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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