CMS Should Heed the Advice of 340B Community on Medicare Negotiations

By Ted Slafsky

The Biden administration deserves credit for playing a key role in passing the first law in history to allow the government to negotiate lower drug prices for America’s 61 million Medicare beneficiaries.

For several decades, many presidents—and even more presidential candidates—have promised to use the government’s vast purchasing power to lower pharmaceutical prices, but none of them achieved it until the Inflation Reduction Act’s (IRA) passage in 2022. Medicare drug price negotiation is an historic and signature achievement for President Joe Biden and Vice President Kamala Harris. However, implementing the law in a way that ensures other federal drug pricing programs continue to work effectively will take great care and attention.

Case in point is the 340B program.

The IRA authorized the Centers for Medicare & Medicaid Services (CMS) to set a “maximum fair price” (MFP) on 10 high-cost drugs beginning in 2026. CMS recently announced the MFPs for these 10 drug products. The agency will select up to 15 more drugs for negotiation of new MFPs effective in 2027, as well as for up to 15 additional drugs for 2028, and up to 20 more drugs for each subsequent year.

Under the IRA, manufacturers must offer covered entities (CEs) the lower of the MFP or the 340B ceiling price, but not both. But as my colleague Shannon Young recently reported, 340B providers are concerned that CMS’ proposed guidance “provides little detail on how to avoid duplicate discounts or how to address other interactions between the 340B program and the new Medicare program.”

Key Concerns

Specifically, 340B providers are concerned that the proposed guidance, which was published in May, would:

• Impermissibly interfere with CEs ability to use 340B drugs for Medicare Part D beneficiaries;
• Put a tremendous and unreasonable burden on CEs;
• Require CEs to share their claims data directly with manufacturers;
• Force CEs to pay higher prices than 340B until they receive a refund from a manufacturer when a drug’s MFP is lower than its 340B ceiling price.

Advice from Wide-Ranging Group

A broad coalition of 340B provider organizations—including various grantee and hospital groups—has implored CMS to “abandon the provisions in the guidance pertaining to 340B and develop a workable means for CEs to continue purchasing at the 340B price without identifying a claim at the point of sale, regardless of whether a drug’s 340B ceiling price is lower or higher than MFP, or, alternatively, require manufacturers to sell drugs at MFP.”

In addition, the coalition has called on CMS to develop a methodology that would enable CEs to choose to retroactively submit 340B claims data to CMS’ Medicare Transaction Facilitator (MTF) and require that the MTF use the data to identify 340B claims and withhold them from being submitted to the manufacturer.

Under CMS’ proposed guidance, 340B providers could be forced to pay much higher prices for the selected drug products and then chase down rebates, retrospectively. The American Hospital Association noted in its letter to CMS that this would create devastating cash flow issues for covered entities. Instead, the provider groups have rightly urged CMS to develop a process that ensures prospective access to the MFP and 340B price. They pointed to a highly successful practice used in Oregon for over a decade, in which the state’s 340B providers access the 340B price and then submit claims data to the Medicaid agency to prevent a duplicate discount.

Key Takeaway

The 340B provider community has been an important partner in the Biden administration’s efforts to improve access to care and lower drug prices. They’ve also played an outsized role in treating patients during the COVID-19 pandemic and continue to be the first in line to help communities during natural disasters and other public health emergencies. The administration should heed their wise counsel before finalizing its IRA implementation guidance this fall.

Ted Slafsky is the Publisher and CEO of 340B Report, the only news and intelligence service exclusively covering the 340B program.  Slafsky, who has over 25 years of leadership experience with the 340B program, is also Founder and Principal of Wexford Solutions.  Ted can be reached at ted.slafsky@340Breport.com.

Disclaimer: The views and opinions expressed in this blog are those of the authors. They do not necessarily reflect the official policy or position of any other agency, organization, employer, or company.