Reflecting on the NACHC-PhRMA 340B Alliance

By Ted Slafsky

Many of us in the 340B community are still trying to digest the news that the National Association of Community Health Centers has formed an alliance with PhRMA and will be advocating for major reforms to the 340B program.

The creation of the Alliance to Save America’s 340B Program (ASAP 340B) has caused the first significant fracture in the broad coalition of 340B providers in my 27 years with the 340B program.

The formation of this “strange bedfellows” alliance is disheartening but not surprising. Health center advocates are increasingly frustrated about a loss of 340B savings from contract pharmacy restrictions imposed by drug manufacturers and feel like they are the casualties in a long war between the pharmaceutical industry and hospitals.

While national hospital organizations have been reluctant to seek a legislative solution to the contract pharmacy impasse, NACHC decided last summer that they could no longer wait for relief from drug manufacturer restrictions and from pharmacy benefit manager policies that deplete centers’ 340B revenues.

NACHC should be applauded for pushing the ball forward and beginning what will be an inevitable negotiation with the drug industry over various aspects of the 340B program.  However, while ASAP 340B’s proposals may be well-intentioned, many aspects of its 10 principles (and a subsequent more detailed document that recently began to be circulated) would severely undermine the nation’s health care safety net and patient care.

Let’s start with the principles that I generally concur with:

• Ensure 340B prescriptions are offered to qualified patients at a discount. While this is not easily accomplished at the contract pharmacy counter, we need to figure out a way to accomplish this goal.
• Prevent PBMs and other payors from siphoning off savings. Most of the 340B savings should go the safety net provider, and we need a national solution to discriminatory reimbursement and other unfair contracting practices.
• Create a neutral 340B claims clearinghouse. We need a solid mechanism in place to ensure that drug manufacturers do not have to provide both an upfront 340B discount and then a rebate to the Medicaid program.  A neutral clearinghouse, selected and overseen by the government, would accomplish this goal.
• Facilitate public reporting on 340B data. All covered entities should be transparent in how they use their 340B savings.  However, as long time 340B expert and former U.S. Health and Human Services Office of Inspector General official Madeline Wallack points out: “Hospitals are open and willing to be more transparent in their 340B use.  Nevertheless, it is going to take some time to figure out the best metrics that would be useful for policymakers and practical for hospitals.”

Many 340B ASAP Policies Would Undermine Patient Care and the Safety Net

Unfortunately, many of ASAP 340B’s other proposals would be extremely detrimental.  For instance, ASAP 340B would prohibit disproportionate share hospitals from using 340B discounts for patients being treated through telehealth arrangements.  In addition, DSH hospitals and their patients would no longer be able to utilize 340B discounted medications through mail order pharmacies or specialty pharmacy settings.  It would also severely restrict patient access and 340B use in the contract pharmacy setting.  All these ideas would limit patient access to convenient and affordable medications and therapy.

There are too many problematic aspects of ASAP’s proposal to go through each one individually.  However, among the additional recommendations that stand out as harmful and unfair, is using charity care as a metric for hospital eligibility in the 340B program.  Charity care is just one of several factors that determine a hospital’s commitment to the underserved.  Any accurate metric needs to also include uncompensated care, bad debt, and underpayments from federal and state payors.

340B ASAP’s proposal would also appear to prohibit 340B prescriptions written by non-employed credentialed providers of DSH hospitals.  This means that prescriptions generated from referrals would be outlawed.  This is another policy that would increase profits for the pharmaceutical industry but would do little to help cash-strapped health systems or their vulnerable patient populations.

ASAP 340B’s efforts fall far short of what is needed for a détente in the ongoing battle between the pharmaceutical industry and 340B providers.  But the creation of this alliance will hopefully motivate hospital groups and Congress to be more proactive in trying to end the contract pharmacy impasse.  For the last three years, I have been making the case in my columns that hospital organizations and other 340B provider groups need to aggressively lobby Congress to clarify the 340B law when it comes to contract pharmacy use.  The federal court cases continue to drag on and I am not particularly optimistic that the pending appellate court rulings will rule in the government’s favor.

While it will be much tougher to resolve the matter through Congress now than it would have been a few years ago, we have no other choice but to turn to Capitol Hill for a resolution to this crisis.

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.