340B covered entities have likely felt bombarded during the last few weeks with various letters from manufacturers, word of additional cuts in Medicare part B drug reimbursement for some hospitals, and an executive order about insulin and epi-pens for community health centers. Advocacy groups, including 340B Health, the National Association of Chain Drugstores, the American Hospital Association, and the American Society of Health System Pharmacists all have issued statements to HRSA and drug manufacturers to suggest they rethink their actions against the 340B Program. HRSA has issued a statement that it has limited regulatory authority, but that it is “considering whether manufacturer policies, including Lilly’s, violate the 340B statute and whether sanctions may apply.”
Below, we offer our guidance on considerations and guidance for each of the issues as follows:
Manufacturers Wanting Your Data
Merck, Sanofi, and Novartis through 340B ESP and additional manufacturers, working with Kalderos through 340B Pay, want covered entities to upload data on a regular basis. Regarding 340B ESP, covered entities would provide data through a contracted portal on a regular basis. Significant concern exists due to potential risk with HIPPA violations and confidentiality agreements in contracts. Additionally, and maybe most importantly, concern over what will be done with the data concerns the 340B community.
Regarding 340B Pay, Kalderos wants to convert the 340B Program to a rebate program instead of the current format by allowing manufacturers to determine if a covered entity is entitled to receive money back based on claims submitted by the covered entity. More details need to be provided outlining the exact process but we believe many potential pitfalls exist including: making sure rebates are paid in full to covered entities, the costs to each entity to convert to, and maintain this model, as well as the compliance risks. One of the biggest issues that may exist with 340B Pay is a rebate process may reduce the covered entity’s control in the program while all the compliance burden still remains with the covered entity.
Communication from manufacturers and Kalderos consistently emphasizes its main priority is to prevent duplicate discounts with Medicare, Medicaid, and commercial payors. The 340B statue requires covered entities to avoid duplicate discounts with Medicaid FFS only and does not indicate a covered entity has responsibility for Medicare and commercial claims.
Blue’s opinion is that there are more risks associated with complying than not complying. There has been no guidance from HRSA and nothing in the 340B statue compelling you to comply. Not complying may result in the loss of some 340B discounts at contract pharmacies, but your 340B data is YOUR data and we feel manufacturers are overstepping by requesting this data. There are many speculations over what this data will be used for and most scenarios are not in favor of the covered entity.
Manufacturers Limiting What Contract Pharmacies Receive 340B Pricing
Eli Lilly and AstraZeneca have stated they will only allow Covered Entities to purchase (or replenish) 340B medications to entity owned pharmacies or in one designated contract pharmacy for entities lacking its own pharmacy. Eli Lilly has now made this effective for all its products except insulin and AstraZeneca indicated it will be with all its products.
It is our recommendation for you to review your contract pharmacy network and be ready to select a designated pharmacy for these manufacturers including strategies to maximize utilization of that pharmacy to save as much 340B revenue as possible. It is also our recommendation to complete the 340B price (unavailable) notification form (https://340bpvp.com/Documents/Public/340B%20Tools/340B-ceiling-price-unavailable-incorrect-340b-ceiling-price-notification-for-hrsa.docx) when you are unable to replenish a drug at 340B pricing. This will assist HRSA to see the impact created by manufacturers and help you track the impact on your program.
Medicare Part B Reimbursement Cuts
The cuts to Medicare Part B reimbursement for DSHs, RRCs, and non-rural SCHs were upheld by an appellate court at the end of July. Medicare Part B drugs obtained through the 340B Program are currently reimbursed at Average Sales Price (ASP) – 22.5% since 2018. These cuts will remain in place and there is a proposal to deepen the reduction even more for 2021. CMS has proposed an additional 6.2% reimbursement reduction for the calendar year 2021 establishing reimbursement at ASP – 28.7%. Comments are due on this proposal by October 5, 2020. While these cuts do not affect all covered entities, they represent another challenge during already difficult times.
If you are a DSH, RRC, or non-rural SCH, now is the time to evaluate the potential impact of these cuts. Blue can assist you with a financial impact analysis and offer guidance to lessen the impact.
Executive Order Targeting FQHCs
Regarding FQHCs, the recent executive order to provide insulin and epi-pens at 340B prices has been confusing and possibly contradictory to laws already in place. The National Association of Community Health Centers is working to advocate for changes to this order and helping guide its members.
It is our recommendation to take no action at this time. This executive order lacks clarity and we feel that HRSA needs to provide guidance for covered entities. In the absence of this guidance, there is nothing in the 340B statue to compel you to comply.
Summary and Next Steps
For all covered entities, ensure you are keeping up with your internal and external compliance audits. Now more than ever, it is vital to show your covered entity is a good steward of the 340B Program and continue to communicate with your oversight committee and legal team about the potential impacts of these issues. Additionally, it is important to network with other covered entities as well as national groups. We do expect, in the coming weeks, more manufacturers will issue letters like those already issued. Covered entities need to advocate for themselves and the protection of the program.
We strongly encourage each covered entity to determine the financial impact of each of these proposed changes to the program to assist it understand the support it will need to provide to the organizations fighting against these changes or challenges. Also, we would suggest the covered entity make no changes to its program or provide any data to outside organizations until there are clear written instructions or regulations from HRSA.
We will continue to monitor developments and provide updates as available. If you have any questions, please reach out to one of our Apexus Certified 340B Experts.