Drug Store Chains Want HHS to Block Pharma’s Moves Against 340B Contract Pharmacy

Your 340B Report for Wednesday August 26, 2020

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Note from the Publisher and CEO:  Happy Wednesday.  Bronwyn Mixter is filling in for Tom Mirga this week and next week.  If you have story ideas or tips, feel free to reach her at bronwyn.mixter@340breport.com or 703-403-5926.

Photo: Steven Anderson, National Association of Chain Drug Stores President and CEO.  NACDS wants the U.S. Health Resources and Services Administration (HRSA) to take action to enforce the 340B statute with respect to drug manufacturers that do not provide 340B pricing on some drugs.

Drug Store Chains Want HHS to Block Pharma’s Moves Against 340B Contract Pharmacy

The National Association of Chain Drug Stores (NACDS) wants the U.S. Health Resources and Services Administration (HRSA) “to take swift action to enforce the clear meaning of the 340B statute” with respect to drug manufacturers that “no longer provide 340B pricing on some drugs to covered entities utilizing contract pharmacies, or…require covered entities to submit contract pharmacy claims data for certain drugs.”

In the alternative, NACDS says HRSA should re-issue its 10-year-old guidance clarifying that entities may contract with multiple pharmacies to dispense 340B-purchased drugs as a legally enforceable 340B program regulation.

Drug manufacturers’ recent actions regarding 340B contract pharmacy “may signal a broader trend by manufacturers to undermine the 340B program,” NACDS said in an Aug. 19 letter to U.S. Health and Human Services (HHS) Secretary Alex Azar and HRSA Administrator Thomas Engels. It said the actions also “will undermine contract pharmacy participation in the 340B program, which could reduce essential access to medications by beneficiaries.”

NADCS’s entry into the fight over 340B contract pharmacy’s future gives provider groups a significant ally against drug manufacturers in the fight.

Chain pharmacies represent almost two-thirds of all contract pharmacies participating in the 340B program, NADCS pointed out. They “play a critical role in bringing pharmacy-led health and wellness services” in medically underserved neighborhoods and “provide a wide range of administrative support services to many 340B-covered entities, allowing them to operate with transparency, efficiency, and accountability,” NACDS wrote.

NACDS said drug manufacturer Eli Lilly’s announcement that it will no longer provide 340B pricing on three formulations of its drug Cialis when it is shipped to contract pharmacies “is tantamount to those manufacturers refusing to offer 340B drugs to 340B covered entities. This action is a clear violation of the 340B statute.” It said Lilly “may be using the drug Cialis as a test case to gauge HRSA’s enforcement of the 340B statute and may signal plans to expand limited distribution to several drugs in the near future. We urge HRSA to ensure this manufacturer’s announcement does not become a larger trend by this and other manufacturers to cut out contract pharmacies in the 340B program.”

NACDS said other manufacturers’ requirements that covered entities report all contract pharmacy claims data to address compliance concerns “is overly broad and burdensome on covered entities and contracted pharmacies. These requests fail to pass the “good-faith” standard outlined in long-standing HRSA guidelines. Thus, HRSA should have an interest in addressing these requests as they appear to set up barriers for participation in the 340B program outside of federal laws and rules.”

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Sanofi Defends 340B Changes in Letter to HHS Secretary

Sanofi has sent a letter to Health and Human Services Secretary Alex M. Azar to address concerns raised by the American Hospital Association about its new 340B program integrity initiative. Under the initiative, 340B covered entities will upload de-identified claims data to a secure system so that Sanofi can identify and prevent duplicate discounts. Sanofi said in the August 13th letter that the initiative will allow the company to continue to meet its commitment to the 340B program while improving program integrity. 

Adam Gluck, head of external affairs at Sanofi, said in the letter that the company’s new initiative complies with the 340B statute and the Pharmaceutical Pricing Agreement (PPA), which require drug companies to offer covered entities covered outpatient drugs for purchase at or below the applicable ceiling price if such drugs are made available to any other purchaser at any price. Gluck said Sanofi will continue to offer all of its drugs to all 340B entities and if a covered entity refuses to provide the requested claims data, Sanofi “will restrict the entity’s use of contract pharmacy arrangements, but these entities will remain eligible to purchase at 340B prices for shipment to their own facilities.” 

