebates or Upfront
Discounts
State MentalEmployees Prisons Schools Health AMP
Medicaid 340BState Pharmacy
Assistance Programs
Supplemental Rebates/Subceiling Pricing
Best Price
340B OPPORTUNITIES FOR STATES: SOLE SOURCE CONTRACTS
• To meet patient definition requirements, 340B provider must provide other services than pharmacy – case management and disease management are possibilities
• For Medicaid, a 1915(b) waiver is required to waive the patient’s freedom of choice
• Utah Medicaid program has a sole source contract with University of Utah for providing factor products and case management services to hemophilia population statewide (although not using 340B pricing)
Powers Pyles Sutter & Verville, PC Bill von Oehsen(202) 466-6550 [email protected]