The View From the Nation’s Capital

Guest Contributor: Ted Slafsky
March 13, 2020

Coronavirus likely to sideline 2020 policy changes for prescription pricing and 340B, while Medicare Part B reimbursement changes continue as planned

The coronavirus (COVID-19) outbreak is not only having a profound impact on our health care system, the American psyche, the stock market and the shelves at Costco — it will also affect what we can expect on drug pricing and 340B legislation.

While election years are generally not conducive for passing big bills in Congress, the epidemic presents a unique situation likely to close any hope for enacting new drug pricing legislation in 2020. Although some D.C. observers believe that a bipartisan bill sponsored by Senators Grassley (R-IA) and Wyden (D-OR) still has a good chance of passage, I am much more skeptical. The Prescription Drug Pricing Act (S. 2543) would:

  • Penalize drug manufacturers that raise Medicare drug prices above the rate of inflation
  • Require drug companies to provide rebates for Medicare Part B drugs
  • Reduce out-of-pocket costs for Medicare beneficiaries
  • Require PBMs to disclose more information about their discounts and fees

Sen. Grassley announced last week that he has been able to convince 24 Republican lawmakers to sign on. This is an important step in convincing Majority Leader McConnell (R-KY) to allow a floor vote. Grassley and Wyden’s S. 2543 also recently received the endorsement of Vice President Pence, and many believe that President Trump will push for its passage, since he is eager for a legislative victory on drug pricing. Nonetheless, my hunch is that the concessions needed to convince Grassley’s Republican colleagues to bless the legislation will make it much less palatable to the bill’s Democratic supporters.

Key Republicans, including Sen. Cornyn (R-TX), continue to express reservations about the inflation penalty. The penalty has been highly effective in controlling prices in the 340B and Medicaid rebate programs. However, the pharmaceutical industry strongly opposes it, and I expect the inflation penalty to be either removed or watered down significantly.

Even if the bill passes the Senate, the chances that the House, which is controlled by Democrats, would agree to the bill are remote. Plus, COVID-19 has quickly become priority one in Washington. As a result, there is little bandwidth to address other matters, even ones that are key pocketbook issues for the general public. Considering that there are approximately 60 days left in session, only must-pass bills are likely to make it to the President’s desk. What does this mean for 340B stakeholders? While we could see some additional drug pricing and 340B bills introduced, they are likely to be message bills that won’t become reality this year.

Recent hearings underscore continued interest in 340B changes
While 340B legislation is highly unlikely this year, the program continues to receive the attention of key policymakers. On Feb. 26, Health and Human Services Secretary Azar was called to testify before the House Energy & Commerce Committee to discuss the Administration’s FY 2021 budget request and its oversight of the coronavirus outbreak. Responding to questions from Rep. Bucshon (R-IN), Azar said the administration thinks 340B savings “need to actually make their way to patients, not just subsidizing hospitals.” Hospitals, he said, often buy insulin “at an extremely low price, but they don’t have to necessarily pass those savings on to the patient. That’s partly why we proposed the Part B changes that would reduce what seniors have to pay in the Medicare program for their drugs.”

Asked by Rep. Bucshon if 340B needs more transparency, Azar answered: “Absolutely. We support transparency in the program, we support giving the regulatory authority as part of our budget and also requiring that hospitals that want to get the benefit of those savings . . . would have to dedicate one percent of their work towards delivering charity care which seems like a pretty low bar.” Later during his testimony, he added, “We need regulatory authority to implement . . . oversight so that we can actually do audits in an enforceable way and have that kind of transparency.”

Nonetheless, House Democrats believe the agency can already enforce the program through guidance and have expressed little appetite towards giving HRSA more power.

HRSA shuts door on major 340B policy changes
Speaking of HRSA, one of the 340B provider community’s greatest fears has been that the agency would move forward with new restrictions on the definition of patient as well as on the contract pharmacy program. In recent years, those concerns extended to hospital and child site eligibility for the 340B program. Through proposed sub-regulatory guidance, the Bush and Obama administrations proposed narrowing the patients and facilities that could access 340B discounts. The proposals were largely embraced by the pharmaceutical industry but received strong pushback from 340B hospitals and the grantee community. None of those proposals were ever finalized.

From the beginning, the Trump administration has been quite vocal in its desire to rein in 340B growth. Citing 340B as a factor in high drug prices, the administration has cut Medicare Part B reimbursement by close to 30 percent, announced plans to narrow the definition of patient and address hospital eligibility through either regulations or guidance. The President’s drug pricing blueprint also raised questions about the contract pharmacy program and hospital’s use of child sites.

Nonetheless, HRSA has not moved forward on these plans. It has increasingly cited a lack of regulatory authority to enforce its rules and has called on Congress to enact legislation to give the agency broad regulatory authority. Last week, the agency gave its most explicit statement yet that it is throwing in the towel when comes to issuing new guidance: “Without comprehensive regulatory authority, HRSA is unable to develop enforceable policy that ensures program requirements across all of the interdependent aspects of the program are met,” agency officials told Inside Health Policy. The HRSA officials, who are not named in the article, further added that they are “limited unless there is a clear violation of 340B statute.”

The agency’s position is also impacting areas where they already have explicit authority to regulate. Late this week HRSA told 340B Report that it will not proceed on long-awaited regulations to resolve disputes between covered entities and drug manufacturers (and vice versa). Although HRSA has been authorized by Congress since March 2010 to issue regulations on this matter, the agency said, “It would be challenging to put forth rulemaking on a dispute resolution process when many of the issues that would arise for dispute are only outlined in guidance.”

Despite repeated requests for regulatory authority, Congress has not granted the agency its wish. Moreover, many lawmakers, particularly Democrats, strongly oppose giving the agency any more power. Therefore, don’t expect anything dramatic coming out of HRSA any time soon—which is a major relief to 340B covered entities.

However, you should expect activity at the Centers for Medicare & Medicaid Services to continue on pace. In an effort to strengthen its position before the courts on its Medicare Part B reductions, the department says it will begin collecting drug acquisition cost data from 340B hospitals on March 23.


Other “View From the Nation’s Capital” Posts from Mr. Slafsky: 

Four Key Takeaways from the 340B Coalition Annual Winter Conference – February 2020
Time to Step Up Your Efforts at the State Level – January 2020
Pro-340B Group Gains Momentum with Grassroots Tactics – December 2019
More States Embrace 340B Program as a Win-Win for Taxpayers, Patients and the General Public – November 2019
AIR340B Quietly Steps Up Advocacy Efforts – October 2019

Ted Slafsky, a leading pharmaceutical policy thought leader, is Publisher & CEO of 340B Report, the first and only independent news service covering the federal 340B drug pricing program.  He is also Founder & Principal of Wexford Solutions, a Washington, D.C. based firm that provides government relations, communications, and business development services. You can follow Mr. Slafsky on Twitter at @tslafsky or reach him at [email protected] or (703) 517-1325.


About 340B Report:

340B Report is the only independent news service that provides breaking news and analysis about the federal 340B Drug Pricing Program. We follow all 340B program developments big and small—in federal government agencies, Congress, courts, the states, associations, the private sector, academia, and more.