Furthermore, Gluck said the 340B statute “does not address contract pharmacy arrangements, nor does it grant HRSA authority to issue binding rules in this area” and “these considerations give manufacturers discretion to adopt their own reasonable approaches.”

John Shakow, a Partner at King & Spalding who represents drug manufacturers, expressed support for Sanofi’s position, saying that the company makes the point that it will not deny 340B covered entities from buying their products and is just requesting data to combat duplicate discounts in the contract pharmacies. 

Shakow said the statutory obligation is to offer the 340B ceiling price to the covered entities and the covered entities remain free to purchase as much product as they want at the 340B price. “It’s just that Sanofi will not facilitate a specific distribution mechanism that puts them in a position of being double dipped,” Shakow said. 

There is nothing in the 340B statue or in the PPA about contract pharmacies and those are the only two sources of law that bind drug manufacturers, Shakow said. 

However, Barbara Williams, a principal at Powers Law, a 340B Report sponsor, said covered entities “would disagree with Sanofi's interpretation of the requirement in the 340B statute that manufacturers must offer covered outpatient drugs at the 340B ceiling price.” 

Williams said covered entities “interpret this provision to mean that manufacturers are required to sell covered outpatient drugs at the 340B ceiling price AND that the covered entity may designate the location to which those drugs are delivered, including contract pharmacies.”

Agreeing with Williams, Stephen Kuperberg, counsel with Powers Law, also said Sanofi’s letter “provides no authority – because there is none – for its assertion that private parties have ‘discretion’ to adopt ‘their own reasonable approaches’ if a statute does not address a specific arrangement.”

Kuperberg said when a statue “is ambiguous, it is for the courts and the agency charged with its implementation to interpret the statute, not individual citizens or corporations.”

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340B Report Publisher and CEO: Hospital Groups Should Consider a New Game Plan on Medicare Part B Cuts

Hospital organizations need to “resurrect their efforts to convince Congress to reverse the Medicare Part B cuts,” according to a new column by 340B Report Publisher and CEO Ted Slafsky. Slafsky points out that 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.  Slafsky served as the long time President and CEO of hospital advocacy group 340B Health until 2018.

Slafsky says the 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,” Slafsky says.   Nonetheless, relying on the courts alone is a risky and time- consuming strategy, says Slafsky.

The presidential election in November also could be important in determining whether the cuts continue, Slafsky says. If President Trump wins reelection, CMS will likely remain on its present course. However, if presidential Democratic 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,” Slafsky says. “These efforts will take time and may or may not be successful.”

Meanwhile, hospitals are losing $25 million a week from these reductions, Slafsky says.

“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,” Slafsky says.

Slafsky’s column also addresses the many other challenges that the 340B provider community have faced over the last 60 days and provides his insights on how to tackle them.

AHA Tells Drug Companies to Stop Undermining the 340B Program

The American Hospital Association (AHA) Aug. 21 sent letters to five drug manufacturers asking them to immediately stop taking actions to limit the distribution of certain 340B drugs to hospitals and health systems. 

The letters to MerckEli LillySanofiNovartis, and AstraZeneca say these actions range from limiting the distribution of certain 340B drugs to demanding on short notice, “superfluous” reporting on 340B drugs distributed through hospitals’ contract pharmacies. 

“It is an outrage that these actions are being taken at a time when hospitals are in the midst of their response to the COVID-19 public health emergency” and “instead of supporting the hospitals caring for communities ravaged by the public health crisis, these companies are attempting to compel hospitals to divert critical resources away from the pandemic,” the AHA said.

In the letters, the AHA said it is concerned that the companies are planning to collect data “intended to limit the distribution of certain of certain 340B drugs to hospitals and health systems.” The AHA said these actions violate statutory, administrative, and ethical guidelines and principles, and “will negatively impact the ability” of 340B hospitals “to care for vulnerable communities.”

The AHA also said the companies’ actions “conflict” with the statute and the Health Resources and Services Administration’s 2010 guidance on contract pharmacy arrangements.

