White House Fast-Tracking 340B Executive Order on Insulin, Epinephrine

Your 340B Report for Thursday September 3, 2020

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Note from the Publisher and CEO Ted Slafsky:  We are still collecting reaction from our breaking story last night but have plenty of other news and information in today’s issue. Due to the Labor Day holiday, we plan to publish next week on Wednesday and Friday.  We’re pleased to include in today’s issue sponsored content from 340B Report sponsor FQHC 340B Compliance Services. I encourage you to read the piece by Michael Gonzalez, President and Lead Consultant, for the company.

If you have news tips, please reach out to me at ted.slafsky@340breport.com, Bronwyn Mixter at bronwyn.mixter@340breport.com or Tom Mirga at tom.mirga@340Breport.com.  Bronwyn has been doing a great job filling in for Tom who returns next week.

The White House’s Office of Management and Budget (OMB) appears to be pushing ahead with its executive order requiring community health centers to pass along all 340B savings on insulin and injectable epinephrine to patients.

White House Fast-Tracking 340B Executive Order on Insulin, Epinephrine

The White House’s Office of Management and Budget (OMB) appears to be pushing ahead with its executive order requiring community health centers to pass along all 340B savings on insulin and injectable epinephrine to patients.  According to a September 1 post on OMB’s Reginfo.gov website, the agency is reviewing a Health and Human Services interim final rule to implement the order. The President Trump’s three other drug pricing executive orders remain stalled. The text of the interim final rule is not yet available.

The executive order, which was signed by President Trump with much fanfare on July 24, requires the HHS Secretary to condition health centers’ future federal grants on making insulin and injectable epinephrine available at the 340B discounted price to a yet to be defined group of low-income individuals that have a high cost sharing requirement, a high unmet deductible, or no health care insurance. 

The executive order says, “Due to the sharp increases in list prices for many insulins and some types of injectable epinephrine in recent years, many of these products may be subject to the ‘penny pricing’ policy when distributed to [federally qualified health centers] FQHCs, meaning FQHCs may purchase the drug at a price of one penny per unit of measure. These steep discounts, however, are not always passed through to low-income Americans at the point of sale. Those with low-incomes can be exposed to high insulin and injectable epinephrine prices, as they often do not benefit from discounts negotiated by insurers or the Federal or State governments.” 

The National Association of Community Health Centers (NACHC) has pushed back strongly describing the order as superfluous and that it could undermine the health center mission.

“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” said Tom Van Coverden, NACHC President and CEO.  “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.”

The Administration’s decision to issue the executive order as an interim final rule appears to be an effort to bypass a notice and comment which can slow down the process.  Barbara Williams, a principal at Powers Law, a 340B Report sponsor, told 340B Report, “an agency may publish a rule as an interim final rule rather than a proposed rule if it determines that it has good cause to do so.”  Williams represents various 340B covered entities and pharmacy service companies in her practice.

“The policy behind the executive order is puzzling because community health centers operate already under strict rules that require them to provide primary care services on a sliding fee scale regardless of a patient’s ability to pay,” Williams said. “If the interim final rule were to adopted, it would be effective immediately, allowing no time for community health centers to implement any needed changes to their pharmacy operations.”  

However, Williams said that “when a new Administration is elected, it typically instructs agencies to withdraw any regulations that are under review at the OMB. So, this rule would like be jettisoned if Trump is not re-elected.” 

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State Health Center Organizations Accuse Drug Industry of Trying to Destroy 340B Program

In a strongly worded statement September 2, the California Primary Care Association (CPCA) and the Florida Association of Community Health Centers are calling on Congress and the Health Resources Services Administration (HRSA) to stop efforts by drug manufacturers to limit access to 340B discounts.  

“Drug manufacturers have joined the ranks of pharmacy benefit managers (PBMs) to destroy one of the most effective federal programs that directs financial resources to disadvantaged communities,” said Andie Martinez Patterson, VP of Government Affairs at the California Primary Care Association.

Some manufacturers have sent letters to community health centers (CHCs) saying they will no longer be shipping 340B-priced drugs to contract pharmacies This action “will increase barriers to accessing affordable pharmaceuticals, especially in rural communities, since they will no longer be able to obtain 340B priced drugs at many of the locations they can today,” they said.

Additionally, some drug makers are demanding 340B covered entities provide data that can potentially be used by pharmacy benefit managers (PBMs) to “try and scoop out these savings from the safety net and keep them for themselves through discriminatory contracting practices,” the health center organizations said. “If this happens CHCs will lose hundreds of millions in resources that are used to pay for an array of benefits and services, including weekend clinic hours, after hours coverage, dietary counseling, and expanded staffing to support the array of health and social needs of their patients.” 

Unless Congress and HRSA “take action, the 340B program may be killed under the weight of manufacturers and PBMs,” Andie Martinez Patterson, vice president of government affairs at the CPCA, said. “CPCA calls on Congress an HRSA to stop these manufacturers from independently restructuring this program, taking away earned 340B savings for patients, and restrict actions that thwart Congress’ and the agencies’ oversight responsibility and statutory intent.”

