2019 Outlook for 340B:
A Conversation with PSG
CEO Dave Borden

The 340B Drug Discount Program has faced turmoil in recent years. 340B covered entities are fighting to protect this essential program from the drug industry, the administration, and critics in Congress. This program also faces challenging shifts in market dynamics. Yet, there is hope. Dave Borden, PSG’s CEO, shared his outlook for the 340B program and what covered entities can do to keep 340B strong.

1. You recently visited Washington, D.C. What’s the latest news from Capitol Hill? Honestly, there were no surprises. The legislators we spoke with expressed broad bipartisan support for the 340B program. They recognize the program’s tremendous value in protecting our nation’s healthcare safety net and extending scarce federal resources to deliver care in needed areas. And while both positive and negative bills will likely be introduced in 2019, we are not convinced legislation will be passed in 2019 or 2020 given the split Congress and the upcoming election. What appears to be of common interest, however, is increased levels of transparency, which would likely result in increased reporting and disclosure requirements for covered entities.

2. Besides greater transparency, what are some of the issues facing the 340B program? A bigger concern for covered entities is the current administration, which is openly critical of the 340B program. Drug companies want to cut back the 340B program, and we’ll see continued attempts to do so including enlisting the support of the administration which has announced intentions to restructure the program. You’ll remember the Medicare Part B cuts to disproportionate share hospitals (DSH). These hospitals challenged the rule—and won. However, the Trump administration has appealed that ruling. Despite the fact that the net impact of the 340B program to drug manufacturers is less than 2% (see study by highly respected and nonpartisan Pew Charitable Trust), drug companies are eager to cut back 340B and I don’t think this is the last time we’ll see attempts to go directly or indirectly after the program.

3. Any other news from Washington? There’s a lot of activity regarding drug prices. For example, there’s a great deal of conflict regarding the proposal to tie reimbursement of drugs to an international pricing index, which would align the prices that Medicare pays for certain drugs with lower prices paid by other developed countries such as Japan or Germany. There is a great deal of push back from the drug companies, doctors and hospitals so it may not come to fruition. There is also a new rebate proposal announced by the administration that is currently in the public comment period. If implemented as proposed, it would make significant changes to safe harbors on rebates for PBMs and drug companies, such as requiring rebates be applied at the point-of-sale and would also make significant changes to the fees that drug companies pay to PBMs for certain services. PBMs, insurers and large employers have expressed concerns about these proposed changes and the resulting impact on drug prices as well as premiums charges to members. With all this commotion, 340B is taking a backseat for now.

4. What should 340B stakeholders focus on? We need to work together. We encourage covered entities to advocate for the 340B program by participating in industry trade groups like 340B Health. We also suggest actively engaging with their Congressional representatives about the good 340B does in the communities they represent. National hospital trade organizations such as the AHA and America’s Essential Hospitals as well as state hospital associations are also working together to advocate for the program. And grassroots organizations such as Community Voices for 340B is critical to educating the public and government officials at all levels of the value 340B brings to the healthcare safety net and caring for our nation’s underserved.

5. Let’s talk about market dynamics. CVS Health’s purchase of 340B administrator, Wellpartner, in late 2017 and the resulting change in business practices have caused concern with covered entities. Forced disruption of their relationships with current service providers as well as a significant increase in cost to do business with CVS, spawning a number of antitrust lawsuits by 340B program administrators and protests by covered entities. The challenge for covered entities, of course, is that CVS is a large conglomerate in the U.S. that controls a vast network of both brick-and-mortar and mail-order pharmacies and covered entities need access to these pharmacies in order to have an adequate network to serve their patients. CVS also attempted to impose reimbursement cuts to 340B pharmacies—fortunately, the company reversed course after significant pushback. Unfortunately, this is not an isolated case and other payers continue to reduce reimbursements to below market levels. We hope to see positive legislation in Congress to prevent such discriminatory reimbursement practices.

6. What can covered entities do to protect their 340B program against these tactics? Again, working together is essential. We are pleased to see that covered entities are working closely with their state advocacy organizations and state representatives to fight back. For instance, West Virginia recently approved legislation prohibiting PBMs from paying 340B pharmacies (including contract pharmacies) a lower rate than non-340B pharmacies. The bill passed unanimously and has been signed into law by the Governor. We would like to see other states adopt this type of legislation. This is just one of a number of efforts on the state level to combat this practice. We also encourage continued close coordination with your national advocacy groups.

7. What’s your take on compliance in 2019? Despite what you might hear from drug manufacturers, covered entities take their compliance obligations very seriously and are following the rules. The tactic of suggesting otherwise being used by drug companies and 340B critics is meant to distract attention from the fact that big pharmaceutical companies—not the 340B program—are the real parties responsible for high drug costs. In reality, 340B has a negligible impact on drug sales and manufacturer revenue. Instead, 340B is one of the few effective means of keeping drug prices affordable.

8. How does PSG help its clients optimize the value of their 340B program? We are a relentless advocate for our clients, enabling them to work efficiently and effectively, deriving appropriate results from their program, while exceeding every 340B compliance standard. We do this through our subject matter experts, superior technology, and a relentless focus on our customers’ success and satisfaction.
   
   Finally, PSG spends considerable time and resources advocating for the 340B program, funding grassroots programs, supporting advocacy groups and being involved in the public debate. We view this as part of our commitment to our clients. We’ve seen the critically important services that 340B covered entities provide to vulnerable patients. We know that if the 340B program was cut back or eliminated, safety net providers would not be able to continue this mission. The 340B program literally saves lives. That’s why it’s our mission to preserve and protect the 340B program.
   

Want to dive deeper into what is happening on Capitol Hill?
Join PSG on May 22 for an interactive webinar session as we discuss key 340B state trends.