The View From the Nation’s Capital

Guest Contributor: Ted Slafsky
September 11, 2019

Recent 340B Developments of Interest

Congress just returned to Washington this week, but there have been several 340B developments both in D.C. and in the states during the long summer recess. In this month’s issue, I cover a few of those topics:

  • HRSA Solicits Bids for Prime Vendor Program
  • Important Developments in the States
  • Family Planning Clinics Begin to Disenroll in 340B

HRSA Solicits Bids for Prime Vendor Program

On August 16th, the Health Resources and Services Administration (HRSA) posted a solicitation notice seeking bids to operate the 340B prime vendor program (PVP). The 340B statute required the Department of Health and Human Services “to establish a prime vendor program under which covered entities may enter into contracts with prime vendors for the distribution of covered outpatient drugs.”

Several years ago, HRSA strongly considered having the Veterans Administration run the PVP due to its experience in negotiating with drug manufacturers and wholesalers. After a relatively short stint with Bergen Brunswig (now called AmerisourceBergen), HRSA selected Apexus, a subsidiary of the group purchasing organization Vizient, to run the program in 2003. Over the years, Apexus has expanded its services from negotiating drug prices and helping with distribution to other areas, including serving as the government’s exclusive technical assistance provider, offering a certification program, hosting 340B University, contracting with pharmaceutical companies to distribute refunds, and more.

The following are a few points of interest:

The new agreement will likely last for five more years. HRSA will evaluate bids based on the following scoring mechanism:

  1. Covered Outpatient Drug Distribution Services – 20 points
  2. 340B Drug Price Negotiation Services – 20 points
  3. Plan for Providing Education and Support – 20 points
  4. Efforts to Retain and Expand Participation – 20 points
  5. Organizational Experience and Capabilities – 15 points
  6. Value of Additional Products and Services – 5 points

Bids are due on October 1.  More details can be found in the notice.

Important Developments in the States

Oregon Passes 340B Friendly Legislation
As I have reported previously, including in my last column, state legislatures are now paying close attention to the 340B program. Some of the bills introduced during this year would be problematic, placing additional burdens and restrictions on 340B covered entities. Fortunately, none of those bills have been enacted.

Other bills have been welcome and can serve as models for other states. On July 16, Oregon Gov. Kate Brown (D) signed Oregon House Bill 2185 into law. The bill, which passed unanimously, prevents pharmacy benefit managers from paying 340B pharmacies less than other pharmacy networks based on their 340B status. This protective measure is important because robbing covered entities of their drug savings undermines the very purpose of the 340B program. The legislation couldn’t come at a better time as more payors try to reduce reimbursement to 340B pharmacies.

Oregon becomes the fifth state to pass similar anti-discrimination legislation this year. These bills have passed in both Democratic- and Republican-controlled legislatures and have been signed into law by governors from both parties. I encourage 340B entities to work with their state legislators and governors to adopt similar legislation. Your trade associations are an excellent resource to help with this initiative.

New Analysis Warns of Dangers from CA Governor’s Executive Order
Navigant, one of the country’s largest healthcare consulting firms, has published a short but helpful analysis warning California 340B entities of the estimated revenue loss from Gov. Newsom’s (D) executive order to transition the Medi-Cal pharmacy services benefit to a fee-for-service (FFS) benefit. Medi-Cal is California’s Medicaid program, and the governor plans to consolidate all of the state’s pharmacy purchasing power with the goal of reducing drug prices.

Navigant says that the transition from managed care to FFS (expected in Jan 2021) would significantly diminish the margin between what covered entities pay for pharmacy dispensed drugs and what they can charge for those drugs.

Here are some excerpts from the paper:

Based on Navigant’s experience with projecting revenue variations related to 340B policy changes and other pharmacy business strategies, the following is the anticipated impact if no action is taken by your organization:

  1. Decrease of ~50% in reimbursement or ~80% in margin on 340B eligible Medi-Cal managed care prescription drugs only (margin impact is specific to drug cost)
  2. The decrease outlined above will result in an overall 5-7% margin decrease per pharmacy, depending on your Medi-Cal managed care population and drug mix. Note: includes all payers (e.g., Commercial, Medi-Cal, Medicare), not only Medi-Cal Managed Care. Final impact for your health system should be calculated for the Medi-Cal Managed Care population only.

The paper provides a number of suggestions for minimizing losses. I am still cautiously optimistic that advocacy groups can work out some type of win-win with the governor and the legislature. One option would be to get an exemption for 340B providers or a less drastic reimbursement cut. The groups have already been successful in getting legislation passed that requires continuous feedback from the covered entity community and consumer advocates, as well as budget justifications for the proposal. I recommend that California 340B providers step up their efforts to convince the governor and the state legislature to come up with a solution.

Family Planning Clinics Begin to Disenroll in 340B

A surge of Title X family planning clinic covered entities (118) terminated their participation in 340B effective July 1, according to my long-time colleague Tom Mirga. The terminations are due to clinics deciding to stop accepting Title X grants due to the administration’s new abortion counseling and referral rule. Now that Planned Parenthood has decided to withdraw from Title X, even more family planning clinics will lose their 340B eligibility and withdraw. Planned Parenthood serves 41% of the four million poor and uninsured patients that qualify for Title X and is the only provider in certain states and communities.

For some clinics, there might be a workaround, namely re-enrolling as STD clinics or being designated as a federally qualified health center. Either way, I anticipate a significant drop in the number of 340B covered entity participants on the Office of Pharmacy Affairs database, considering that there are approximately 3,000 Title X sites enrolled in 340B. On a related note, there was an interesting article in Politico on the dilemma that these clinics face when deciding what to do with the pharmaceuticals and devices they have already purchased at a discount.


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

Key Takeaways from the 340B Coalition Summer Conference
Clearing Off the Desk – June 2019
Be Vigilant on State 340B Activity
A Welcome Addition to the 340B Debate
Clearing Off the Desk – April 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.