Health Centers Seek Meeting With Merck About its 340B Contract Pharmacy Data Request

Your 340B Report for Tuesday August 11, 2020

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The National Association of Community Health Centers has asked to meet with Merck to discuss alternatives to Merck’s request for health centers’ 340B contract pharmacy claims data, and also to solicit the drug manufacturer’s ideas about stopping PBMs from taking away health centers’ 340B savings.

Health Centers Seek Meeting With Merck About its 340B Contract Pharmacy Data Request

The National Association of Community Health Centers (NACHC) late last week told drug manufacturer Merck it has “serious concerns” about the company’s “request for data on 340B‐priced drugs dispensed to health center patients via contract pharmacies.” It asked to meet with Merck to discuss other ways to avoid duplicate 340B discounts and Medicaid rebates on the same drugs. NACHC also said it would appreciate Merck’s insights on stopping discriminatory contracting practices that pharmacy benefit managers and insurers use to seize health centers’ 340B savings for themselves.

NACHC’s Aug. 7 letter to Merck came one week after the American Hospital Association (AHA) asked U.S. Health and Human Services (HHS) Secretary Alex Azar to stop Merck’s action on 340B contract pharmacy and related actions by manufacturers Eli Lilly and Sanofi. Three weeks ago, NACHC signed a letter from the 340B Coalition to Azar asking him to stop Lilly and Merck. (Sanofi began demanding 340B covered entities’ contract pharmacy claims data during the period between the two letters to Azar).

In late June, Merck began sending letters to 340B covered entities asking them to begin uploading contract pharmacy claims data every two weeks into a vendor’s software platform. Merck said it “will use this data to match against rebate claims it receives to ensure it isn't paying duplicate Medicaid discounts and duplicate discounts on Medicare Part D and commercial utilization through our contracts with commercial payers.” The company said it might take “less collaborative, and substantially more burdensome” action against uncooperative entities. It asked entities to begin supplying the requested data by Aug. 14.

NACHC told Merck in its letter that, with respect to 340B drugs reimbursed by Medicaid, its request for health centers’ contract pharmacy claims data “would require much more than a ‘good faith effort.’”

“Merck’s one‐size‐ fits‐all approach is unfair to [federally qualified health centers] FQHCs and other providers who have strong histories of compliance and who utilize rigorous systems to ensure program integrity,” NACHC said. The “massive” amount of data requested “would constitute a significant administrative burden for FQHCs,” and the data would give Merck a competitive advantage over competitors, it said.

“It is not appropriate to ask FQHCs to engage in an onerous reporting process to hunt for potential duplicate Medicaid discounts when there is no evidence or history to suggest that they are responsible for such discounts—and when their efforts will provide a competitive advantage to the organization demanding the data,” NACHC wrote.

NACHC told Merck it interpreted the company’s interest in data about potential duplicate 340B discounts and Medicare Part D and commercial rebates “as indicating that you do not want to pay voluntary discounts to Pharmaceutical Benefits Managers (PBMs) for drugs purchased under 340B.”

NACHC noted, first, that “there are no 340B program integrity issues involved with” Part D and commercial rebates, “and FQHCs are under no obligation to support Merck’s efforts to avoid paying them.” Second, NACHC predicted:

if Merck uses data submitted by FQHCs to reduce rebates to PBMs, the PBMs will make up for the shortfall by reducing reimbursement to the FQHCs. As a result, Merck will still be providing 340B discounts, but FQHCs will no longer be benefitting from them. In other words, complying with Merck’s request for data on Medicare and commercial patients will undermine the benefit of the 340B program for FQHCs, threatening their on‐going ability to offer affordable pharmaceuticals and other services for their low‐income, medically‐vulnerable patients.

NACHC said it would “welcome an opportunity to discuss alternative approaches that could meet Merck’s needs without further eroding FQHCs’ ability to retain 340B savings, or placing undue burdens on their staff.”

“We have several ideas around duplicate Medicaid discounts that we would be happy to share, and we would appreciate your insights on how to address discriminatory contracting,” it said.


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Drug Companies Squeezing 340B Contract Pharmacy Are Big Donors to Congressional Campaigns

The three drug manufacturers cracking down on 340B contract pharmacy have donated a combined $1.58 million this year to candidates running for Congress and political action committees (PACs) affiliated with individual candidates, campaign contribution data collected and analyzed by news organization STAT shows.

