Brace Yourselves: A Major 340B Hospital Court Ruling and CMS Proposed Rule Are Coming

Your 340B Report for Tuesday June 30, 2020

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Two major related 340B policy developments—one judicial, the other regulatory—involving CMS’s deep cuts in Medicare Part B reimbursement for 340B-acquired drugs are on their way.

Brace Yourselves: A Major 340B Hospital Court Ruling and CMS Proposed Rule Are Coming

Two major related 340B policy developments—one judicial, the other regulatory—are on their way.

Both involve the U.S. Centers for Medicare & Medicaid Services’ (CMS) deep cuts in reimbursement for 340B-acquired drugs under the Medicare hospital outpatient prospective payment system (OPPS). It’s been almost seven months since a federal appeals court heard oral arguments about a lower court’s ruling that the nearly 30 percent cuts are illegal. Appeals courts can take as long they need after arguments to decide cases. However, the median for this court is just under four months.

Meanwhile, CMS said in August 2019 that if it lost its appeal, it anticipated proposing its remedy for the cuts in its OPPS proposed rule for 2021. CMS normally publishes its OPPS proposed rule for the coming year between the last week of June and the third week of July. We’re in that window now. As of late this morning EDT, the proposed rule was still pending White House approval for publication.

If the court doesn’t hand down its opinion expeditiously, it’s unclear whether CMS will base future hospital drug reimbursement on data from its recent survey of hospitals’ 340B drug acquisition costs. Hospitals were outraged by the CMS data request which occurred just months after the pandemic began and some decided to ignore the CMS request altogether, sources tell 340B Report.


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Hospitals Have to Start Paying for COVID-19 Treatment Remdesivir

Drug manufacturer Gilead Sciences yesterday set the price of remdesivir, its investigational COVID-19 treatment, at $390 per vial for governments of advanced countries and $520 per vial for U.S. private insurance companies. The company says that works out to a price to the government of $2,340 per patient for a five-day course of treatment. It also works out to a $3,120 price to insurers. Gilead said insurers would pay more “because of the way the U.S. system is set up and the discounts that government healthcare programs expect.” Gilead did not specify which drug discounts.

Gilead also said it “has entered into an agreement with the U.S. Department of Health and Human Services (HHS) whereby HHS and states will continue to manage allocation to hospitals until the end of September. After this period, once supplies are less constrained, HHS will no longer manage allocation.”

The American Hospital Association (AHA) reported yesterday that the agreement will let U.S. hospitals buy up to 500,000 treatment courses through September. It said, “hospitals will pay no more than the wholesale acquisition price for the drug, or $3,200 per treatment course, which AmerisourceBergen likely will ship to them every two weeks.”

The federal government was expected to exhaust its initial free supply of 1.5 million doses of remdesivir yesterday, with the last shipments going to California, Texas, Arizona, Florida, and New York, Inside Health Policy reported.

Last week, the Institute for Clinical and Economic Review (ICER), a nonprofit organization that calculates evidence-based prices for new drugs, said cost-effectiveness analysis suggested a price of between $4,580 and $5,080 for remdesivir for a 10-day treatment course.

Remdesivir is now used exclusively on an inpatient basis and thus is not subject to 340B pricing. In its statement yesterday, Gilead said it is evaluating treatment “in outpatient settings.”

As previously reported, researchers Dr. Kao-Ping Chua and Rena Conti have pointed out that several drugs in COVID-19 clinical trials have orphan designations, making them exempt from 340B discounts for thousands of critical access hospitals, rural referral centers, sole community hospitals, and free-standing cancer hospitals. Chau and Conti predicted that remdesivir and other orphan designated drugs being tested for COVID-19 inpatients “may ultimately be used for outpatients.”

Studies of remdesivir show it can reduce average hospitals stays for patients with severe cases of COVID-19 from 15 days to 11 days, with no indication of reduced mortality. A recent Oxford University study of dexamethasone, a generic steroid that ICER says costs about $15 for a 10-day treatment course, found it may reduce deaths with patients with severe COVID-19 by up to one third.

STAT+ reports that U.S. hospitals are reporting shortages of some injectable versions of dexamethasone, which was approved for use in 1961. ABC News reports that the U.S. Homeland Security Department has warned law enforcement and government agencies that the nation is experiencing shortages of more than 200 generic drugs and medical supplies “due to strains on the supply chain caused by international shutdowns early on in the pandemic.” The group Patients for Affordable Drugs yesterday released a report finding that “drug companies raised the list prices of 245 drugs by an average of 23.8 percent since the first case of the novel coronavirus in the U.S. was reported in January. The research found that 75 percent of those price hikes were drugs directly linked to COVID-19 treatment or conditions that place people at higher risk of the virus.”

Dr. Peter Bach of Memorial Sloan Kettering’s Center for Health Policy and Outcomes told the Associated Press that Gilead’s price for remdesivir “puts to rest any notion that drug companies will ‘do the right thing’ because it is a pandemic.”

 “The price might have been fine if the company had demonstrated that the treatment saved lives,” Bach said. “It didn’t.”


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Trump Administration Says ACA Is Unconstitutional, But Not All of it Needs to Go

The Trump administration told the U.S. Supreme Court last week that although a 2017 law made the entire Affordable Care Act unconstitutional, the court should limit the relief it grants to the two Texans who sued to have the law struck down to the injuries they suffered.

The administration’s brief in the case, California v. Texas, is at odds with briefs filed by 17 Republican state attorneys general and the two individual plaintiffs, who argue that the entire ACA is unconstitutional, and its enforcement should be enjoined completely. Democratic state attorneys general and U.S. House Democrats defending the ACA have until late July to file their briefs.

