Your 340B Report for Thursday April 2, 2020

New York State Poised to Cut 340B Providers’ Medicaid Drug Reimbursement, Could Other States Follow?

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New York State lawmakers continue to work on the fiscal year 2021 state budget in the state Capitol in Albany. Budget language released this morning makes clear that lawmakers want to transfer Medicaid managed care pharmacy benefits to Medicaid fee for service and base reimbursement for 340B-purchased drugs on actual acquisition cost plus the state’s professional dispensing fee. When the cuts would kick in is less clear. Source: Shutterstock

New York State Poised to Cut 340B Providers’ Medicaid Drug Reimbursement, Could Other States Follow?

New York State budget legislation language released this morning would, over the strong objections of 340B providers, transfer the Medicaid managed care pharmacy benefit to Medicaid fee for service “no sooner than April 1, 2021.”

The language is clear that lawmakers want state health officials to base Medicaid drug reimbursement for 340B-purchased drugs on actual acquisition cost plus the state’s professional dispensing fee—something providers say would deprive them of millions of dollars in 340B program savings that they cannot afford to lose, especially at a time when providers will likely be coping with the aftermath of the deadly viral pandemic. Less clear is when the cuts would kick in: as soon as April 1, 2021, or no sooner than April 1, 2023.

Lawmakers have not yet passed the budget for the fiscal year that began yesterday but continue working.

The arguments raised against the Medicaid drug benefit transfer in New York echoes those raised in California, where a 2019 gubernatorial executive order that would shift the Medicaid managed care pharmacy benefit to Medicaid fee for service remains on track to take effect Jan. 1, 2021. California is the most populous state and New York ranks fourth. Both are public policy bellwethers for the rest of the country. If the New York budget bill reaches Gov. Andrew Cuomo (D) as it is now written and the governor signs it, it could influence other states to follow suit.

Regarding drugs obtained through the 340B drug pricing program, the New York budget language about shifting the Medicaid drug benefit from managed care to fee for service says

when reimbursing covered entities, as defined under section 340B of the public health service act (42 U.S.C. §256b), for drugs that would otherwise be eligible for pricing under section 340B of the public health service act, the [state health] department shall examine all reasonably available methods for determining actual acquisition cost and the professional dispensing fee and, beginning in the fiscal year starting April 1, 2021, review and adjust reimbursement for such drugs such that no sooner than April 1, 2023, reimbursement shall be determined based on a method that the commissioner determines that utilizes the actual acquisition costs and professional dispensing fee.

The commissioner of health shall convene an advisory group composed of stakeholder representatives determined in the commissioner's sole discretion, for purposes of providing non-binding recommendations to the department by October 1, 2020 on available methods of achieving savings in the state fiscal years beginning on and after April 1, 2021, with respect to reimbursement for drugs eligible for pricing those under section 340B of the public health service act, and for which the department has existing authority to take such action.

The Community Health Center Association of New York State said, “We are currently reviewing the budget. CHCANYS and our members continue to demand that the state permanently allow Community Health Centers to keep their 340B savings.”

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New Utah Law Stops PBMs from Paying 340B Providers Less for Drugs—Medicaid-Reimbursed Drugs Excepted

Utah Gov. Gary Herbert (R) signed legislation March 28 to stop pharmacy benefit managers in the state from varying drug reimbursement based on whether a drug is a 340B drug or a pharmacy is a 340B entity. The prohibition, however, is not applicable to drugs reimbursed by Medicaid.

In addition to clamping down on discriminatory drug reimbursement by PBMs representing non-Medicaid payers, the new Utah law also says PBMs may not

  • assess a fee, charge-back, or other adjustment on a 340B entity on the basis of its 340B status

  • restrict an entity’s access to the PBM’s pharmacy network

  • require an entity to enter into a contract with a specific pharmacy to participate in the PBM's pharmacy network

  • create a restriction or an additional charge on a patient who chooses to receive drugs from a 340B entity

  • create “any additional requirements or restrictions on the 340B entity”

  • require a claim for a drug to include a modifier to indicate that the drug is a 340B drug unless the claim is for payment by Medicaid.

The new law “tells PBMs to honor the 340B program and pay as they should under that program and not play games on 340B reimbursement,” said Dave Gessel, Executive Vice President and lead lobbyist for the Utah Hospital Association. “It should help our 304B hospitals, many of which are rural, to get appropriate and fair reimbursement under the 340B program.”

The Association of Utah Health Centers “was heavily involved in this bill as well, even more than UHA,” Gessel said. AUCH and the bill’s sponsor, state Sen. Evan Vickers (R)—an independent retail pharmacist in rural southwest Utah—“really get the credit on this,” he said.

“We often hear from 340B contract pharmacies that they are receiving contracts [from PBMs] that ask them if they are doing 340B and in some cases discuss a lower reimbursement model,” said Rob Nahoopii, CEO and Lead Pharmacist Auditor for Utah-based Turnkey Pharmacy Solutions. He called Vickers “a stand-up guy who represents pharmacy well….He has a strong standing on the Senate Health and Human Services Committee, especially when pharmacy is involved.”


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Update: COVID-19 and 340B

ASHP Asks Azar to Protect Hospitals from Losing 340B Eligibility During COVID-19 Pandemic

The American Society of Health-System Pharmacists (ASHP) yesterday asked U.S. Health and Human Services secretary Alex Azar yesterday to waive the Medicare Disproportionate Share Hospital (DSH) program adjustment percentage requirement for hospital eligibility for 340B drug discounts “for the duration of the COVID-19 public health emergency.”

Like America’s Essential Hospitals and hospital group 340B Health before it, ASHP points out that changes in a hospital’s payer mix during the pandemic could cause the hospital to fall below the Medicare DSH threshold for 340B eligibility: greater than 11.75 percent for disproportionate share, children’s, and free-standing cancer hospitals and greater than or equal to 8 percent for rural referral centers and sole community hospitals.

