Drug companies halt some 340B discounts; will HRSA step in?

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Erin McCallister Senior Manager, Health Research Institute, PwC US October 08, 2020

Congress and hospitals are calling on HHS’ Health Resources and Services Administration (HRSA) to intervene as drug companies pull back 340B discounts for some therapies. However, the agency responsible for the program’s oversight has suggested it may have limited authority to stop the practice.

At a House hearing last week and in a letter to HHS Secretary Alex Azar last month, members of Congress questioned a recent practice by drug companies to limit the sale of 340B discounted drugs to the physical location of the safety-net hospital or one off-site (contract) pharmacy if the hospital lacks an on-site pharmacy. At least one state attorney general has also asked for the practice to cease.

The drug companies are seeking claims data from contract pharmacies to avoid a practice known as dual discounting, in which a Medicaid beneficiary is dispensed a 340B drug, but then the prescription is also included in the Medicaid rebate payment or other rebate programs.

In January, the Government Accountability Office found that there wasn’t sufficient oversight of the program to avoid duplicate discounts for Medicaid beneficiaries. Some of the pharmaceutical companies have said they would not ship the discounted drugs to contract pharmacies if the hospitals didn’t comply with the data request.

Members of Congress argue that the data request is beyond the scope of the 340B statute, is “burdensome for providers” and raises “issues related to patient privacy.” They are asking that Azar use his authority to “require these companies to comply with the law.”

2010 guidance permitted 340B hospitals to have an unlimited number of contract pharmacies, extending the sale of discounted treatments to these outlets. However, HRSA, which oversees the 340B program, has said that it is evaluating the companies’ actions but that its 2010 guidance is not legally enforceable.

In the meantime, the HHS general counsel sent a letter to one company suggesting that it didn’t have the authority to set deadlines on HRSA to render a decision and that the absence of a decision by the agency was a signal of approval.

HRI Impact analysis

If HRSA does not curtail the actions by pharmaceutical companies, 340B hospitals could suffer at a time when many hospitals face liquidity crises due to the pandemic.

Under the 340B program, drug companies sell pharmaceuticals to certain hospitals at discounted rates and the hospitals are reimbursed by payers at a higher rate than what they paid for them. The 340B entities are expected to use the monetary gains from the program to pay for care of uninsured or underinsured individuals.

Since the 2010 guidance, the size of the program by revenues has increased. A recent analysis found that 340B drug sales increased 23% in 2019 to $30 billion, with the spending for the program growing threefold since 2014.

The American Hospital Association criticized the move by pharmaceutical companies as “unconscionable,” urging companies to make 340B drugs “available and accessible to vulnerable communities and populations.” The group also noted that nearly half of 340B hospitals are in rural areas where contract pharmacies could expand access and provide financial relief.

The Pharmaceutical Research and Manufacturers of America (PhRMA) believes there should be more checks and balances in the system and raised concern that 340B entities aren’t using the revenues from the program for charity care. “Increasing accountability and oversight in 340B should always be a priority,” the organization said in a blog post this week.

Both President Donald Trump and the Democratic presidential nominee, former Vice President Joe Biden, have made drug spending a key priority of their campaigns, but their healthcare platforms do not address the 340B program. Nonetheless, past actions could signal how the election outcome may affect the program.

During the Trump administration, CMS has sought to align Medicare reimbursement of 340B drugs to the prices paid by hospitals—a change that hospitals have battled in court. Additionally, HRSA released a rule last month that would implement the Trump administration’s executive order passing along the low 340B prices for insulin and epinephrine pens to consumers at federally qualified health centers.

When Biden was vice president, the Affordable Care Act expanded 340B eligibility to free-standing cancer centers, critical access hospitals and others.

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Contact us

Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Ingrid Stiver

Senior Manager, Health Research Institute, PwC US

Erin McCallister

Senior Manager, Health Research Institute, PwC US

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