Perspectives and Experiences of 340B Hospitals

Perspectives and Experiences of 340B Hospitals August 22, 2017 Jeff Davis Legislative and Policy Counsel 340B Health 2016 340B Health 2017 340B Health 1

Disclaimer This presentation should not be construed or relied upon as legal advice 2017 340B Health 2

Agenda 1. 340B Overview 2. Key Requirements/Challenges 3. Regulatory Developments 2017 340B Health 3

About 340B Health Nonprofit association that represents over 1,300 hospitals in the 340B program all hospital types At the table since inception of program in 1992 The only advocacy organization focusing exclusively on 340B hospitals Provides technical assistance on 340B issues 2017 340B Health 4

340B Program Overview Program created in 1992 to give safety-net providers discounts on outpatient drugs To have their drugs reimbursed by Medicaid and Medicare Part B, manufacturers must enter into a Pharmaceutical Pricing Agreement with the federal government and participate in 340B Discounts available on outpatient drugs only; not inpatient drugs Drugs may only be given to hospital patients; cannot be transferred outside of hospital or used for patients not treated at the hospital 2017 340B Health 5

340B Ceiling Price 340B discount is built into purchase price Brand-name drugs (except clotting factor and drugs approved exclusively for pediatric use) Generally, 340B price is average manufacturer price (AMP) 23.1%(AMP) Additional discount if best price is lower or price increased more quickly than rate of inflation Generic drugs & prescription OTC drugs: AMP 13%(AMP) Effective January 1, 2017, additional discount for generic drugs if price increased more quickly than rate of inflation Clotting factor and drugs approved exclusively for pediatric use: AMP 17.1%(AMP) 2017 340B Health 6

340B Providers Hospitals Disproportionate Share Hospitals Critical Access Hospitals Rural Referral Centers Sole Community Hospitals Free Standing Children s Hospitals Free Standing Cancer Hospitals Federal Grantees Federally Qualified Health Centers Federally Qualified Health Center Look- Alikes Native Hawaiian Health Centers Tribal / Urban Indian Health Centers State-operated AIDS drug assistance programs Ryan White HIV/AIDS Program Grantees Black Lung Clinics Comprehensive Hemophilia Diagnostic Treatment Centers Title X Family Planning Clinics Sexually Transmitted Disease Clinics Tuberculosis Clinics 2017 340B Health 7

340B Hospital Eligibility Hospital Type Non-Profit/ Gov t Contract Requirement (Does not apply to public hospitals) DSH % Subject to GPO Prohibition Subject to Orphan Drug Exclusion Disproportionate Share Hospital (DSH) Yes > 11.75% Yes No Children s Hospital Yes > 11.75% Yes No Free-Standing Cancer Hospital Critical Access Hospital (CAH) Yes > 11.75% Yes Yes Yes N/A No Yes Rural Referral Center Yes > or equal to 8% No Yes Sole Community Hospital Yes > or equal to 8% No Yes 2017 340B Health 8

340B DSH Hospitals http://www.340bhealth.org/images/uploads/340b_morelowincomepatients.png 2017 340B Health 9

340B DSH Hospitals http://www.340bhealth.org/images/uploads/340b_providemorecare.png 2017 340B Health 10

340B DSH Hospitals 340B DSH Hospitals are More Likely to Provide Vital Services http://www.340bhealth.org/images/uploads/340bhealth_vitalhealthservices.png 2017 340B Health 11

340B DSH Hospitals 340B DSH hospitals treat 65% more low-income Medicare cancer drug patients who are dually eligible for Medicaid than non-340b hospitals and 63% more than physician offices 340B DSH Hospitals Non-340B Hospitals Physician Offices 2014 22.8% 13.8% 14.0% 2013 22.4% 14.8% 13.9% http://www.340bhealth.org/files/lowincomeoncology.pdf 2017 340B Health 12

340B DSH Hospitals http://www.340bhealth.org/images/uploads/340b_demograhics.png 2017 340B Health 13

Use of 340B Savings Savings help offset cost of providing drugs for free or at reduced rate Also helps generate funds that providers use to improve and expand care because 340B discounted drugs are given to insured patients that pay at market rates Examples of how hospitals use their 340B savings: Give drugs to low-income uninsured patients for free or at a reduced price Open and operate an indigent care clinic Provide free oncology service to low-income patients Implement medication therapy management programs to improve patient care and reduce health costs and readmissions 2017 340B Health 14

Contract Pharmacy Survey June 2017 survey of 340B Health members All hospitals reported that a loss or reduction of contract pharmacy benefit would negatively impact ability to serve low-income and rural patients DSH hospitals more likely to report using benefit to: Maintain or provide more uncompensated care Provide discounted and/or free drugs to low income and/or rural patients Provide more services despite low Medicaid reimbursement Rural hospitals more likely to report using the benefit to: Maintain current levels of care or keep their doors open Less likely to have their own outpatient pharmacy 2017 340B Health 15

Size of 340B New study shows that the total 340B discount in 2015 of $6.1 billion was: 1.3% of the $457B drug market 4.0% of the $151B specialty drug market 3.6% of $170B in total discounts and rebates 340B is a small share of the drug market and does not increase drug prices http://www.340bhealth.org/files/340b_financial_impact_7_17.pdf 2017 340B Health 16