In late 2018, a federal district judge ruled that the 2017 law that eliminated the ACA’s federal tax penalty for not buying health insurance made the entire ACA unconstitutional. A federal appeals court ruled in late 2019 that the individual mandate’s elimination made the ACA partially unconstitutional, and it sent the case back to the lower court to decide which parts should stay and which should go. Both sides appealed to the Supreme Court and it accepted the case in March. The Court could announce when it will hear arguments as soon as Oct. 5.

If the high court decides that the entire ACA is unconstitutional and none of it can be left standing, all of the law’s 340B provisions would be struck down with it. These include increases in Medicaid drug rebate percentages (and, by extension, in 340B drug discounts); expansion of 340B to thousands of rural and other types of hospitals; and 340B provider and manufacturer program integrity provisions, perhaps most notably the secure 340B ceiling price website.

In addition, the U.S. Health Resources and Services Administration’s (HRSA) limited power to regulate the 340B program would come to an end. A federal judge, in a different case, ruled that HRSA had explicit regulatory authority over 340B in just three areas, with the power coming from the ACA.

Bipartisan Accord Splintering on Drug Pricing Legislation in Congress

The Democratic-controlled U.S. House yesterday passed legislation, H.R. 1425, to enhance the Affordable Care Act (ACA) and give the federal government power to negotiate Medicare Part D drug reimbursement with drug manufacturers. The White House said the president would veto it if it reaches his desk.

Meanwhile in the Senate, there’s been a rupture between the GOP and Democratic co-sponsors of the chamber’s main drug pricing bill.

As previously reported in 340B Report, H.R. 1425’s drug-price negotiation section was adapted from H.R. 3, the drug-pricing bill the House passed in December. H.R. 3 has language that essentially would end providers’ revenues on 340B-purchased drugs billed to Medicaid managed care organizations. House Democrats did not copy that controversial language from H.R. 3 into H.R. 1425. The language, however, also appears in S. 2543, the lead drug pricing bill in the Senate.

In a Wall Street Journal op-ed yesterday, Senate Finance Chair Chuck Grassley (R-Iowa) said he will push to include S. 2543, which he co-sponsored with Finance Committee ranking Democrat Ron Wyden (Ore.), in the next coronavirus relief package. In the article, Grassley said, “Democrats have left the negotiating table…. I can only assume the Democratic Party would rather use the issue of drug prices as a political hammer in November’s election than work to address it now.”

This morning, the news organization The Hill reported that Wyden “is dropping off as a co-sponsor.”

“Democrats have not walked away from the table on drug pricing — Republicans never showed up in the first place,” Wyden said.

The New York Times on June 27 ran an article on prospects for drug-pricing legislation in Congress that focused mainly on the Senate bill. “The political will to address the issue appears to have faded away,” it says.

In Victory for 340B Clinics, Gov. Newsom and Legislature Reverse Course on  340B Cuts

California state lawmakers have approved a $202.1 billion state budget for 2020-21 that partially restores funds that Gov. Gavin Newsom (D) proposed in January to protect non-hospital 340B clinics from financial losses due to a major forthcoming change in state Medicaid drug reimbursement.

Under a 2019 gubernatorial executive order, effective January 2021 California will shift Medi-Cal managed care pharmacy benefits into Medi-Cal fee for service, which pays acquisition cost for 340B-acquired drugs versus higher negotiated rates under Medi-Cal managed care. The transfer is expected to cost hospital and non-hospital 340B providers hundreds of millions of dollars in lost revenues on 340B drugs billed to Medi-Cal.

Late last year, California health centers persuaded the Newsom administration to seek $105 million in the state’s fiscal 2020-21 budget to protect health centers and other non-hospital 340B covered entities from financial losses due to the pharmacy benefit transfer. In May, Newsom sent lawmakers a revised budget with about $20 billion in cuts due to the COVID-19 pandemic, including the money for 340B health centers and other non-hospital entities. The California Primary Care Association (CPCA) and others lobbied lawmakers to restore the supplemental funds. According to CPCA, the budget includes $26.3 million in supplemental aid for the first six months of calendar year 2021.

“We will hold the administration to making sure that, on an annual basis, the pool has at least the $105 million,” a CPCA spokesperson said. “The first test of this will be the FY 21-22 budget.”

New Drug Manufacturer Notices on HRSA Website

The U.S. Health Resources and Services Administration (HRSA) has posted two new drug manufacturer notices about refunds for 340B overcharges on its website and a handful of new manufacturer notices about limits on distribution of certain drugs.

  • Lupin Pharmaceuticals, which HRSA audited last year and found that the manufacturer had charged providers above the 340B ceiling price for unspecified products, says in a notice it “will work to issue refunds to those Covered Entities” that overpaid by $10 or more in the aggregate for about 50 drug products for the period from Q4 2018 through Q1 2019. Lupin said it will not issue refunds on its own accord if its data show that an entity overpaid by less than $10 in the aggregate.

  • Bausch Health has posted an update about refunds for potential overcharges stemming from its decision to move three products to direct distribution for 340B covered entities and 340B contract pharmacies effective April 1, 2020.

  • Drug manufacturer Incyte posted two notices, one about limiting distribution of its orphan cancer drug Pemazyre to 340B covered entities, and the other about limiting distribution to 340B entities of its orphan drug Jakafi for polycythemia vera and other conditions.

  • Drug manufacturer Deciphera posted a notice about its limited distribution plan for its cancer drug Qinlock.

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