The View From the Nation’s Capital

Guest Contributor: Ted Slafsky
August 26, 2020

Recent Actions Underscore the Need for a Renewed Focus on Protecting 340B

It is hard to believe that the 340B provider community was celebrating two important victories just a few months ago. In June, the Health Resources and Services Administration (HRSA) announced that it was eliminating a long-standing barrier that kept hospitals from using 340B pricing for patients at new provider-based offsite locations. The barrier, which had concerned hospitals and hospital groups for two decades, prevented hospitals from accessing 340B pricing for as long as 22 months. At the same time, the agency announced that it was embracing telehealth as a mode of health care delivery and that the flexibilities it provided to all 340B providers in March would remain in place throughout and beyond the COVID-19 emergency.

But in the past 60 days, the 340B community has been hit with the following:

Eli Lilly announced that it would no longer provide 340B discounts on three formulations of Cialis when the drug is delivered to a contract pharmacy; a potential precursor to additional restrictions on more expensive and highly-utilized drug products. AstraZeneca went even further, announcing it will “only process 340B pricing through a single contract pharmacy site for those covered entities that do not maintain their own on-site dispensing pharmacy.”

  • Merck, Sanofi and Novartis have made broad and highly burdensome data requests from 340B entities that utilize contract pharmacies. Sanofi and Novartis even warn covered entities that they will no longer provide discounted drugs starting October 1 if the information is not shared. More big-name drug manufacturers are expected to follow suit.
  • The Trump administration unveiled an unnecessary and unworkable executive order regarding insulin and injectable epinephrine, targeted at community health centers.
  • A closely-divided U.S. appeals court ruled that the dramatic Medicare Part B reimbursement cuts to 340B hospitals are permissible. Soon after, the Centers for Medicare and Medicaid Services (CMS) proposed even larger Part B cuts for 2021.

All of this as 340B providers continue their heroic work on the front lines fighting the pandemic.


Manufacturer actions: why now and what can we do?
What should we make of these manufacturer actions, and what can we do about them? The pharmaceutical industry has never liked the contract pharmacy program since it presents an opportunity for more eligible prescriptions to qualify for 340B discounts. When the contract pharmacy program was in its infancy over a decade ago, the drug industry strongly considered suing to block the program. However, whether due to concern over public backlash, questionable legal grounds or competing priorities, they never pulled the trigger.

Now the industry feels emboldened to take action on its own. This is likely due to the belief that HRSA will not discipline this behavior. Over the past few years, the agency has increasingly taken the position that its 340B program guidance is not legally enforceable unless there is a clear violation of the 340B statute. The agency has repeatedly called on Congress to give it broad authority to issue regulations on all aspects of the program. Lawmakers and many 340B provider advocacy groups believe HRSA has plenty of power already and should strongly enforce the existing rules.

If there has ever been an example of a clear violation of the statute, the industry’s recent efforts meet this definition. Drug manufacturers are not allowed to flout the statute by refusing to provide 340B discounts to safety net providers or demanding claims data that is not relevant – and that could violate HIPAA and other laws. As 340B provider groups have pointed out, manufacturers have no right to the data requested, and 340B covered entities have no obligation to share the data.

Covered entities would be wise to follow the lead of their industry advocacy organizations, including 340B Health, NACHC and the American Hospital Association. The national groups are requesting the government intervene to halt these actions. They have also written to the companies to ask that they withdraw their initiatives and instead to work with the industry in good faith to address any legitimate concerns when it comes to Medicaid duplicate discounts. Congressional advocacy and potential litigation, particularly in the case of Lilly, are also going to be important.


President’s executive order
As for the executive order, NACHC is working hard to educate the White House, lawmakers and the public about the administration’s misguided action. They are also providing valuable information and guidance to their members on how to address the executive order.

While the goal of ensuring that vulnerable patients can access pharmaceuticals at an affordable price is clearly laudable, the President’s initiative could undermine these efforts and violate the law. Federally-qualified health centers (FQHCs) and other 340B grantees are already required to offer discounts on a sliding-fee scale. As Shannon Stephenson, CEO of Cempa Community Care and President of Ryan White Clinics for 340B Access points out, the patient groups in the executive order are loosely defined as those who have high cost-sharing, a high unmet deductible or no health insurance. “The order would contravene current law that legally prohibits FQHCs from providing discounts to entities that can pay the full fee schedule price.” In addition, 340B prices fluctuate quarterly, and as a result, there would be times when health centers would have to charge their diabetic patients hundreds of dollars for insulin.


A new approach on Medicare Part B cuts?
340B hospitals suffered a major setback on July 31 when, in a 2-1 decision, the U.S. Court of Appeals for the District of Columbia Circuit overturned a federal district judge’s rulings that CMS exceeded its statutory authority by reducing Medicare Part B drug reimbursement for 340B hospitals in 2018 and 2019. The nearly 30 percent reduction is in place for this year and CMS has proposed even deeper cuts in 2021. Hospital groups that sued the government will likely request a rehearing by a full panel of judges. This is a wise move, and the hope is that they will have better luck with the full panel.

November’s presidential election result could be important in determining whether the cuts continue. If President Trump wins reelection, CMS will very likely remain on its present course. If Democratic presidential nominee Biden wins, his new administration might halt implementation of CMS’s FY 2021 proposed rule. It would then be up to the 340B provider advocacy organizations to convince the new administration to reverse the cuts. These efforts will take time and may or may not be successful.

Meanwhile, hospitals continue to lose $25 million a week from these unfair reductions. It is time for hospital organizations to resurrect their efforts to convince Congress to reverse the cuts. In the previous session of Congress, a bipartisan group of 200 members of the House co-sponsored a bill to overturn the cuts. Over half the Senate also called on their leadership to prevent the cuts. While it is unlikely that Congress will act before November 3, I am confident that 340B hospitals can convince lawmakers to reverse the cuts, or at the very least, significantly reduce the cuts.


The bottom line
The 340B program faces its biggest threats since the mid-1990s, when drug manufacturers were almost successful in making the program voluntary. 340B providers will have to be more engaged than ever through the legal, political and public relations arena to take on these unprecedented challenges.



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

Why the November Elections Really Matter for Drug Pricing and the 340B Program – July 2020
Time to Tackle Racial Disparities in Healthcare – June 2020
The Nation’s View of the Drug Industry and its Implications for 340B Stakeholders – May 2020 
COVID-19’s Impact on the 340B Community: Every Cloud Has a Silver Lining – April 2020
Coronavirus Likely to Sideline 2020 Policy Changes for Prescription Pricing and 340B – March 2020

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.