March 12, 2024
Key Takeaways from the SUSTAIN 340B Act and Things to Consider When Weighing In
By Ted Slafsky
(Part Two of a Two-Part Analysis)
In February, the U.S. Senate bipartisan “Group of Six” released an eagerly anticipated discussion draft bill and a bill summary/request for more information on the most highly debated issues in the 340B program. The bill, “Supporting Underserved and Strengthening Transparency, Accountability, and Integrity Now and for the Future of 340B Act (SUSTAIN 340B Act),” is over 50 pages and covers almost every matter that 340B stakeholders care about. As I discussed in a previous column, I expect the bill to get more traction than any other 340B reform bill since 2010, the last time a major 340B bill became law. The senators say they want to enact the bill during this session of Congress. While that is an ambitious goal and one that may not be possible in an election year, it will certainly be the primary 340B legislative vehicle in the 119th Congress which begins in January 2025.
Part 1 of my column focused on the importance of the legislation, the influential lawmakers behind the bill and a few of the critical areas addressed including the intent of the 340B program and the structure and scope of the contract pharmacy program. Part 2 focuses on the other key elements of the bill and the additional areas that the senators are requesting feedback on prior to their April 1 deadline. These areas include: patient definition, child sites, provider transparency, duplicate discount protections, “pickpocketing” protections and user fees.
Patient Definition: The current patient definition is not addressed in statute but is spelled out in HRSA’s 1996 patient definition guidance. A federal court in South Carolina recently ruled that the definition is too narrow and that the 340B statute does not require a covered entity (CE) to have initiated a healthcare service resulting in a prescription filled with a 340B discounted drug. 340B provider groups praised the court’s decision and the drug industry panned it.
While the patient definition section of the bill is left blank, the senators believe that the patient definition should be clarified and codified in statute. They also say that 340B discounts should only be used when there is a meaningful relationship between the CE and the patient. The senators ask several questions that will help them determine eligibility including:
- Should the type of patient encounter or specific level of services provided be considered?
- Should the length of time a relationship exists between a CE and a patient be a factor in how a patient is defined? If so, what is an appropriate time frame?
- When a patient is served by multiple CEs, what elements should be considered when determining which CE claims a discount for a given patient?
- What tools should be provided to HRSA to ensure it can implement a patient definition that accommodates diversity in CE types while promoting consistency, clarity and integrity in the program?
Importantly, the definition of patient would not be left to HRSA to determine. Instead of giving the agency regulatory authority to issue the rules, the definition would be in statute. This is a relief to 340B providers who are concerned that the agency would re-issue its 2015 proposal to significantly restrict access to 340B discounts.
Child Sites: The senators are seeking additional feedback from stakeholders on how to appropriately ensure child sites are aligned with the intent of the 340B program. “There have been examples in recent years of child sites that have benefitted from participation in the 340B program but have not provided access to needed benefits in their communities. We believe it is important to the integrity of the program that child sites are wholly-owned by and financially and clinically integrated into the covered entity,” they say.
Just like their contract pharmacy proposal, the senators would require CEs to extend their financial assistance/patient assistance policies to child sites. While many hospitals already follow this practice, hospitals and other covered entities would have to report, for the first time, very detailed information on their patient mix, charity care levels and use of 340B savings at each child site. Hospital groups have criticized charity care (and the use of uncompensated care) as insufficient metrics for determining community benefit or 340B’s value. Hospital groups are also concerned that some of their child sites could lose 340B eligibility and argue that the savings from these sites are important to the overall purpose of the program “to stretch scarce resources” and expand access to care.
Provider Transparency: The senators acknowledge the concern from the drug industry, HRSA and some lawmakers and academics that 340B providers should be more transparent in their use of the 340B program. “We believe that requiring covered entities to report detailed information regarding their program savings, policies, patient and prescription information, and then enabling that information to be publicly available by the Secretary will help ensure all stakeholders have trust and confidence that the program is being used as intended.”
The SUSTAIN 340B Act would require CEs to report information such as the number of individuals who were dispensed or administered drugs at the 340B price (specific to type of health insurance coverage), the cost incurred at each site for charity care, patient demographics, state/local contracts (for non-governmental hospitals), a list of contract pharmacies, the discount realized under 340B and a description of the CE’s use of savings. This information would be publicly available, and the Government Accountability Office would be required to submit a report to Congress to ensure that providers and the government follow the new rules. Providers would also need to estimate their 340B savings by calculating the difference between 340B acquisition cost and the WAC price. 340B providers argue that this metric significantly overstates the value of the 340B discount. Emily Cook, a partner at the law firm McDermott Will & Emery, brings up a number of important questions related to the transparency requirements that 340B providers should consider when responding to the RFI.
Duplicate Discount Prevention: Like the 340B Protect Act, which has been endorsed by many 340B provider groups, the SUSTAIN 340B Act would require the government to select a neutral clearinghouse to review claims rather than one selected and paid for by the drug industry. However, the bill would extend the sharing of data beyond what the law currently requires to also include Medicare and commercial payors. Another area of concern is that CEs would be responsible for repaying drug manufacturers for duplicate discounts in the Medicaid fee-for-service and Medicaid managed care areas, even if the state or managed care organization (MCO) is at fault. There is also concern that the draft bill would result in the loss of 340B savings from Medicaid managed care since the bill would, for the first time, make CEs responsible for potential duplicate discounts in the MCO space.
Pickpocketing Protections: Similar to the laws that have been enacted by 27 states to protect 340B providers and contract pharmacies from underpayments and other alleged discriminatory practices by PBMs and health plans, the SUSTAIN 340B Act would expand these protections to all states. When submitting comments, Cook says stakeholders should consider:
- Whether the proposed protections appropriately address restrictions currently imposed by payors, as well as restrictions that could be imposed in the future, and, if not, what additional protections should be included
- Whether the penalties imposed on pharmacy benefit managers should be imposed on other payors subject to the anti-discrimination provisions
User Fees. The bill includes a user fee program that would be paid for by CEs to help cover program administration, including enhancing program integrity and oversight activities included in the bill such as the new claims clearinghouse. The fee would be “no greater than [.01]% of the savings the CE receives under the 340B program, calculated as the difference between the wholesale acquisition cost (WAC) and the 340B price of the drugs purchased under the 340B program.”
While the fee is lower than what has been proposed by previous Democratic and Republican administrations (which would have been based on 0.1% of total 340B purchases per CE), the metric would still “vastly overcount the benefit [of 340B] to the CEs,” Cook told my colleague Rich Daly for a story he wrote in 340B Report. Instead, the fee should derive from the difference between 340B prices and average sales price, which is used by Medicare in determining payment, she said.
Another way to calculate the savings that could be even more accurate (at least in the case of hospitals) would be the difference between 340B prices and GPO prices. When preparing comments for the RFI, Cook says that stakeholders should not only consider raising whether the 340B savings metric is accurate but also whether any specific uses contemplated in the legislation should be added or removed.
Importance of Submitting Comments: The proposed bill strikes a good balance between the interests of 340B providers and the drug industry and the senators should be commended for their hard work. It is critically important for stakeholders to weigh in on the discussion draft and answer the questions raised in the RFI by April 1. I encourage you to consult with your trade associations and advocacy groups and talk to your counsel and auditors to solicit their feedback. Responses may be submitted to Bipartisan340BRFI@email.senate.gov. Feel free to send me a copy of your final comments (ted.slafsky@340breport.com) and best of luck!
