Sasse Reintroduces Bill in U.S. Senate to Keep Hospitals from Losing 340B Eligibility During Pandemic

Your 340B Report for Tuesday May 19, 2020

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U.S. Sen. Ben Sasse (R-Neb.) tried but failed to amend the CARES Act to protect hospitals from losing their 340B eligibility due to changes in patient mix during the COVID-19 epidemic. He recently introduced a bill to achieve the same goal.

Sasse Reintroduces Bill in U.S. Senate to Keep Hospitals from Losing 340B Eligibility During Pandemic

U.S. Sen. Ben Sasse (R-Neb.) has introduced legislation to protect hospitals from losing their 340B eligibility due to changes in patient mix during the COVID-19 epidemic.

Five types of hospitals qualify for 340B drug discounts based in part on their Medicare disproportionate share (DSH) adjustment percentage. Hospitals groups have warned that some could lose eligibility during the pandemic if their DSH percentage falls just a fraction. They have asked Congress and the Trump administration suspend the requirement during the emergency.

Sasse in late March offered an amendment to the CARES Act to pause checking 340B hospitals’ DSH percentages during the pandemic. It was tabled and the act became law without it. Sasse later pledged to sponsor a bill to suspend the DSH percentage checks and to work to include it in the next round of pandemic emergency relief. He introduced the bill, S. 3631, earlier this month. His bill also waives for 60 days the critical access hospital 25-inpatient-bed limit and offers other relief for rural health care providers.

Meanwhile, on the House side of Congress, more than 120 representatives signed a letter to House and Senate party leaders asking them to include in the next COVID-19 relief bill the same protection for 340B hospitals. The House passed a relief bill, the HEROES Act, 208-199 on May 15 but it excluded the eligibility protection for 340B hospitals. The bill is expected to stall in the Senate and President Trump has said he will veto it.

The House members’ letter seeking protection for 340B hospitals also asked that the hospitals be allowed to buy covered outpatient drugs through group purchasing organizations during the pandemic. Sasse’s bill does not address the 340B hospital GPO exclusion. Early in the pandemic, Rep. Brian Higgins (D-N.Y.) called on the Health Resources and Services Administration to suspend audits of covered entities. No bill to address this matter has been introduced.


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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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California Governor Drops Plan to Shield HRSA Grantees from 340B Revenue Loss

California Gov. Gavin Newsom (D) has dropped his request to state lawmakers to give the state’s health centers and other Health Resources and Services Administration grantees more than $100 million starting next year to cushion the blow of his executive order to shift pharmacy benefits from Medi-Cal managed care (MCO) to Medi-Cal fee for service (FFS) beginning January 2021. The state’s health center association says it will now lobby hard in Sacramento to postpone the pharmacy benefit transfer.

In his first act as governor in 2019, Newsom signed an order to lower prescription drug costs that included carving pharmacy benefits out of Medi-Cal MCO and moving them into Medi-Cal FFS, which reimburses drugs at actual acquisition cost. MCO drug reimbursement, negotiated between providers and payers, is higher. 340B providers have to carve-in Medi-Cal FFS under existing state law. State health centers estimate that consolidating Medi-Cal drug benefits in FFS would cost them about $150 million a year in lost 340B savings.  California hospitals are also concerned about a significant loss of 340B revenue but were not protected in Newsom’s request.

Health centers lobbied the legislature and governor last year either to preserve the status quo for them or close the funding gap. In his proposed fiscal 2020-21 state budget in January, Newsom asked for a $105 million supplemental payment pool for non-hospital 340B covered entities to mitigate his executive order’s financial impact. The pool would get $52.5 million during the first six months of 2021, with an understanding, health centers say, that another $52.5 million would follow.

Last week, Newsom released a revised 2020-21 budget proposal with about $20 billion in cuts due to COVID-19’s impact. His proposed cuts included the $52.5 million for health centers and other non-hospital 340B providers. Lawmakers and the governor must reach an agreement on the budget before July 1, the start of California’s next fiscal year.

Carmella Castellano-Garcia, president and CEO of the California Primary Care Association, said in an interview that losing the supplemental aid will destabilize and impose unnecessary financial hardship on California’s health centers, which she said are playing a critical role in responding to the COVID-19 pandemic in underserved communities.

“This makes no sense,” she said. “We are going to press the governor and legislature to delay implementation. We are exploring all options legislatively and otherwise.”

Castellano-Garcia said her association’s 180 member health care organizations initially saw a 50 percent decline in patient visits due to the pandemic, which translated into a 50 percent decline in revenues. Income from telehealth encounters has raised health center revenues somewhat, she said, but they are still off by 39 percent.

About 200 health center sites statewide have been closed to patients during the pandemic, Castellano-Garcia said. California centers have furloughed about 5,000 employees and laid off 800.

“Now is not the time for the governor to move forward with this major transition,” she said. Losing more than $100 million in 340B savings “would have been onerous a year ago,” she continued. “Now, it’s egregious.”

The 16 health center organizations belonging to Health Center Partners of Southern California (HCPSC) are losing nearly $30 million a month combined due to the pandemic, said Tim Fraser, the regional health center consortium’s vice president of government affairs. HCPSC estimates that that moving the Medi-Cal MCO pharmacy benefit to FFS would cost its members about $23 million a year combined in lost 340B savings.

“Our health centers can’t sustain that,” Fraser said. “We are already bleeding.” Losing the promised supplemental financial assistance “is only going to disrupt the fragile healthcare system we have during the pandemic.”

“This is not the time,” he said. “A delay must occur.”

Bipartisan Group in Congress Wants More Help for Providers Treating the Most Vulnerable

A bipartisan group of 91 members of Congress is urging U.S. Health and Human Services (HHS) Secretary Alex Azar to allocate a significant proportion of unspent COVID-19 provider relief dollars to hospitals and other providers that serve a disproportionate number of Medicaid and low-income patients.

“We are concerned the allocations to date do not provide sufficient relief for health care providers in our districts treating the most vulnerable populations at risk for becoming infected with the virus,” the lawmakers said in a May 14 letter to Azar. Congress and President Trump initially appropriated $100 billion for COVID-19 provider relief under the CARES Act. It appropriated another $75 billion under the Paycheck Protection Program and Health Care Enhancement Act. HHS has distributed about $72 billion to date.

The lawmakers pointed out to Azar that HHS’s distribution methodology, particularly for the main $50 billion disbursement thus far, “disadvantages providers who see a lower volume of traditional Medicare patients and have fewer commercial payers.”

“The net patient revenue metric does not fully capture the unique challenges faced by providers on the front lines of the health care safety net,” they wrote. “Consequently, it does not provide adequate support to the providers who serve vulnerable communities disproportionately at risk of exposure and infection.”

The lawmakers said they “have heard from a number of mission-driven hospitals who are losing tens of millions of dollars yet have received limited federal support. Many of these hospitals have thin operating margins and are struggling to make payroll while simultaneously outfitting their facilities and personnel and competing for scarce resources to respond to the COVID-19 outbreak.”

Reps. G.K. Butterfield (D-N.C.) and Pete Olson (R-Texas) were the driving forces behind the letter. In a statement, America’s Essential Hospitals President and CEO Bruce Siegel thanked them and their colleagues for their “strong bipartisan support for essential hospitals and the nation’s health care safety net.”

“Their letter calling on the administration to target more funding to hospitals that care for many Medicaid and low-income patients recognizes the urgent needs of essential hospitals,” Siegel said. “These front-line providers face severe financial hardships as they confront COVID-19 while also meeting their mission of caring for our most vulnerable patients and distressed communities.”

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