Eligible Patients HRSA s 1996 guidelines (61 Fed. Reg. 55156 (Oct. 24, 1996)): 1. The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual s care; and 2. The individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity; and 3. The individual receives a health care service or range of services from the covered entity which is consistent with the service or range of services for which grant funding or Federally-qualified health center look-alike status has been provided to the entity.* *Third prong applies to HRSA grantees only and not to hospitals 2017 340B Health 17

Eligible Patients (cont d) HRSA s 1996 guidelines (cont d) An individual will not be considered a patient of the covered entity if the only health care service received by the individual from the covered entity is the dispensing of a drug or drugs for subsequent self-administration or administration in the home setting 2017 340B Health 18

Offsite Outpatient Clinics Outpatient facility must be a reimbursable facility listed on the hospital s most recently filed Medicare cost report All offsite outpatient facilities that purchase or provide 340B drugs to hospital patients must be registered on the OPA database as child sites of the parent hospital OPA does not require hospitals to register clinics/departments/services located within the four walls of the parent hospital (i.e., the same physical address as the parent hospital) 2017 340B Health 19

Inventory Management HRSA 1994 Covered Entity Guidelines: If individuals other than eligible patients receive drugs from CE or CE s pharmacy, must establish adequate safeguards to prevent diversion (e.g., separate purchasing accounts and dispensing records) For hospitals, this occurs in any mixed use setting (i.e., setting that treats inpatients and outpatients, such as a surgery department) CEs can keep 340B inventory physically separate or use a virtual inventory system (most common) Hospitals track dispenses to outpatients and inpatients Replenish dispenses at 340B or GPO based on drug s NDC New NDCs initially purchased at WAC 2017 340B Health 20

340B & Medicaid CE must determine whether it will use 340B drugs for Medicaid patients Will use 340B for Medicaid = carve-in Will not use 340B for Medicaid = carve-out The 340B law protects a manufacturer from having to pay a 340B discount and Medicaid rebate on the same drug (i.e., duplicate discount ) Federal and state rules in place to protect manufacturers 2017 340B Health 21

340B & FFS Medicaid Fee-for-Service (FFS) Medicaid claims: Carving in use 340B drugs for Medicaid patients CE lists on OPA Medicaid Exclusion File Database all Medicaid billing numbers or National Provider Identifiers used by the entity to bill Medicaid for 340B drugs Carving out no 340B drugs for Medicaid patients Check box on OPA website indicating entity will not bill Medicaid for 340B drugs Failure to follow these rules could result in repayment to manufacturers or the state 2017 340B Health 22

Medicaid Managed Care Medicaid managed care claims became subject to rebates under the Affordable Care Act in 2010, but 340B claims were exempted from this requirement CMS final rule released in May 2016 requires states to either have MCOs exclude 340B claims from utilization reports or have providers submit claim data directly to states 2017 340B Health 23

GPO Prohibition Disproportionate share hospitals, free standing children s hospitals, and free standing cancer hospitals may not use a group purchasing organization (GPO) or other group purchasing arrangement when purchasing covered outpatient drugs Can use GPO for inpatients These hospitals must use 340B priced drugs or other non-gpo priced drugs (usually WAC-priced drug) for all eligible outpatients May not pick and choose when to use 340B Exception: offsite locations can opt out of 340B 2017 340B Health 24

CMS Part B Proposal Issued July 13, comments due September 11 Would reduce Part B payments for drugs to 340B hospitals under the Outpatient Prospective Payment System (OPPS) by nearly 30% Current payment for Part B drugs: ASP + 6% Proposed for 340B hospitals: ASP 22.5% Hospitals would be required to identify non-340b Part B OPPS claims using a modifier Requirements would take effect January 1, 2018 2017 340B Health 25

340B Health s Perspective CMS s proposal, if finalized, would harm hospitals ability to serve low-income and rural patients, undermining the purpose of the 340B Program It is not clear that the Secretary of HHS has the statutory authority to reduce payment to 340B hospitals in this manner or to interfere to this degree with a program administered by another agency in HHS 2017 340B Health 26

340B Health s Perspective CMS s proposal does not address the root issue of high drug prices CMS understates the impact on 340B hospitals 340B Health has significant concerns about the 2015 GAO study, which is referenced as a reason to move forward with the proposal 2017 340B Health 27

HRSA Regulations Final version of 340B mega-guidance withdrawn pending review (1/31/17) Proposed mega-guidance and administrative dispute resolution regulation withdrawn (8/1/17) Final rule, civil monetary penalties for manufacturer overcharges and how to calculate ceiling prices (1/5/17) Delayed until October 1, 2017 New proposed rule released 8/17/17 that would delay effective date to July 1, 2018 2017 340B Health 28

Questions? Jeff Davis Legislative and Policy Counsel 340B Health 1101 15 th St. NW, Suite 910 Washington, D.C. 20005 (202) 552-5867 jeff.davis@340bhealth.org 2017 340B Health 29