Session #5: 340B Drug Pricing Primer. Joseph Schindler Saturday, Jan. 12, :15 a.m. 12:15 p.m. Hennepin 3

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1 Session #5: 340B Drug Pricing Primer Joseph Schindler Saturday, Jan. 12, :15 a.m. 12:15 p.m. Hennepin 3

2 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 His professional involvement includes the board of Healthcare Financial Management Association (HFMA).

3 340B Drug Pricing Primer Joe Schindler, Vice President of Finance Minnesota 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 1

4 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 Outpatient drugs 340B Program Price discounts Required for all manufacturers in Medicaid 2

5 Intent of the Program Stretch scarce federal resources 1 Reach more eligible patients 1 Provide more comprehensive services 1 Reduce price of pharmaceuticals for patients Expand services offered to patients Provide services to more patients 1. HR Rep No , pt 2, at 12 (1992). 340B Program Evoluton B Statute 1st Guidelines 1996 Contract Pharmacy, Patient Definition 2004 Vendors 2010 Affordable Care Act 1st Proposed Regulations 3

6 Health Care Reform Affordable Care Act P.L (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 (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 The 340B price is actually considered a ceiling price Can offer subceiling prices Drug Manufacturers 4

7 340B Pricing Level 340B Covered Drugs Covered Not Covered Outpatient prescription drugs Over-the-counter drugs (with prescription) Inpatient drugs Vaccines Clinic-administered drugs Biologics (prescription) Insulin 5

8 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 filedmedicare Cost Report To register additional outpatient facilities, complete the online Register an Outpatient Facility registration at: 6

9 340B Enrollment Procedure Determine Eligibility Enroll online Submit Forms to OPA as directed Await decision from OPA 340B Prohibitions and Requirements Prohibitions Diversion Duplicate Discounts 7

10 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 guidelines 1 A drug is dispensed in an area of a larger facility that is not eligible (e.g., an inpatient service, a noncovered clinic) 1. Fed Regist.1996;61(207): Entities should enroll all eligible outpatient or satellite sites 8

11 Group Purchasing Organization (GPO) Prohibition Orphan Drug Exclusion 9

12 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 mustpay for all 340B drugs Fed Regist. 2010;75(43):

13 340B Program Resources Office of Pharmacy Affairs (OPA) 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 care Integrity 11

14 Prime Vendor Program (PVP) 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 Negotiation of o340b sub-ceiling pricing odiscounts on value-added products, services, and supplies Overcharge recovery Pricing transparency Reports and tools Technical assistance Value 12

15 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 13

16 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 14

17 Regulatory Update Outpatient PPS CY B Provisions Health & Human Services Blueprint to Lower Drug Pricing (340B Section) International Pricing Index Model Mega Guidance Rumors Outpatient Final Rule for CY B 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 nonexcepted 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

18 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 16

19 Proposal to Move to International Pricing Index (IPI) Model Between 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 17

20 Senate vs. House Approach to the 340B Program 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 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 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 Rep. McKinley (R-WV):Reverses a OPPS cut H.R 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) 18

21 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 340BGood 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 19

22 AHA 340B Stewardship Principles Commitment Campaign Questions / Comments 20