According to STAT, Merck through its PAC has donated $765,500 to candidates or their affiliated committees, Eli Lilly $482,400, and Sanofi $335,500.

STAT reported yesterday that 23 major drug makers and the two major drug industry trade associations—Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO)—have contributed roughly $11 million to congressional candidates this year, through their PACs. Individual candidates and their affiliated committees have received $8.62 million. Broader political groups like National Republican Senatorial Committee, and other drug industry PACs, including PhRMA’s, have taken in another $2.59 million from the drug companies, STAT said. So far this year, 53.5 percent of drug industry PAC donations to lawmakers or groups affiliated with a political party have gone to Republicans, while 46.6 percent have gone to Democrats, according to STAT’s analysis.

Lilly, Merck, and Sanofi have drawn attention recently for decisions either to stop providing 340B pricing on certain covered outpatient drugs shipped to contract pharmacies (Lilly), or to ask (Merck) or require (Sanofi) providers to submit contract pharmacy claims data for the company’s products to enable the company to identify when it pays 340B discounts and Medicaid, Medicare Part D, and/or commercial rebates on the same products. Merck said it would take “less collaborative, and substantially more burdensome” action against covered entities that decline to supply the requested information. Sanofi said it will stop shipping its products to uncooperative providers’ contract pharmacy partners.

Providers could challenge the three companies’ actions in the courts. The fight also could spill over into Congress.

Pfizer is leading the way in congressional campaign spending this year among the 23 drug manufacturers STAT studied, with $974,986 in donations. Other big donors include Amgen ($889,500), Roche/Genentech ($543,000), and Johnson & Johnson ($542,000). BIO has donated $201,673 and PhRMA $194,500 so far in 2020.

Senate Majority Leader Mitch McConnell (R-Ky.) “raked in more from the industry than any other lawmaker,” STAT said. He has received $197,386 from the drug industry this cycle. Industry PACs “have also thrown more than $100,000 each to five other Republican senators up for reelection, many of whom are seen as industry allies: Sens. Thom Tillis of North Carolina, Bill Cassidy of Louisiana, Cory Gardner of Colorado, John Cornyn of Texas, Steve Daines of Montana,” STAT reported. The top two Democratic recipients overall were Sens. Chris Coons (Del.) and Robert Menendez (N.J.), who “represent states where pharmaceutical manufacturers play large roles in the local economy,” STAT noted.


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COVID-19 Relief Breakdown Puts 340B Hospital Legislation in the Slow Lane

The impasse between congressional Democrats and the White House over the next round of COVID-19 relief is a setback for supporters of bipartisan legislation to give 340B hospitals added protection and flexibility during the pandemic.

On Saturday, the day after talks collapsed, President Trump signed executive orders on unemployment benefits, evictions, student loans, and payroll taxes. While policy experts remain skeptical about whether and how the president’s orders will be executed, it appears to have placed a temporary pause on negotiations on a relief bill.

Attaching 340B hospital-related legislation to the next big COVID-19 bill is seen as the best chance for getting help for 340B enacted. U.S. Senate Majority Whip John Thune’s (R-S.D.) 340B hospital bill, S. 4160, would protect hospitals from losing their eligibility for 340B drug discounts during the pandemic due to changes in payer mix. It gained two more co-sponsors on Aug. 6, raising the total (including Thune) to 12, evenly divided between Republicans and Democrats. Sens. Cory Gardner (R-Colo.) and Kirsten Gillibrand (D-N.Y.) were the latest to sign on.

The week before, Reps. Doris Matsui (D-Calif.) and Chris Stewart (R-Utah) introduced H.R. 7838. Like S. 4160, it would protect hospitals from losing 340B eligibility during the pandemic if changes in their patient loads cause their Medicare disproportionate share adjustment percentage to fall below the level necessary for their hospital type to qualify for 340B (greater than 11.75 percent for disproportionate share and free-standing children’s and cancer hospitals, and greater than or equal to 8 percent for rural referral centers and sole community hospitals). Matsui and Stewart’s bill also would temporarily waive the  statutory prohibition on hospital purchases of outpatient drugs through group purchasing organizations (GPOs). In May, Matsui and Stewart persuaded 121 fellow representatives to sign a letter to House and Senate party leaders advocating the 340B program protections and flexibilities that their bill seeks.

