The View From the Nation’s Capital

Guest Contributor: Ted Slafsky
April 1, 2019

Below is part one of the ‘Clearing Off the Desk’ series. Read part two here.

Clearing Off The Desk…

In my latest column, I am going to tackle a few issues that are timely and relevant to 340B stakeholders. Sometimes, I will take a deep dive into a particular subject, but there is so much going on right now with 340B, it’s too hard to limit it to one.

Another Reason To Be Concerned About ACA Lawsuit

Just when advocates, industry leaders, and even a bipartisan Congress had started to believe that the biggest battles over the ACA were a thing of the past, the Trump Administration has thrown a major wrench into the works. On March 25, the Department of Justice changed its position on the law’s constitutionality, telling the U.S. Court of Appeals for the 5th Circuit that it supports the state of Texas’ lawsuit to scrap the entire ACA. In December, a federal judge in Texas ruled that because the individual mandate was repealed, the entire law was no longer valid. At first, the DOJ said it believed the consumer protection elements should be scrapped but not the entire law. Now, if the DOJ and the plaintiffs win their case, tens of millions could lose their health coverage, and it would wreak havoc on a healthcare system that has been built around the nine-year-old law.

While most of the concern surrounds big-picture issues, such as Medicaid expansion, pre-existing conditions, and biosimilar pathways, don’t forget about the significant 340B provisions that are part of the ACA. Expanding the program to Critical Access Hospitals, Sole Community Hospitals, and Rural Referral Centers was the culmination of close to a decade-long bipartisan effort to ensure that rural hospitals and their patients could benefit from 340B discounts. Nearly 100 rural hospitals have closed in the past decade, and nearly one in five are currently at risk of closure. According to a 2017 survey conducted by 340B Health, 74% of rural hospitals reported using their 340B savings to help keep their doors open. More than half (55%) said cuts to their 340B savings would directly impact their ability to remain open.

Rural hospital access to drug discounts was not the only 340B accomplishment in the ACA. If it weren’t for the ACA, there would be no mechanism to ensure manufacturers comply with their obligation to provide the correct price to covered entities. Drug manufacturers are now subject to civil monetary penalties if they overcharge. In addition, it is the ACA that required HHS to move forward with the ceiling price database that went live today.

The good news? Many legal scholars believe that the 5th Circuit will overturn the suit. If the 5th Circuit affirms the decision, it goes to the Supreme Court, which has defended the law in the past, albeit with a more liberal makeup of justices. Also, considering the enormous pushback from senior Republican lawmakers and the President’s cabinet members, it is possible the Administration will reverse course again.

I wouldn’t count on that, though, and advise all readers to contact their lawmakers to express deep concern about any effort to undermine the ACA. It is particularly important for those readers who have Republican congressional representatives to weigh in.

This Is No April Fool’s Joke

HRSA’s long-awaited 340B ceiling price database is expected to go live on April 1. Despite its launch date, this is no April Fool’s joke. Nine years after the ACA was enacted, 340B providers will finally have a mechanism to determine whether they have been overpaying for pharmaceuticals. While the database is a work in progress – for instance, stakeholders will only have access to the unit ceiling price rather than the package size price – this is a milestone moment. As Dentons Law Counsel Greg Doggett points out, the Office of Pharmacy Affairs has already posted six notices from manufacturers announcing plans to offer repayments or make 340B pricing available for a drug in limited distribution. OPA published only eight notices for the entire 2018 year. Perhaps this is an indication that the CMP rule and ceiling price submission requirement are already having a positive effect.

In a comprehensive memorandum published by the attorneys at Powers Law, the firm provides important history and context to the overcharge problem. The team also provides a roadmap for challenging manufacturers and also makes a strong case that drug companies should not be able “to evade payment of overcharges” for past periods. The attorneys remind us of the landmark 2011 Supreme Court case “Astra USA vs. County of Santa Clara.” In the case, the federal government took the drug industry’s side that covered entities do not have the right to sue manufacturers for overcharges and that only HHS may enforce the drug company’s obligation to charge at or below the ceiling price. During the oral arguments, the Justices were assured by government attorneys that more rigorous enforcement and formal administrative procedures to combat overcharges were imminent. These assurances were persuasive and the courts sided with the government and the drug industry.

Almost a decade later, HHS had failed to implement the rules. “It was not until a group of covered entities sued in 2018 that HRSA implemented some, but not all, of the long-overdue regulations,” the firm points out. Shockingly, “HRSA has still not implemented the mandatory Administrative Dispute Resolution (ADR) process that Congress had directed be promulgated by September 20, 2010.” Now that the CMP rule and database are off the ground, let’s hope the agency moves forward to finalize the ADR – an important step to ensure proper oversight of overpayments.

Key Takeaways from The President’s Budget Proposal

Last month, President Trump submitted his annual budget request to Congress. Other analysts have already summarized the various 340B proposals (some of which have been proposed before and are unlikely to come to fruition), but two key aspects stuck out to me.

Significant increase in the estimated size of the program. HRSA now says 340B sales are approximately 4.3% of the overall U.S. drug market, up from 3.6% last year and 2.6% in the prior year. While these are major increases, I am skeptical of the figure and believe that even if accurate, the agency is using the wrong metric. While the agency doesn’t explain how it came up with the higher figure, there is no question that the drug industry has been lobbying the Administration to come up with higher estimates. Regardless, as researchers from the non-partisan Pew Charitable Trust point out, the total amount of sales through the 340B program is not nearly as important as the marginal impact of 340B discounts on drug sales (1.4%) and manufacturer revenues (1.9%). Pew also points out that if 340B were scaled back or eliminated, it wouldn’t impact overall drug spending but instead just transfer money to the drug industry.

Bottom Line? While the new HRSA data may result in a higher percentage impact, 340B remains a relatively small but absolutely vital program.

New 340B restrictions may be coming down the pike. The budget request references Government Accountability Office recommendations to clarify the definition of patients eligible to receive 340B drugs, hospital eligibility, prevention of duplicate discounts, and audit expectations. “HRSA prioritizes developing and providing clear policies to stakeholders through regulations and guidance,” says the Administration. This statement should strike fear in the hearts of the provider community. Given the Administration’s 340B track record, we need to be prepared for proposed restrictions that would significantly curtail the program and hamper the safety net mission. The silver lining? The changes are likely to be in proposed form and require notice and comment. Perhaps they will never be finalized, but don’t bet on it.


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

Clearing Off the Desk (Part 2)
A Welcome Addition to the 340B Debate
Be Vigilant on State 340B Activity

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.