Drug Industry, Hospitals Differ on Future of 340B Program

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By Bronwyn Mixter

The drug industry wants changes to the federal 340B drug discount program in 2017, but safety-net providers want the program to be protected.

Pharmaceutical companies are concerned about the program’s expansion and are hoping for legislative and regulatory changes to ensure the program is serving what they call “its original intent.” But safety-net providers such as hospitals say the program should be protected because what they see as threats to indigent patients—including ACA repeal and potential block grants for Medicaid—make it a bad time to clamp down on the 340B program.

The 340B program, created in 1992, requires drug manufacturers to provide outpatient drugs to eligible health-care providers at significantly reduced prices. The program is administered by the Health Resources and Services Administration (HRSA), part of the Department of Health and Human Services.

Industry Seeks Program Changes

Stephanie Silverman, a spokeswoman for the Alliance for Integrity and Reform of 340B (AIR 340B), told Bloomberg BNA “we anticipate a great deal of legislative and regulatory activity around 340B in the coming year.” However, she didn’t specify any bills her coalition will support in the new Congress.

AIR 340B is a coalition of patient advocacy groups, clinical care providers and manufacturers. Members include the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO).

“There has been a lot of momentum on Capitol Hill and elsewhere from all the government and private studies that demonstrate the challenges of the program in its current form and from hearings on this issue,” Silverman said. “We sense the time is ripe to reform the program and put it on a sustainable footing that honors its original intent.”

In a Dec. 6 report, AIR 340B said the 340B program is expected to reach $23 billion in total drug sales by 2021, up from the estimated sales for 2016 of $16.1 billion. At the time the report was released, the group said the program’s growth has gone unchecked for too long and policy makers should re-examine it.

Contract Pharmacies, Eligibility Metric

AIR 340B’s report said a key driver of program growth for the next five years will be expanded utilization at existing 340B entities because of practice acquisitions, physician practice affiliations, patient referrals and contract pharmacies.

Also, the report said by 2021, the use of contract pharmacies in the 340B program will exceed $6 billion.

HRSA in 2010 issued guidance allowing covered 340B entities to contract with an unlimited number of third-party pharmacies to dispense 340B drugs. The report said the guidance resulted in a dramatic growth in contract pharmacy arrangements, which are expected to continue to drive growth in 340B sales for at least the next five years.

AIR 340B also has concerns about the metric used to determine hospital eligibility for the program. The disproportionate share hospital (DSH) metric is calculated based on inpatient stays by Medicaid and low-income Medicare beneficiaries. The group has said previously “the 340B program can only meet its intended purpose if it benefits true safety net hospitals servicing high numbers of low-income, uninsured, indigent patients.” The group says “other more appropriate metrics [would] better align eligibility criteria with the interests of patients in need.”

Safety-Net Providers Weigh In

Ted Slafsky, president and chief executive officer of 340B Health, told Bloomberg BNA in 2017, “we’ll certainly be spending a lot of time, both us and our members in Capitol Hill, to educate lawmakers about the program and to underscore how important it is to protect the program as we move forward with” the potential repeal of the Affordable Care Act. 340B Health represents public and private nonprofit hospitals and health systems that participate in the 340B drug discount program.

The repeal of the ACA “could potentially impact 340B because there were some 340B provisions” in it and if there is a complete repeal those provisions could be impacted, Maureen Testoni, senior vice president and general counsel for 340B Health, told Bloomberg BNA. Specifically, the ACA expanded the 340B program to rural hospitals.

“We do know that there have been some industry critics, like AIR 340B, that have been advocating for legislative change,” Testoni said. “In today’s world, where you’re talking about repealing the Affordable Care Act and possibly doing block grants to Medicaid, there’s a potential for health care for low-income populations to really see a significant upheaval and it seems unlikely that you would want to do anything to 340B on top of that since it’s such a lifeline for safety-net providers.”

Testoni said she hasn’t “been hearing that massive 340B reform is something that’s definitely on the agenda of the key [congressional] committees right now. But again, it’s kind of early to tell because everyone that we’ve talked to has just been focused on the issue of repealing the ACA” and doing block grants to Medicaid.

What Happens to HRSA’s Guidance?

Hospitals and the drug industry are both waiting to see whether a long-awaited final guidance will come out at the end of the Obama administration.

HRSA released a proposed version of its so-called omnibus guidance in August 2015. The agency said at the time it was “proposing this [document] to provide increased clarity in the marketplace for all 340B Program stakeholders and strengthen HHS’s ability to administer the 340B Program effectively.”

The White House Office of Management and Budget started its review Sept. 1, 2016, of the final guidance document (RIN:0906-AB08 ), according to the OMB’s reginfo.gov website.

The guidance defines who is considered a patient for purposes of the 340B program and covers drug company responsibilities, such as procedures for issuing credits and refunds.

Testoni said it’s unlikely that the omnibus or “mega” guidance will come out. While she said she doesn’t have any inside information on that, it’s been a common occurrence during changes of administration that many of the pending guidances and regulations don’t come out. “Instead the [new] administration really focuses on the initiatives that are really a big part of their goals going in and I just don’t see the 340B guidance rising to that level,” Testoni said.

The OMB also is reviewing a final rule (RIN:0906-AA89) from HRSA that would impose civil monetary penalties on pharmaceutical companies that charge too much for drugs in the 340B program. The rule, required under the Affordable Care Act, would impose monetary sanctions on drug manufacturers “who intentionally charge a covered entity a price above the ceiling price established under the procedures of the 340B program and also define standards and methodology for the calculation prices for purposes of the 340B program,” according to the OMB's website. The monetary sanctions are capped at $5,000 per instance.

The final rule was supposed to come out in November, but it hasn't yet. It's also unclear what a repeal of the health-care law would mean for the rule.

To contact the reporter on this story: Bronwyn Mixter in Washington at bmixter@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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