by Lisa Scholz, PharmD, MBA, FACHE, Senior Vice President Industry Relations
February 2, 2023
It is time to accept the uncomfortable truth that the ground has shifted beneath our beloved safety net program.
The decade since 2012, when congressional inquiries began into 340B, has brought quite the storm on 340B. But instead of battening down the hatches, covered entities need to be prepared and perhaps reflect on Sun Tzu’s The Art of War: “The supreme art of war is to subdue the enemy without fighting.”
What happens, though, when war is declared? You fight.
The latest skirmishes
This week alone:
- A federal appeals court ruled unanimously in favor of AstraZeneca, Sanofi, and Novo Nordisk in their contract pharmacy lawsuits against the government, handing the drug industry a big victory, with two other appeals court decisions still to come.
- Two more drugmakers — Bayer and EMD Serono — became the 20th and 21st manufacturers to announce contract pharmacy restrictions.
Meanwhile, critical or outright anti-340B opinion pieces have been popping up like dandelions. The program recently made an unflattering appearance on The Daily, the widely syndicated podcast from The New York Times. Even the Rev. Al Sharpton penned a column calling for more oversight — surely the first time his name has appeared in this blog.
What is happening? Manufacturers and covered entities are at war over the purpose and intent of 340B.
I wrote recently that it’s time to field a strong defense, do some internal housekeeping and take other steps to weather the storm. Submit an opinion piece defending 340B and outlining its benefits to your local newspaper. Our program is too important, and our mission too critical, to let our opponents define the terms of this debate.
Now let’s run down the rest of the 340B news.
Part B remedy
A federal court decided to let the Department of Health and Human Services design a remedy for nearly five years of illegal Medicare Part B payments following last summer’s Supreme Court case. The Centers for Medicare and Medicaid Services says it will issue a proposed rule in April outlining its suggested remedy for the underpayments, which stretch from 2018 through late September of 2022.
That opens the proposal to a 60-day public comment period after a federal judge declined to order HHS to issue repayments with interest immediately. CMS’ wording also leaves the door open to offering multiple alternatives.
Add it all up, and the actual repayments might take a while.
“We are disappointed that the district court elected to extend this delay by remanding this case back to the department to determine the appropriate remedy,” Melinda Hatton, general counsel and secretary of the American Hospital Association, said in a statement. She added that “like the district court said in its opinion, the AHA ‘expects that HHS will act promptly to remediate its underpayments.’”
We’ll also be watching the HHS Spring agenda for word on implementing the drug-pricing measures of the Inflation Reduction Act. For its part, CMS made it official that it will announce the first 10 Part D drugs selected for negotiations by Sept. 1, with the negotiated maximum fair prices to be announced by the same date in 2024. Expect manufacturers to jockey furiously to keep their drugs from appearing on that list. Here’s a full timeline of the Medicare Drug Price Negotiation Program.
DSHing up controversy?
In other interesting news, the Medicare Payment Advisory Commission has voted to recommend that Congress scrap Medicare’s disproportionate share hospital (DSH) and uncompensated care payments and adopt a new way to compensate hospitals that serve a large number of indigent patients. MedPAC argues that DSH payments are too low for hospitals with a high share of Medicare patients and are calculated based only on inpatient percentage. Further, it says uncompensated care reimbursements aren’t focused on Medicare beneficiaries and provide larger payments to hospitals with higher shares of Medicare Advantage patients.
MedPAC’s proposed $2 billion safety net index payments would be based on a formula that the commission says would align Medicare funds more directly with hospitals serving low-income beneficiaries and could improve financial stability for safety net hospitals. The recommendation is expected to go to Congress in March.
MedPAC’s proposal makes no mention of the 340B program, which uses DSH percentage to determine eligibility for most hospital types. But there are reasons to be wary beyond complicating how to determine eligibility.
First, it was MedPAC that first floated the idea of cutting Part B payments to 340B hospitals from average sales price plus 6% to ASP minus 22.5% (sound familiar?). So there is precedent for their recommendations becoming official policy.
Secondly, it’s not hard to see how the proposal could set off competition for funding, as hospitals argue over who provides the most services for the poor and the term “safety net” gets picked apart. We’re already seeing competing proposals for “essential” designation and funding for beleaguered hospitals. The safety net needs to stick together. Channeling Sun Tzu again, the very fiber of a strong defense is tearing apart the enemy, which makes the battle that much easier to win.
How the ground has shifted
Adding to the contract pharmacy woes, Eli Lilly announced it will no longer allow covered entities to designate central fill pharmacies as eligible sites under its limited distribution model. It’s yet another example of how manufacturers change the rules of the game just as we (reluctantly) learn how to play.
Finally, we have more clarity on who will lead committees in the House that have purview over 340B.
Energy and Commerce Committee Chair Rep. Cathy McMorris-Rogers (R-Wash.) announced that Rep. Brett Guthrie (R-Ky.) will lead the Subcommittee on Health, while Rep. Morgan Griffith (R-Va.) will chair the Subcommittee on Oversight and Investigations. Guthrie has voiced support for more transparent hospital prices, and he’s also from Kentucky, a key target of drugmaker spending as the home of Senate Republican leader Mitch McConnell. Griffith, meanwhile, previously co-sponsored legislation to allow rural and free-standing cancer hospitals buy orphan drugs at 340B pricing for use to treat non-orphan conditions.
Meanwhile, Rep. Jason Smith (R-Mo.) beat out Rep. Vern Buchanan (R-Fla.) to helm Ways and Means, which is a good sign, as Smith hails from a state with a strong 340B safety net.
Keep doing the good work and have faith that you’re doing the right thing. Remember these words from Martin Luther King, Jr.: “Our very survival depends on our ability to stay awake, to adjust to new ideas, to remain vigilant and to face the challenge of change.”
And these words from Sun Tzu: “generally in warfare: If ten times the enemy’s strength, [one should] surround them; if five times, attack them; if double, divide them; if equal, be able to fight them; if fewer, be able to evade them; if weaker, be able to avoid them.” Our strength is the patients we help.
Have courage and know our strength.
If you’d like to continue the conversation with me, schedule a time that works for you and I’ll be in touch!