Additionally, in the letter to Eli Lilly, the AHA said the company stopped distributing erectile dysfunction drug Cialis through the 340B contract pharmacies and “has left the door open to expand this unjustified action to Eli Lilly products.”

Meanwhile, the American Society of Health-System Pharmacists (ASHP) said in an Aug. 24 news release that it is asking the Department of Health and Human Services to stop drug manufacturers from “willful” noncompliance with 340B program requirements. If the HHS does not act quickly, ASHP said it will work with its partner organizations to “aggressively” advocate for Congress to reinforce the existing law.

“Allowing manufacturers to cherry-pick programmatic elements while, at the same time, enforcing all programmatic requirements for 340B providers is not only unfair, it violates federal law,” Tom Kraus, vice president of government relations at ASHP, said. “The 340B program benefits patients – in the middle of a public health emergency, federal policy makers should be doing everything possible to safeguard patient access and services.”

Drug Companies’ Reaction

Novartis said in a statement provided to the 340B Report that while it “continues to support the principles behind the 340B program, we believe – as many other manufacturers do – that the program has grown beyond its original intent.”

As a result, Novartis is transitioning to a new system that will allow it to identify and mitigate the issue of duplicate discounts and ineligible rebates from 340B contract pharmacies. 

“We believe this change is necessary to make the 340B program more sustainable, while ensuring transparency and ensuring minimal impact to the program stakeholders,” Novartis said. “This change will not affect patient access to prescribed medicines.”

Merck said that while it “strongly” supports the 340B Program, “the program has grown well beyond its intended purpose and requires greater transparency, regulatory oversight, and accountability to ensure that it continues to effectively serve patients as intended and remains sustainable over the long-term.” 

“Manufacturers continue to pay Medicaid rebates to states on prescriptions filled with 340B Program-purchased drugs despite this being statutorily prohibited,” Merck said. “To help address this problem, Merck seeks to work collaboratively with 340B-covered entities to access additional pharmacy claims data.”

Sanofi also said in a statement that it supports the 340B Program’s “core objective of increasing access to outpatient drugs among uninsured and vulnerable patients and is committed to maintaining and strengthening its mission” and part of that commitment is ensuring 340B program integrity remains a shared objective of drug manufacturers, covered, entities, and the Health Resources and Services Administration (HRSA). The company said it has conducted audits of 340B claims and recouped millions of dollars based on erroneous duplicate billings. 

Eli Lilly and AstraZeneca did not return requests for comment.

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New Initiative Launched to Enlist 340B Community in Improving Diversity in Clinical Trials

Greater patient diversity is needed in clinical trials, and 340B providers can play a key role in addressing these disparities, according to a new initiative.  The effort, launched by a company that works closely with safety net providers, pharmaceutical companies and government researchers, is focused on both short-term challenges like treatments and vaccines for COVID-19 and longer-term health care issues.

While the American population is increasingly diverse, clinical trials struggle to reflect that diversity, according to a white paper from par8o, a referral management provider. According to the white paper, 31 cancer drugs have been approved since 2015 and fewer than 5 percent of the patients participating in 24 of those trials were Black Americans. However, Black Americans make up 13.4 percent of the U.S. population. Additionally, Native Americans and Alaska Natives account for 2 percent of the U.S. population but were not represented at all in two-thirds of drug trials conducted in the U.S., par8o said. 

Minorities are disproportionally affected by enrollment barriers due to a higher likelihood of receiving care at under-resourced healthcare facilities, lack of insurance, and comorbidities that exclude them from trials, the white paper said. Provider lack of awareness about clinical trials also is a significant barrier.

While the U.S. population is 60 percent White, 18 percent Hispanic/Latino, and 13 percent Black, health center patient populations are 41 percent White, 36 percent Hispanic/Latino, and 22 percent Black. “Given the disparities identified in clinical trial access by minority groups, it stands to reason that if research initiatives could be optimized to include America’s health centers, it would increase overall trial participation and the ratio of minority grops in clinical trials,” the white paper said. 

