Another month, another opportunity for opponents to attack 340B.
Such was the case as HRSA announced that purchases under the 340B drug program in 2023 rose 24% to $66.3 billion, with disproportionate share hospitals leading the way at $51.8 billion, or 78% of total program spending.
Spending on prescription drugs rose 8.4% to $405.9 billion in 2022, the most recent year for which data are available, and HRSA noted that drugs acquired through specialty distribution channels account for 60.6%, or $40 billion, of all 340B spending despite constituting just 36% of all units purchased under the program.
While critics say the numbers prove that 340B is out of control, others have again pointed out that drugmakers’ ever-rising prices, focus on developing expensive specialty drugs and other tactics have played no small role in inflating 340B spending over time. HRSA also does not disclose key information such as the volume of 340B units purchases or the amount of savings realized under the program. Stakeholders also note that another major factor behind program growth is the ongoing shift from inpatient to outpatient care.
J&J rebate fallout
The dust continues to settle after Johnson & Johnson dropped its proposed 340B rebate model for two of its top-selling drugs, Stelara and Xarelto, after the government threatened the company with expulsion from Medicaid and Medicare Part B.
The drug industry trade group PhRMA sent a 12-page letter to HRSA Administrator Carole Johnson in which it alleged the agency’s move “improperly interferes with manufacturers’ rights under the statute to implement reasonable business practices to improve transparency and compliance, as articulated by two federal appellate courts.”
In an op-ed, Maureen Testoni, president and CEO of 340B Health, said program stakeholders must “remain vigilant.”
“The debate about replacing 340B discounts with rebates is not new,” she wrote. “The pharmaceutical industry has been pushing for rebates for years and shows few signs of relenting on this goal. Even the very strong HHS enforcement response in this instance does not mean drugmakers cannot try proposing a rebate scheme they think might gain federal approval.”
She’s absolutely right, and there are good reasons to worry about rebate models in 340B, which I’ll get to shortly. My guess is that J&J is waiting to see how the Nov. 5 election shakes out before deciding whether to file a lawsuit it has likely already drafted against HHS.
More on rebates
Remember Kalderos, the company that floated a platform in 2021 called 340B Pay that would require covered entities to upload claims data in exchange for rebates? They’re back with a new product they’re calling Truzo, which would enable manufacturers to manage both upfront payments and rebates for 340B, the Medicaid Drug Rebate Program, commercial insurance and the forthcoming “maximum fair pricing” under the Inflation Reduction Act (IRA) drug price negotiations.
Kalderos sued HHS over its blocking of its 340B Pay rebate platform, and the case has been on pause since 2022, pending the resolution of several federal cases centered on contract pharmacy restrictions. This week, Kalderos received permission from the judge in the case to file an amended complaint within 30 days to restart the case. Sources tell me the discussions between the feds and Kalderos have centered more on the types of data the company is asking for than on the idea of rebates themselves. If true, it doesn’t bode well for 340B entities.
Another reason to worry: CMS issued final guidance in October for the next round of Medicare drug price negotiations but pointedly declined to resolve questions about how the process will work with 340B. The IRA requires manufacturers to offer maximum fair pricing (MFP) — offered through a rebate — or 340B ceiling pricing, whichever is lower. It also offers no mechanism for identifying 340B purchases or avoiding duplicate discounts.
That means covered entities could accumulate 340B eligibility for a claim that is rejected by the manufacturer or audited due to an MFP rebate directly provided to the pharmacy. This could lead to excessive audits and clawbacks of 340B discounts for covered entities.
Manufacturers, meanwhile, want a way to safeguard against paying out rebates for drugs purchased under 340B. Kalderos is essentially floating their new rebate platform as a way for them to do just that.
Contract pharmacy update
Drug industry-backed platform 340B ESP has backed off from its onerous new policy to require covered entities to submit eight data points among other claims submission information. Yet in reverting to terms of use adopted in 2022, the site still defers to manufacturer policies — meaning those same eight data points, which covered entities have complained are not always easily accessible and could be considered proprietary, may still be required by certain drugmakers.
At any rate, it’s worth pointing out that 340B ESP shares the same parent company, Second Sight Solutions, as Beacon, the platform J&J planned to use for claims submissions under its scrapped rebate proposal. Perhaps both parties decided to lay low and avoid confrontation — at least until the election.
Meanwhile:
- Arkansas says it has begun enforcement actions against AstraZeneca for violating its state law prohibiting contract pharmacy restrictions. The company is reportedly the last major drugmaker subject to a complaint in the state that has not exempted Arkansas providers from its exclusions.
- Organon is expanding its contract pharmacy restrictions to HRSA-funded health centers, including community health centers, effective Dec. 1.
- UCB has extended its restrictions to all federal grantees and added new reporting requirements for 340B hospitals, starting Nov. 25.
Other 340B news
- A fifth hospital has sued HRSA over its decision to approve 340B program audits by J&J, alleging the agency failed to require the company to provide written notice of alleged violations and did not follow other protocols. All five lawsuits have been filed in the U.S. District Court for the District of Columbia.
- Lobbying on 340B remained steady in the third quarter of 2024, according to newly released federal filings. They show more than 360 law and government relations firms spent money on 340B lobbying, mirroring the same record period in 2023, despite very limited legislative action on Capitol Hill in this election year.
- Stand For US PAC, the organization that aired ads falsely linking 340B with illegal immigration and abortion in states considering bills to prohibit contract pharmacy restrictions, took in nearly $4 million in funding from Building America’s Future, another dark-money group. The news was reported by 340B Report.
The publication also ran an interesting story about comments a former Trump administration official, Joe Grogan, made about 340B at a healthcare conference in New York.
Grogan, former director of the White House’s Domestic Policy Council, was bashing 340B as being “out of control” when he reportedly acknowledged the federal government doesn’t “have the money to shore up the community hospitals and solve the 340B problem.”
In other words, he’s acknowledging the essential role the program plays in keeping many smaller hospitals open. He’s also implying these hospitals would need taxpayer assistance if the program were suddenly eliminated — the very thing many 340B opponents inaccurately use as an attack line.
Don’t forget to vote Nov. 5!
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