National Provider Groups Express Outrage Over Lilly’s Action

National 340B provider organizations swiftly condemned Eli Lilly and Co’s recent decision to significantly restrict access to 340B pricing and want the Department of Health and Human Services to enforce the statue and prevent the action.

On September 1, Lilly announced it that it will no longer provide 340B discounts to 340B contract pharmacies with the exception of insulin. In a notice announcing this change, Lilly says it will provide 340B pricing on its insulin products only if the contract pharmacy does not mark up the drug, otherwise charge a dispensing fee, or bill an insurer or payer for the product.  Since Lilly’s announcement, the Health Resources and Services Administration (HRSA) has pushed back, telling 340B Report that it has not blessed Lilly’s limited distribution notice and is considering sanctioning the company and others that restrict 340B pricing.

Eli Lilly’s actions “will hurt hospitals, health centers, and clinics as well as the patients they serve who are living with low incomes and in rural areas,” Maureen Testoni, president and CEO of 340B Health, said in a statement. “Lilly’s action violates federal law.”

“Lilly and other manufacturers must not be permitted to make an end run around the 340B statute in a brazen attempt to avoid their responsibilities under the program,” Testoni said. “We call on Health and Human Services Secretary Azar to enforce the statute and prevent these actions.”

Lilly’s exception “to this new policy for insulin is no real exception at all, as it prevents covered entities from realizing any 340B savings by barring pharmacies from filing insurance claims on insulin or even charging a fee for the cost of administering the drugs,” Testoni said.

“As we said after Lilly first announced its refusal to offer 340B discounts for one of its drugs (an action that several other manufacturers closely followed), if the administration will not use its authority to enforce the law, we will pursue all legislative and legal avenues available to us to defend the safety net,” Testoni said.

Shannon Stephenson, president of Ryan White Clinics for 340B Access (RWC-340B) said “Lilly’s latest move – without notice, effective immediately – is further proof that these actions are subversive of Congress and HRSA’s [the Health Resources and Services Administration] role to regulate the program.” RWC-340B is a national organization of HIV/AIDS medical providers receiving support under the Ryan White CARE Act and participating in the 340B program.

“For Ryan White Clinics, there is no question that these manufacturer actions would seriously undercut our ability to fight COVID-19 and HIV/AIDS, directly threatening the care we provide by limiting access to how and where our patients receive their prescriptions,” Stephenson said.

Richard Church, partner at K&L Gates who represents 340B providers, said Lilly “pioneered this strategy with their action related to Cialis, so it is not surprising that in the face of no clear regulatory response that they would extend the policy to their full portfolio of retail drugs.”  

“As with all things 340B, this is part of a multiplayer chess match and now all other 340B stakeholders will be assessing their next move - including whether HRSA takes action to argue that the drug manufacturers are in violation of the 340B Program statute or CMS argues that the manufacturers are threatening the eligibility of their drugs for continuing Medicaid reimbursement,” Church said.

Drug Manufacturer Response

Eli Lilly told 340B Report on Sept. 1 that it took this action because the 340B program needs reform to better define who is entitled to discounts, determine hospital eligibility, and clarify what role contract pharmacies should appropriately play. 

The company also said it supports recent executive action on 340B that “sought to make insulin available to low-income patients at the same price at which it was purchased. A 340B patient filling their prescription for a penny-priced Lilly insulin at any participating contract pharmacy will be able to do so at the same price we well it for under the program – approximately 10 cents.”

John Shakow, a partner with King & Spalding who represents drug manufacturers, told the 340B Report, “as long as manufacturers offer the discounted 340B ceiling price directly to covered entities in a non-discriminatory way, they have met their obligations under the statue and” the Pharmaceutical Pricing Agreement (PPA).

“That Lilly has chosen not to facilitate the troubled contract pharmacy distribution mechanism (with certain reasonable exceptions) is within its legal rights,” Shakow said. “It's smart, too, that Lilly draws attention to the extreme 340B markups on penny-priced insulin by demanding that the discounts be made available to the consumer.  At the very least, commercial for-profit pharmacies ought not profit at the expense of patients in this government program."   

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America’s Essential Hospitals Push Back on Drug Manufacturer Actions

An additional hospital group, America’s Essential Hospitals (AEH), Aug. 28 sent a letter to Health and Human Services Secretary Alex Azar urging him to prevent drug manufacturers from undermining the 340B program.

“Recent actions by five of the largest drug manufacturers threaten to undermine the ability of 340B hospitals to access affordable, lifesaving drugs for their patients,” the letter said. “These actions are contrary to the 340B statute, add unnecessary burden on hospitals that already are stretched thin during an unprecedented pandemic, and impede vulnerable populations’ access to affordable drugs.”