For now, the way forward for S. 4160 and H.R. 7838 is uncertain.

The stalemate between congressional Democrats and the administration over COVID-19 relief also affects other priorities for safety-net health care providers:

  • CARES Act Provider Relief Fund. Hospital, physician, and nursing associations have asked Congress and the president for an additional $100 billion. Inside Health Policy reported Aug. 7 that providers in current hot spots are particularly concerned. About $155 billion of the $175 billion placed in the fund has already been allocated, with an unspecified amount reserved to reimburse providers for COVID-19 testing and treatment. Congressional Democrats want to put another $100 billion into the fund; Senate Republicans want to put in another $25 billion.

  • Aid for community health centers. House Democrats and Senate Republicans agree on giving health centers an additional $7.6 billion. Getting them the money, however, hinges on making a deal on the overall COVID-19 relief bill.

  • Paycheck Protection Program. The program, which gives businesses loans to keep workers on the payroll, expired Aug. 8. The U.S. Small Business Administration has stopped accepting applications. $128 billion out of the original $521 billion remains. What will happen to that money is unclear. Health care and social assistance providers (including hospitals and health centers) received $67.3 billion in PPP loans—more than any other business sector.

  • Medicare loans. As we previously reported, hospitals that received temporary advances on future Medicare payments lasting 120 days under the CARES Act are becoming obliged to pay the money back. The American Hospital Association is urging Congress and Trump “to grant full forgiveness of accelerated payments for all hospitals.”

“Buy American” Prescription Drug Executive Order Could Backfire, Stakeholders Say

President Trump’s executive order last week aimed at reducing U.S. reliance on foreign-sourced prescription drugs and pharmaceutical ingredients could help bring on the drug shortages the order is designed to avoid, the brand and generic drug industries and other health care stakeholders warn.

Trump on Aug. 6 ordered each executive department and agency to buy more “essential medicines, medical countermeasures, and critical inputs” domestically “to minimize potential shortages.” They would have to limit contracts to U.S.-made products and “[divide] procurement requirements among two or more manufacturers located in the United States, as appropriate.” Department and agency heads can waive the requirements during emergencies. Trump also gave the U.S. Food and Drug Administration a six-month deadline for a report identifying vulnerabilities in the prescription drug supply chain.

Pharmaceutical Research and Manufacturers of America said the executive order “could disrupt the global pharmaceutical supply chain, jeopardizing our ability to respond to the current crisis and potentially leading to major long-term supply chain disruptions, including shortages.” The Association for Accessible Medicines, which represents generic and biosimilar drug manufacturers, said, “Without addressing the undervaluation of generic and biosimilar medicines in the U.S. with sustainable market supply plans, we simply cannot secure the domestic market and supply chain with scale and sustainability.”

Trump’s executive order notes that, under the Defense Production Act, the federal government can prioritize fulfillment of its prescription-drug-related contracts and/or orders over other buyers and/or commandeer prescription drug materials, services, and facilities to promote national defense. An American Society of Health-System Pharmacists official told the publication Inside Drug Pricing yesterday that, while ASHP supports encouraging domestic production, letting the federal government push its contracts to the front of the line or seize other buyers’ purchases could disrupt hospitals’ access to critical drugs.

Hospital 340B Recertification Begins Next Week

Annual recertification of eligibility for 340B drug discounts for hospitals will run this year from Aug. 17 through Sept. 14. U.S. Health Resources and Services Administration (HRSA) grantees went through the recertification process this year from Jan. 27 through Feb. 24. Failure to recertify results in termination from the 340B program.

Manufacturer Posts Limited Distribution Notice to 340B Entities

The U.S. Health Resources and Services Administration (HRSA) yesterday posted a notice from drug manufacturer Viela Bio informing 340B covered entities that it is using a single distributor, Cardinal Health Specialty Distribution, to distribute its orphan-designated drug Uplizna. The product is used to treat NMOSD, an autoimmune disease that affects optic nerves and the spinal cord.