“Losing 340B eligibility would materially damage the ability of these hospitals to meet patient needs,” ASHP said. “Hospitals’ COVID-19 response efforts, with their attendant admissions and payor mix changes, should not be reflected in a hospital’s DSH adjustment percentage. Reducing DSH percentage based on time-limited emergency measure unfairly penalizes hospitals and affects their ability to access 340B pricing. Given the uncertain nature of admission rates and payer mix over the course of the COVID-19 crisis, we believe that no DSH adjustment percentage should be made during the public health emergency. This will ensure that hospitals and their patients do not lose access to the 340B program just when they can least afford it.”

Sen. Ben Sasse (R-Neb.) last week tried but failed to get an amendment attached to the $2 trillion economic stimulus bill to avert disqualifying hospitals from 340B due to falling DSH percentages during the COVID-19 public health emergency.

Urban Institute Foresees Big Rise in Patients With Medicaid Coverage or no Insurance at all

New research by the Urban Institute suggests that, with the sharp reduction in economic activity due to COVID-19, health care providers should brace themselves for many more patients with Medicaid coverage or no health benefits at all.

Unemployment due to the COVID-19 pandemic will likely cause many people to lose their employer-sponsored health benefits and enroll in Medicaid, especially in states that expanded Medicaid eligibility under the Affordable Care Act, the report states. “Joblessness will likely increase uninsurance rates throughout the country in the coming months, and states that did not expand Medicaid under the ACA will likely see larger increases,” the group predicts.

The report also notes that if the U.S. Supreme Court completely overturns the ACA in a case it will hear and decide sometime after October 2020, “expanded eligibility for Medicaid, premium subsidies for nongroup insurance coverage, and marketplace plans could be eliminated,” meaning “unemployment would likely lead to much more uninsurance than currently projected.”

“Before the COVID-19 crisis, Urban Institute researchers estimated that reversing the ACA would result in 20 million people losing health insurance coverage,” the report states. “Given the rising numbers of unemployed working-age adults, that estimate is outdated and far smaller than what may occur given the current circumstances.”


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HRSA Clarifies How 340B Non-Health Center Grantees Can Share Inventories Among Locations

The Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA) late last year clarified that non-hospital, non-health center 340B covered entities cannot share 340B purchased drugs among locations without first submitting a joint purchasing and distribution plan to HRSA and getting its approval.

According to Powers Law Principal Barbara Straub Williams, OPA’s December 2019 340B program update came as a surprise to many covered entity grantees, which were not aware that HRSA followed this policy.

In the update, HRSA made clear that the 340B grantee/sub-grantee relationship is not the same as that between hospital or health center parent and child sites. 340B parent hospitals and health centers register their offsite locations where 340B drugs are used under the parent’s 340B ID. In contrast, HRSA said in the update, non-health center 340B entities “do not have associated site or parent/child relationships in OPAIS [the 340B program covered entity database], they each have distinct 340B IDs and generally may not share inventory or purchase on a single account.”

“This applies even though the locations are providing services under the same grant and are part of the same corporate entity,” Williams said. “For example, a Ryan White clinic, family planning clinic, or STD clinic might get a grant to provide services and open up a central location. It registers that location to participate in 340B and then decides that it needs a second location, as it is allowed to under its grant. HRSA requires the second location to be registered in OPAIS but under a different 340B ID. 340B inventory is kept separate at each location, and each would enter into separate contract pharmacy agreements.”

“This can get tricky,” Williams continued, “particularly if you have patients that might sometimes go to the main location and sometimes go to the secondary location. Contract pharmacies would not want to keep separate accounts for each location. The guidance is helpful in that it finally clarifies HRSA’s policy.”

The December 340B program update links to a 340B Prime Vendor worksheet grantees can use to help them prepare a combined purchasing and distribution proposal to submit to HRSA.

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Hospital Group Finds Major Flaws in Recent 340B Study

Two weeks ago, we wrote about a new paper in Health Services Research that linked hospital participation in 340B with increased charity care spending, a higher probability of offering discounted care, and a higher probability of raising the income eligibility limit for discounted care. The study’s authors, however, said the percentage increase in charity care was “minuscule” in terms of actual dollars spent and “appeared to be offset by reductions in other types of community benefit spending.” The authors, which included 340B hospital critic Rena Conti, added that their findings cast doubt on 340B hospitals’ predictions that the nearly 30 percent cut in their Medicare Part B drug reimbursement would lead to patient service cutbacks.

In a March 25 blog post, hospital group 340B Health says the study’s findings about increased charity care, increased discounted care, and increased income eligibility limits for discounted care met the “strict test for statistical significance.”

“Methodological flaws raise questions about other study findings,” the group said. For example, it said the finding that the increase in charity care was offset by decreases in other types of community benefit relied on a flawed measure of community benefit, and that the finding did not meet the authors’ own measure of statistical significance. Emphasizing negative findings that do not meet the authors’ own tests for statistical significance gives “the appearance of bias,” the group said.

It said the study’s examination of hospitals’ provision of low-profit services left out some services deemed essential by experts, failed to account for the effects of payer mix on profitability, and failed to account for hospital size. The group also said the paper “has factual errors which detract from its overall credibility.”

“Overall, this study finds that hospitals do in fact increase services to low-income populations when they enroll in the 340B program,” the group concluded. “The authors try but fail to negate these findings by applying a poor measure of overall community benefit, ignoring the role of hospital size, and emphasizing findings that don’t meet their own stringent standards for statistical significance. This kind of shoddy work only manages to further confuse policymakers and health care providers working to address the health care needs of vulnerable patients.”

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