Five drug manufacturers recently have taken actions to limit access to 340B drug discounts. AstraZeneca and Eli Lilly have told 340B covered entities that they will no longer charge the 340B discounted price for their drugs when they are dispensed by community-based pharmacies. Additionally, Merck, Novartis, and Sanofi are demanding claims data for all commercially insured, Medicaid and Medicare Part D patients filling prescriptions in a 340B contract pharmacy.

AEH said these actions “are a clear violation of drug manufacturers’ statutory obligation to provide 340B discounts to covered entities.” 

The drug manufacturers requesting claims data say they are trying to prevent duplicate discounts. However, AEH said the statutory prohibition on duplicate discounts only applies in the context of Medicaid and covered entities, in conjunction with state Medicaid programs, already take steps to avoid duplicate discounts.  “There is no reason related to 340B program integrity for manufacturers to seek to avoid duplicate discounts in the Medicare or commercial contexts, as there is no such thing? as a duplicate discount in those contexts,” the letter said.

“If the manufacturers follow through with their threats to not honor 340B pricing at contract pharmacies, patients who have come to rely on contract pharmacies in their neighborhoods would be left without their usual source of discounted drugs,” the letter said. “Instead, they would have to purchase these drugs at higher prices or at other pharmacies less accessible to them.”

AEH said it urges the HHS to intervene. “By putting a stop to these unjustified and burdensome actions, HHS will lift an unnecessary burden from hospitals and ensure continued access to affordable drugs, a key priority of this administration,” the letter said.

Rural Health Care Providers Urge HHS Sec. Azar to Take Action 

A coalition of over fifty small 340B providers in the Midwest Sept. 2 sent a letter to Health and Human Services Secretary Alex Azar to express “dire concerns” about recent actions by drug manufacturers to limit 340B discounts.

“It is not lost on this covered entity group that this dramatic aggression was launched during a period where already overwhelmed hospitals faces dwindling supplies and manpower”, the letter says.  Specifically, the group says it objects to efforts by certain drug manufacturers to mandate that covered entities submit all contract pharmacy claims data to the manufacturers and that certain companies are blocking access to 340B pricing altogether. Drug manufacturers say they are taking this action to prevent duplicate discounts and ensure 340B integrity. 

“The aggressive demand for covered entities to participate was not reinforced by any evidence of duplicate discounts but rather on what appears to be a broad assumption that duplicate discount payments are widespread,” the letter said. 

The groups said the 340B statute allows manufacturers to audit covered entities to ensure compliance with duplicate discount prohibitions. In the guidelines for these audits, it states that manufacturers must submit audit work plans to the HRSA for review before conducting an audit.

“By demanding covered entities provide claims detail on a bi-weekly basis, manufacturers are essentially requiring entities to participate in an unsubstantiated, non-HRSA regulated, entity funded perpetual manufacturer audit,” the covered entities said.

The group said that they cannot comply with participation in the manufacturers’ proposed program but they would welcome the opportunity to meet with the companies and Azar “to discuss how to strengthen 340B program integrity within the existing regulatory guidance of HRSA and the 340B program”.

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Half of Americans Fear a Major Health Event Could Lead to Bankruptcy, Survey Finds

Half of Americans fear a major health event could lead them to filing for bankruptcy, according to a survey released Sept. 1 by West Health-Gallup.  

The results of the survey, which were first reported by Axios yesterday, points out that the fear of bankruptcy is even higher for members of minority groups and younger people. Nearly two-thirds (64 percent) of people of color report being extremely concerned or concerned about bankruptcy, a 12 percent increase over last year. Fifty-five percent of adults 18 to 29 years of age share these concerns, up from 33 percent in 2019.

“Rising healthcare costs continue to pose a significant threat to millions of Americans and the pandemic has only made the situation worse,” Tim Lash, chief strategy officer of West Health, said. “With so many Americans fearing they are but one health event away from bankruptcy, it’s more urgent than ever for policy makers to finally address the healthcare cost crisis before it gets even more out of control.”

Additionally, 15 percent of adults surveyed report that at least one person in their household currently has medical debt that will not be repaid within the next 12 months. This kind of medical debt is highest among those in households with annual incomes less than $40,000 (28 percent). Another 26 percent of Americans surveyed report that they would need to borrow money to pay a $500 medical bill – a number that grows to 43 percent among people of color and 46 percent among those living in households with annual incomes less than $40,000 per year.  Studies have shown that 340B covered entities provide much higher levels of care to low-income and minority populations than other providers.

The survey also found that drug pricing continues to be a top issue for voters. The share of Americans citing lower prescription drug costs as the single most important issue or among the most important issues influencing their vote in 2020 has increased by 5 percentage points, to 35 percent, from February. The issue is particularly important among non-White adults (48 percent versus 29 percent for White adults), as well as among households with less than $40,000 in annual income (52 percent).

The survey is part of the West Health-Gallup U.S. Healthcare Study, an ongoing series of surveys on the impact of high healthcare costs on Americans. The results are based on interviews with 1,007 U.S. adults conducted from July 1-24th.