Largest Hospital Group to CMS: 340B Drug Survey Is Burdensome, Ill-Timed, Illegal

Your 340B Report for Tuesday May 5, 2020

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The American Hospital Association wants Centers for Medicare & Medicaid Services Administrator Seema Verma to withdraw CMS’s controversial survey of hospitals’ acquisition costs for 340B drugs billed to Medicare Part B. The survey deadline is May 15. | (Source: Shutterstock)

Largest Hospital Group to CMS: 340B Drug Survey Is Burdensome, Ill-Timed, Illegal

The Centers for Medicare & Medicaid Services (CMS) should not ask hospitals “to divert critical staff time or other resources during a national public health crisis” to collect and report data about how much it costs them to buy drugs through the 340B program, the American Hospital Association (AHA) tells CMS Administrator Seems Verma in a May 2 letter.

“On behalf of our nearly 2,000 340B member hospitals, the AHA calls on CMS to withdraw this survey,” AHA Executive Vice President Thomas Nickels writes. “340B hospitals in the throes of this health crisis need every able staff resource to enable them to meet and manage new demands.”

The association told Verma that using the survey results to set Medicare Part B reimbursement rates for 340B drugs, as CMS has said it might do, violates the Medicare statute and the Administrative Procedures Act. AHA also said CMS “underestimated the burden on hospitals in terms of time and staff needed to complete the survey”

“340B hospitals are suffering financially, and staff are overwhelmed from managing the frontline of the COVID-19 pandemic,” Nickels wrote. “340B hospitals should not be asked to divert resources away from patient care at this time.”

Hospital groups America’s Essential Hospitals and 340B Health issued statements last week calling for the survey to be withdrawn.

On April 24, CMS announced that hospitals had through May 15—just 10 days from today—either to provide their acquisition costs for all for 340B-purchased drugs reimbursed by Medicare Part B during the end of 2018 and beginning of 2019, or let CMS use 340B ceiling prices obtained from the Health Resources and Services Administration (HRSA) “as reflective of your hospital acquisition costs.” CMS has indicated that if it loses its appeal in a lawsuit over its nearly 30 percent cut in hospitals’ Medicare Part B reimbursement for 340B-purchased drugs, it might base future reimbursement on the survey results.

Hospitals continue to weigh the pros and cons of choosing among taking CMS’s “detailed” survey, taking the “quick” survey, or not responding. Attorneys at the Polsinelli law firm, for example, wrote on April 30 that, “Given the legal and policy considerations at issue, we surmise that hospitals should consider 1) not responding or 2) using the Detailed Survey option, AND 3) submitting correspondence to their respective MACs [Medicare administrative contractors] stating their objections to the survey.”

CMS’s survey, the Polsinelli attorneys say, “continues to be riddled with potential for hospitals to inadvertently make inaccurate affirmative public disclosures of pricing data. The outcome is very likely to negatively influence future Medicare reimbursement rates…. The timing and content of the survey raise a number of key considerations that respondents should carefully analyze before completing CMS’s survey. Given the potential implications noted above, rapidly completing the survey may have unintended and long-term reimbursement consequences.”


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RWC-340B’s Shannon Stephenson (left) and Peggy Tighe testify before a Tennessee Senate committee March 10 on behalf of legislation to prohibit discriminatory reimbursement by pharmacy benefit managers against 340B entities.

Defense in Congress, Offense in the States

Ryan White Clinics Fighting Against Discriminatory 340B Reimbursement

“We are taking the fight to the states,” said Shannon Stephenson, president of Ryan White Clinics for 340B Access (RWC-340B), a national organization of HIV/AIDS medical providers receiving support under the Ryan White CARE Act and participating in the 340B drug pricing program. 

Following their active defense of 340B during the last several years, RWC-340B has been “playing offense” in state legislatures to prohibit “discriminatory reimbursement.” Discriminatory reimbursement is a practice where pharmacy benefit managers (PBMs) and other third party payers offer 340B participating providers lower reimbursement rates than those offered to non-340B entities.

Just before the COVID-19 crisis, state legislation to prohibit discriminatory reimbursement was advancing in Stephenson’s home state of Tennessee. Legislation was advanced in the Tennessee House and remains pending in the state Senate. 

Stephenson and RWC-340B legislative counsel, Peggy Tighe, J.D., Principal at Powers Law (a 340B Report sponsor), testified before the Tennessee State Senate Commerce and Labor Committee on March 10. The Senate committee delayed further action on the bill to gather additional information and remains delayed due to the COVID-19 emergency.

Stephenson said, “We are asking the states to help us protect 340B.” She added, “Now more than ever, if the states allow PBMs to take away the benefit of the 340B program, states won’t be able to pick up the costs we now bear to help our communities.” In addition to her role as RWC-340B President, Stephenson is the CEO of Cempa Community Care, a Ryan White clinic with locations in Chattanooga and Johnson City, Tenn.

States that have recently passed legislative language to prohibit discriminatory reimbursement include Utah and Oregon (in March 2020 and April 2019 respectively) as well as West Virginia, Minnesota, South Dakota, Montana, Massachusetts, and Rhode Island within the past two years. Other states actively engaged in efforts to advance similar legislation earlier this year include Ohio, Florida, and Georgia.

Most states advancing legislation to prohibit discriminatory reimbursement did so in the PBM reform. In 2019, 47 state legislatures had over 200 bills related to PBMs. In this abbreviated year for state legislatures, 38 states had 166 bills related to PBMs.