To improve diversity in clinical trials, par8o has launched a new product, the par8o Research Network, to connect health center patients with nearby clinical trials. Hannah Drake, director of marketing at par8o, told the 340B Report the research network will match patients to clinical trials for both rare diseases and more common conditions, as well as COVID-19 vaccine trials. There is no cost for health centers to participate in the network. 

Drake said the network will give patients access to clinical trials that they would not normally have access to and could improve quality of life for patients.

California DHCS Demands 340B Providers Conduct Self-Audits of Overpayments

In July, the California Department of Health Care Services (DHCS) sent letters to 340B covered entities demanding they conduct self-audits of 340B program overpayments from Dec. 1, 2016 through Dec. 31, 2019.

According to California law, covered entities are required to dispense 340B outpatient drugs to Medi-Cal patients, when available, the letters said. If a covered entity is unable to purchase a certain 340B drug, the entity may dispense a drug purchased at regular drug wholesale rates, but it is required to maintain documentation of the inability to obtain the 340B drug. Covered entities are required to submit claims to Medi-Cal for 340B drugs at rates not exceeding actual acquisition cost (AAC), plus a dispensing fee. The statute also requires covered entities to identify a 340B drug on the claim.

The DHCS requested each covered entity provide the following information:

  • identify and disclose all claims submitted to Medi-Cal for 340B drugs that were not flagged as 340B drugs on the claim;

  • identify and disclose all claims submitted to Medi-Cal for 340B drugs at rates exceeding AAC;

  • identify and disclose all drugs that were unable to be purchased at 340B discounted rates and that instead were purchased at regular drug wholesale rates, and eventually dispensed to Medi-Cal patients;

  • identify and disclose all practitioners by name and national provider identifier (NPI) number who prescribed the 340B drugs;

  • identify and disclose all 340B drug wholesalers, including account number, from whom 340B drugs were purchased;

  • if the entity is a contract pharmacy, provide copies of all contracts with covered entities; and

  • calculate and disclose the total amount of any overpayment.

The DHCS asked covered entities to return their completed self-audit findings and a summary form to 340B.Audit@dhcs.ca.gov within 60 days. Additionally, by the same date, covered entities must return all overpayments that were identified in the self-audit, the DHCS said.

In a California Hospital Association (CHA) article on the self-audit demand, Ryan Witz, vice president of health care finance initiatives at CHA, said it is unclear whether the DHCS has the authority to demand that 340B providers perform self-audits or attest to the accuracy of their self-audit. 

Witz said the CHA recommends that each 340B hospital “carefully review the request and consult with legal counsel to determine next steps.”

SpendMend Acquires TurnKey Pharmacy Solutions and Elevate340B

SpendMend Aug. 25 announced it has acquired TurnKey Pharmacy Solutions and Elevate340B and said it plans to immediately relaunch the joint end-to-end offering as SpendMend Pharmacy, which will specialize in compliance, optimization, and growth services for 340B programs at hospitals, clinics, and healthcare facilities. The acquisition is one of several recent transactions where 340B service providers have been acquired by larger companies with more resources.

“The TurnKey and Elevate340B solutions integrate perfectly into our existing platform of solutions and will help us to realize a swift delivery of SpendMend Pharmacy to the marketplace,” Dan Geelhoed, CEO of SPendMend, said. “Our mission is to help hospitals improve patient care through the delivery of our innovative cost-savings solutions. We believe our 340B solutions will go a long way to help support the bottom line of hospitals so they can focus on delivering superb patient care.”

TurnKey provides 340B audit and compliance services and established Elevate340B in 2016 as a consulting solution to help hospitals optimize and grow their 340B programs beyond the initial audit engagement. 

Existing TurnKey and Elevate340B clients will not experience any disruption to services as a result of the acquisition, according to company officials. The SpendMend Pharmacy solution for 340B Compliance and Optimization is immediately available to existing SpendMend clients and the general healthcare marketplace.

“We could not be more pleased with the outcome of the acquisition,” Robert Nahoopii, cofounder and CEO of TurnKey, said. “Joining the SpendMend team is not only a perfect cultural fit for our companies, but access to SpendMend’s go-to-market resources will immediately accelerate our ability to provide vital services to hospitals and clinics across the U.S.”