January 3, 2024
Happy New Year to you and yours! I hope your holiday season was warm and bright and that you are refreshed and ready to tackle the challenges of the year ahead.
As for 2023, it was another tumultuous year for the 340B program. Emboldened by the first ruling siding with manufacturers from three high-profile federal appeals cases, more manufacturers restricted contract pharmacy access or expanded their existing limitations (more on both below). Meanwhile, the federal government finalized its $9 billion Medicare Part B remedy for 340B hospitals, with $7.8 billion in offsetting cuts set to begin in 2025, sparking a wave of lawsuits. Our safety net discount drug program endured more than its share of negative press in 2023, and Congress has started nibbling around the edges, for better or worse.
Finally, late in the year came the blockbuster ruling from a federal judge in the Genesis lawsuit challenging the government’s definition of a 340B patient.
The road ahead
What’s it all mean for 2024?
Let’s start with the patient definition case, in which the judge ruled HRSA was applying too narrow a definition in saying eligibility was limited to prescriptions from services that originated from the covered entity. The government has until Jan. 2 to file an appeal in the case; plenty of covered entities have been awaiting that decision because they are interested in testing the limits of the ruling, which the judge took pains to say was limited strictly to the Genesis case.
Staying with the courts, we should expect rulings from the remaining two contract pharmacy cases involving Eli Lilly in one and an enjoined Novartis and United Therapeutics in the other. We’ve been expecting those rulings since last summer; the oral arguments for each case took place in 2022.
The courts are also tied to the program’s political fate in 2024. Will the contract pharmacy decisions all go in favor of the manufacturers and prompt Congress to step in? (The alternative, a series of split rulings, increases the odds the matter ends up before the Supreme Court.) Given that 2024 is an election year, it’s hard to see Congress undertaking substantive 340B reform and instead continuing to nibble at the edges — and more on that below.
More and more states are signing laws barring pharmacy benefit managers from discriminating against covered entities. Many states will be watching the drug industry’s legal challenges to Arkansas’ state law, which adds a prohibition on manufacturers restricting 340B pricing at contract pharmacies, to see if they can follow suit. And if enough states follow Arkansas’ lead, it could spur Congress into action.
On the other hand, new state laws requiring 340B reporting in Maine and Minnesota have us wondering whether this could become the new norm.
We’re also keen to learn more about 340B Working Table, the mysterious alliance between drugmaker Genentech, South Dakota-based Sanford Health and South Carolina-based Carolina Health Centers, and their primary aims. The group has said it’s backing the so-called “gang of six” senators who solicited ideas for tackling 340B reform. That group includes Sen. John Thune, a Republican and 340B supporter who represents Sanford’s home state.
Finally, will an administrative dispute resolution (ADR) final rule be our NYE present? The new ADR was included in the White House’s list of regulatory priorities for the remainder of 2023.
Covered entities should buckle up. It's looking like another bumpy year for 340B.
Catching up on 340B news
More manufacturer mayhem as Japanese company Takeda became the 29th drugmaker to restrict access to 340B pricing at contract pharmacies. Starting Jan. 22, Takeda will either honor 340B pricing at hospitals’ wholly owned pharmacies or let them designate a single contract pharmacy within 40 miles of the parent location, along with submitting claims data. Federal grantees are exempt.
Meanwhile, Biogen added a third drug, Zurzuvae, used to treat postpartum depression, to its list of drugs subject to contract pharmacy restrictions for 340B hospitals.
There was more activity from Congress last month:
- The U.S. House passed the Lower Costs, More Transparency Act, which requires reporting on 340B spread pricing on Medicaid managed care plans, with the data to be publicly posted online in a searchable format. The bill, which also includes measures to increase PBM transparency, passed 320-71 with significant bipartisan support. It now moves to the Senate.
- Also, the House Energy and Commerce Committee unanimously approved the Medicare PBM Accountability Act, which would require PBMs and their affiliated pharmacies to report lists to prescription drug plan sponsors of drugs for which they have contracts with 340B covered entities. It’s similar to a PBM transparency bill passed in July by a Senate committee, and considering that PBMs are widely loathed, this legislation could have legs.
In Michigan, state health regulators released a final policy that will require 340B hospitals to file annual reports, starting in December 2024, outlining program costs for all Medicaid outpatient fee-for-service claims during the previous fiscal year. But the state will also start letting hospitals bill Medicaid at higher rates for 340B drugs.
In an unexpected move, Office of Pharmacy Affairs (OPA) Director Lt. Cmdr. Emeka Egwim stepped down Dec. 2 to take a new position elsewhere in the Department of Health and Human Services, per 340B Report. Egwim had been in the role overseeing OPA and 340B since February 2022, and his resignation came as a surprise. It begs the question of why he wanted out.
Nevertheless, OPA will be fine, and there should be no hiccups for 340B. Chantelle Britton, a former senior advisor at HRSA, is now acting director, while Rear Admiral Krista Pedley and veteran OPA Deputy Director Michelle Herzog are still around.
Lastly, a brief reminder that all covered entities are required, as of Jan. 1, to include JG or TB claims modifiers on 340B drugs purchased under Medicare Part B. If you’re a customer of The Craneware Group, our Trisus Claim application offers this as an automated service, with additional monitoring options available through some of our revenue integrity products.
We look forward to working together with all stakeholders to strengthen the healthcare safety net in 2024. Happy new year!