RWC-340B and their allies have argued that discriminatory reimbursement allows for-profit PBMs to threaten the safety net when it is most vulnerable; harms low income, medically vulnerable patients served by 340B providers; and undermines the purpose and efficacy of 340B. They also contend that HRSA has stated that discriminatory reimbursement is a serious threat to the 340B program. Further, they note, the practice allows PBMs and insurers to lower 340B provider rates compared to non-340B.

“The 340B program was never meant to allow PBMs or insurers to usurp the benefit of the 340B drug discount program,” said Tighe. “We are busily preparing to continue this important fight at the state level by aligning RWC-340B with community health centers, hospitals, and other HIV/AIDS allies.”

More information on RWC-340B can be found on the RWC-340B website. Also see RWC-340B’s Discriminatory Reimbursement Talking Points. More information about Powers Law can be found on the Powers Law website. Powers’ work on the COVID-19 crisis can be found on their COVID-19 Resources Page.


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GAO Calls Attention to its “High Priority” 340B Duplicate Discount Recommendations

The U.S. Government  Accountability Office (GAO) late last week gave U.S. Health and Human Services (HHS) Secretary Alex Azar a second nudge about the Health Resources and Services Administration’s (HRSA) inaction on GAO’s recommendations in 2018 about preventing 340B duplicate discounts under Medicaid managed care.

Every spring, GAO sends Cabinet secretaries a list of high-priority GAO recommendations for their departments that haven’t been implemented—the ones GAO thinks warrant the leaders’ attention. The annual report gives GAO a way to point out when its advice isn’t being followed.

In a June 2018 report on 340B contract pharmacy, GAO said the Health Resources and Services Administration (HRSA) should issue guidance to providers about preventing 340B duplicate discounts in Medicaid managed care, audit providers to ensure they were following the guidance, and “ensure that identified violations are rectified by the entities.” GAO also said HRSA should work with the Centers for Medicare & Medicaid Services (CMS) as it saw fit on developing guidance for state Medicaid providers. HRSA agreed that providers and states both needed guidance. But, it explained, CMS would have to play a critical role in the development of guidance for it to succeed. Calls and discussions between them were continuing, it said.

GAO noted in last year's priority open recommendations report to Azar that HRSA and hadn’t followed its recommendations. It reminded Azar again in this year’s report, released on April 30.

The reminders to Azar aren’t the only sign that GAO would like to see more executive branch action on 340B duplicate discounts.

In late January, GAO issued a related report about duplicate discounts and the intersection between the 340B and Medicaid drug rebate programs. This time, GAO said CMS should ensure that states have policies and procedures on using 340B drugs for Medicaid beneficiaries. The P&Ps should cover how to flag when 340B drugs are used for Medicaid beneficiaries and how those drugs should be excluded from Medicaid rebate requests, in both Medicaid fee for service and managed care. GAO said HRSA should incorporate compliance with the state P&Ps in its 340B covered entity audits and require covered entities to work with drug manufacturers about repaying identified duplicate discounts in Medicaid managed care.

Hospital group 340B Health slammed GAO’s recommendations for stricter federal policing of 340B duplicate discounts, calling them “misguided, unworkable, and contrary to federal law.”

Shortly before GAO published the report, CMS on Jan. 8 published a bulletin for state Medicaid programs outlining best practices for avoiding 340B duplicate discounts in Medicaid. It included the controversial observation that states could use the state plan amendment process to carve 340B drugs entirely out of both Medicaid fee for service and managed care. It made the same observation in its comments on the GAO report. 340B provider groups pointed out that carving all 340B drugs out of Medicaid would deprive hospitals, health centers, and others of sorely needed income they get on 340B-purchased drugs billed to Medicaid managed care contractors at above cost.

Regarding GAO’s recommendations touching on 340B covered entity audits and repayments to manufacturers, HRSA noted “it does not have regulatory authority related to the prevention of duplicate discounts for covered entities.” It also said it lacks authority to decide whether states’ P&Ps “are adequate or appropriate to prevent duplicate discounts” or to force providers to comply with those P&Ps. HRSA said even if it had such powers, in practice they would be hard to exercise.


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CARES Act Funds for COVID-19 Hotspots and Rural Providers Begin Flowing

The U.S. Health and Human Services Department (HHS) announced last week how it will distribute $12 billion in CARES Act funds—$2 billion more than originally announced—to hospitals in COVID-19 hotspots and another $10 billion to rural providers suffering financially due to the pandemic. Hospitals will start getting the money via direct deposit in the coming days, HHS said.

Just under 400 hospitals that were hardest hit by the virus in 33 states are getting $10 billion, paid in fixed amounts per each COVID-19 inpatient admission through April 10. Another $2 billion is going to the same hospitals based on their Medicare and Medicaid disproportionate share and uncompensated care payments. HHS said these hospitals accounted for 71 percent of all COVID-19 inpatient admissions nationwide.

Rural acute care general hospitals, critical access hospitals, rural health clinics, and community health centers in rural areas are sharing the other $10 billion. The hospitals and health clinics will each get a minimum base payment plus a percent of their annual expenses, HHS said. According to the National Association of Rural Health Clinics (NARCH), every rural health clinic will get no less than $100,000. Independent clinics will get the money directly. Money for provider-based clinics will be channeled through their parent hospitals. NARHC said providers should start seeing deposits this week.

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Tweets of Note

Adam J. Fein @DrugChannels
Today's surprising #340B data point: @Merck $MRK disclosed that one-third (!) of #Keytruda sales come from #340B covered entities
drugch.nl/2SGJRSq More evidence that this program is an unexpectedly large share of the pharma market. Discounts are likely >60%.