Could We Have the Makings of a Grand Bargain on 340B?

By: Ted Slafsky

For the past three decades, hospitals and federal grantees have been more successful than pharmaceutical companies when it comes to policy changes to the 340B drug discount program.  Despite the drug industry’s deeper pockets, 340B covered entities have been able to leverage their local ties to federal and state lawmakers to (1) block legislation that they perceive to be harmful or (2) expand the program and make other changes that are favorable to their interests.  Prior to my current position as Publisher & CEO of 340B Report, I spent 22 years in the trenches advocating for the 340B program.  During this period, the program was extended to children’s and rural hospitals, the contract pharmacy program was significantly expanded, and important policing measures were put in place to ensure 340B providers received the correct price on drug purchases. On the state level, we began to pass bills to protect 340B providers from unfair reimbursement cuts by PBMs and other payors and that momentum continues today.

While 340B providers continue to wield significant clout, hospitals, in particular, are facing unprecedented challenges. The fallout from recent front-page investigative reports in The New York Times and the Wall Street Journal on alleged misuse of the program continues. In the less than two months since state legislative sessions have begun, legislation has been introduced in three states—Virginia, Indiana, and Connecticut—intended to ensure that 340B hospitals are being good stewards of the program.  While the bills are slightly different, they would all impose new reporting requirements on 340B hospitals, says Devon Seibert-Bailey, former Legislative Director for Rep. David McKinley (R-WV).  Seibert-Bailey, who now represents a group of 340B hospitals at the government relations firm Strategic Health Care, says that legislators in other states have drafted but have chosen not to proceed with 340B hospital reporting mandates.  She says that other states may consider such legislation in the coming the months.

In Virginia, State Del. Kathy Tran (D) told 340B Report that she introduced her bill to require more accountability from 340B hospitals in response to a New York Times investigation that accused a Catholic health system of exploiting the 340B program at the expense of one of its inner-city hospitals to enrich its other hospitals located in wealthier, suburban neighborhoods.  Her bill would effectively require Virginia 340B hospitals to abide by the American Hospital Association’s now purely voluntary 340B Hospital Commitment to Good Stewardship Principles.  The bill was voted down 3-2 last month during a health subcommittee mark up with all three Republican delegates voting against the legislation.

In Indiana, State Rep. Martin Carbaugh (R) has introduced a wide ranging hospital transparency bill that includes a requirement that 340B hospitals disclose their revenue from the 340B program in both the hospital and specialty pharmacy setting and how much charity care is being provided by the institution.

In Connecticut, Democratic Gov. Ned Lamont has introduced a bill that would require 340B hospitals to annually file with the state:

• a list of manufacturers from whom the hospital bought drugs through 340B
• a list of such drugs categorized by quantity, actual purchase price, and 340B ceiling price
• the reimbursement amount by each payer categorized by manufacturer, quantity, actual purchase price, and ceiling price
• “the difference in cost for each covered outpatient drug, identified by such drug’s National Drug Code number, due to the difference in the ceiling price or actual price paid, and the actual price paid by any patient or payer”
• “a summary providing how the difference in cost” as described in the preceding bulleted item “was applied for the benefit of the community.”

“The governor’s proposal will ensure discounted drugs purchased through the federal 340B program benefit the low-income consumers and communities the program was designed to help,” a fact sheet about the bill says.

Connecticut’s Bill Has a Twist

Unlike the other two state bills, Gov. Lamont also would require drug companies to offer 340B pricing at any pharmacy that the 340B covered entity contracts with.  Drug manufacturers would be forbidden from:

• restricting the number or type of locations through which covered drugs may be dispensed by or on behalf of a 340B covered entity
• conditioning 340B drug sales on enrollment with third-party vendors or on the sharing of claims information or other data
• charging above 340B ceiling price and making entities request rebates in lieu of discounts
• interfering with an individual’s choice to receive a covered drug from an entity or a contract pharmacy
• delaying shipment of 340B drugs
• retaliating against covered entities or pharmacies for exercising their rights under the legislation.

The bill would also prohibit PBMs from imposing a number of practices that 340B providers consider to be discriminatory including targeting 340B providers and their contract pharmacies for lower reimbursement.  The bill would let covered entities or the state attorney general “seek a temporary or permanent injunction and such other relief as may be appropriate to enjoin a pharmacy benefits manager or drug manufacturer from continuing to enforce contract provisions that violate” the legislation.

The Importance of Compromise

While Lamont’s bill may be considered by some hospitals as too prescriptive, there is no question that any type of resolution to the contract pharmacy impasse will require concessions from the 340B provider community, particularly 340B hospitals.  This is the case both at the state and national level.  Even allies such as Sen. Bernie Sanders (I-VT), the new chairman of the committee that has jurisdiction over 340B,  has expressed concern about reports of 340B misuse and has said that tax-exempt status of non-profit hospitals should be reviewed.

The time that hospitals could effectively control the 340B agenda has passed.  If they hope to restore access to 340B pricing in the contract pharmacy setting and make other changes to the program, 340B providers will need to be prepared to be more transparent in how they use their 340B savings and ensure that they are being good stewards of this vital program.

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.