BREAKING: Health Centers Challenge Administration Suggestions They Put 340B Profits Over Patients

Your 340B Report for Saturday July 25, 2020

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U.S. HHS Secretary Alex Azar spoke yesterday during a White House event to announce drug pricing executive orders—including one on health centers’ 340B drug discounts on insulin and EpiPens. The event was held on a stage designed to look like a pharmacy.

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Health Centers Challenge Administration Suggestions They Put 340B Profits Over Patients

The nation’s community health centers last night struck back against a presidential executive order and Trump administration comments that suggest they are profiting from the 340B program at the expense of their low-income patients who lack insurance or have high deductibles and co-pays.

As we reported late last night, National Association of Community Health Centers (NACHC) President and CEO Tom Van Coverden said in a statement, “By law, regulation, and mission, every penny that health centers save through 340B discounts is used either to make medication affordable for low-income patients, or to support other activities that expand access to care.”

“Health centers are accountable and transparent in how they apply resources to patient care,” Van Coverden said. “Health centers are not charging low-income patients ‘massive, full prices’ for pharmaceuticals. Indeed, health center staff are putting their lives on the line every day to protect vulnerable populations from the spread of COVID-19.”

“Let’s be clear:  health centers support actions to make drug prices affordable,” he said. “As safety net providers committed to ensuring affordable access for all, health centers are already part of the solution—not the problem.”

Van Coverden was responding to an order President Trump signed late yesterday afternoon. It requires the U.S. Health and Human Services (HHS) secretary to condition federally qualified health centers’ future federal grants on making insulin products and anaphylactic reaction auto-injectors available to low-income, uninsured, or under-insured patients at the reduced price FQHCs pay for the products under the 340B program. It was one of four executive orders on drug pricing.

The 340B executive order states that, due to drug manufacturers’ steep price increases for many insulin and injectable epinephrine products, and due to 340B’s “penny pricing” policy when drug price increases outpace the rate of inflation, FQHCs can buy insulin and EpiPens for a penny per unit of measure, but the “steep discounts… are not always passed through to low-income Americans at the point of sale.” The administration offered no evidence to support that assertion.

During a White House signing ceremony, Trump said FQHCs “should not be receiving discounts for themselves while charging their poorest patients massive, full prices.”

HHS Secretary Alex Azar said Trump was “taking on the federal health centers” and “taking on the issue that they are getting radical discounts on insulin and EpiPens so that low-income Americans get the benefits of those discounts.”

In an HHS news release issued late in the day, U.S. Health Resources and Services Administration (HRSA) Administrator Thomas Engels—whose agency runs the federal health center program—said, “Today’s action by the President will ensure that the most vulnerable among us receive the greatest benefit from both the health center and 340B drug pricing programs. The executive order will further help these two programs work together to see to it that health center patients have access to both high quality primary care and life-saving, affordable medications.”

In remarks to the 340B Coalition virtual summer meeting on July 22, Engels thanked health centers and other health care providers enrolled in the 340B program for their service to underprivileged populations. “Many of you operate health centers and we value and appreciate the work you have been doing during this crisis,” he said. “Health centers across the nation are playing a vital role in supporting local community responses to the COVID-19 public health emergency.” Engels also recognized the major role the administration has assigned to health centers in its initiative to end the HIV epidemic in America.

Groups and Attorneys React

The American Hospital Association issued a special bulletin to its members last night describing all four executive orders on drug pricing that Trump signed yesterday but not stating AHA’s position on any.

Community Oncology Alliance, the trade group for-profit oncology centers that has been highly critical of the 340B program, said in a statement that Trump’s order “passing discounts on insulin directly to patients is an important first step in fixing what is a completely broken 340B Drug Pricing Program.”

Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO Stephen Ubl said in a statement, “in the middle of a global pandemic, when nearly 145,000 Americans have lost their lives and millions of others have suffered untold economic hardships, this administration has decided to pursue a radical and dangerous policy to set prices based on rates paid in countries that he has labeled as socialist, which will harm patients today and into the future.”

PhRMA has been very supportive of eliminating rebates provided to pharmaceutical benefit managers and has taken aim at the 340B program, but it has been careful to focus its criticism of 340B primarily on hospitals and contract pharmacies. 

During yesterday’s executive order signing ceremony, Trump acknowledged the pharmaceutical industry’s opposition to tying Medicare Part B prices to an international index. He said the administration will hold off on publishing the executive order addressing this issue until Aug. 24 in hopes of working something out with the industry.

“The heads of the major drug companies have requested a meeting to discuss how we can quickly and significantly lower drug prices and out-of-pocket expenses for Americans,” the president said. “And we’re going to see them on Tuesday. We’ll see if we can do something here. But this could’ve been done a long time ago….they have some ideas how to significantly reduce drug prices….So we’ll see what they have to say on Tuesday. Maybe they have an idea that’s good, but it’s got to be very substantial…. But the fourth order, we’re going to hold that until August 24th, hoping that the pharmaceutical companies will come up with something that will substantially reduce drug prices. And the clock starts right now.”

Barbara Straub Williams, Principal at Powers Law, a 340B Report sponsor, said the executive order regarding health centers “is going to be a tough sell politically. FQHCs are a very sympathetic group of providers. They already are required to operate under a required sliding fee scale for indigent patients.”

Helen Pfister, Partner at Manatt, Phelps & Phillips, said: “In yet another acknowledgement of HRSA’s limited enforcement authority over the 340B program, the Executive Order applies only to FQHCs, and relies on HHS’s authority to make Section 330 grants to FQHCs, instead of relying on HRSA’s authority under the 340B statute. It’s not clear whether the Executive Order would apply only to insulin and injectable epinephrine provided by FQHCs directly to their patients, or whether it would also apply to 340B purchased insulin and epinephrine dispensed to FQHCs through contract pharmacies. If the latter, that would expand the universe of patients who would be able to obtain insulin through FQHCs.”

Leah D’Aurora Richardson, Partner at K&L Gates, noted that the order regarding health centers “is qualified to the extent of HRSA’s authority, requires a change to each HRSA grantee’s grant agreement, and would only apply to ‘low income’ patients with no insurance or with high cost-sharing obligations, none of which are clearly defined. All of which means, the order has no immediate impact on grantees and a number of open questions will remain unanswered, likely until after the November election.”