Pharmacy Market BUZZ

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December 340Buzz: Welcome to the interregnum

Welcome to the interregnum – an arcane Latin expression for “between reigns.” In U.S. politics, it is the interval between the end of one president’s time as leader and the coming to power of the next president. We are currently there and, depending on the participants and your political persuasion, it can sometimes seem interminably long. Officially, there remains only a joint session of Congress that will meet to finalize the vote count and certify results on January 6, and the inauguration of the new president and vice president at noon on January 20. Unofficially, there is an enormous amount of background activity the incoming administration is conducting in preparation for assuming presidential power, and many of these decisions will carry substantial implications for our healthcare system and its 340B programs.

As President-elect Joe Biden assumes office, turns the page, and begins governing, what can we expect to see in the first 100 days of a Biden presidency? Against the backdrop of a worsening COVID-19 pandemic, what are the prospects for 340B programs and the ACA? How will the leaders Biden’s chosen (and will choose) promote and defend his healthcare policies or alter his predecessor’s? With the recent arrival of two COVID-19 vaccines, and the promise of an economic stimulus package and an omnibus appropriations bill, it’s an exciting start to 2021, so buckle-up!

Breaking news — Most Favored Nation pricing model delayed

On December 23, a Maryland U.S. District Court judge granted a 14-day restraining order delaying the start of the Most Favored Nation (MFN) Model, due to take effect on January 1, 2021. The MFN Model seeks to align U.S. drug prices with those available in foreign countries and would lower reimbursement to Medicare Part B providers and suppliers for the top 50 Part B drugs and biologicals.

The judge in the case is also reviewing a request for a preliminary injunction, which would further delay the case and perhaps scuttle the demo – a clear win for providers and drug manufacturers. Three other lawsuits seeking preliminary injunctions have also been filed.

It’s all over but the shouting

Assuming that nothing goes sideways on either January 6 or January 20, Joe Biden will be our 46th U.S. president. So, what can kinds of actions on healthcare and 340B do we expect to see early on in a Biden administration?

  • Eliminating the earnings cap on Obamacare tax credits that subsidize the purchase of health insurance. People and families earning more than 400% of the federal poverty limit currently don’t qualify for financial assistance, yet still struggle to afford health insurance. Eliminating the cap on tax credit eligibility and lowering the cost of coverage from 9.86% of income to 8.5% will help middle-class families better afford their health insurance.
  • Lowering the Medicare eligibility age from 65 to 60. A five-year bracket of people, approximately 23 million in total, who don’t currently have Medicare Part D coverage through a 340B covered entity, would gain this coverage and potentially better health if the Medicare eligibility age was reduced.
  • Offering premium-free access to the public option for the 4.9 million individuals eligible for Medicaid but living in states who have not implemented the expanded Medicaid option, or where buying healthcare coverage is cost-prohibitive.

Unexpected nomination

President-elect Joe Biden named California Attorney General Xavier Bacerra to be his Secretary of Health and Human Services, pending Senate confirmation. A surprise nomination, Bacerra’s name was not one that was publicly circulated for the position. A 12-term congressman from California, Bacerra helped pass the ACA and led the defense of it before the Supreme Court as California Attorney General. He previously endorsed a government-run “Medicare for all” healthcare system, which has raised red flags with Republican senators. A Stanford-educated attorney with decades of experience as a legislator, Bacerra is seen as a savvy attorney and politician who can assist Biden in navigating the complexities of the legislative process and help him achieve key healthcare policy goals. While five Republican Senators quickly objected to his nomination, it is uncertain whether this level of opposition will grow to threaten his confirmation.

Alphabet soup – HHS, HRSA & CMS

Letters and lawsuits continued to fly in December as a result of ongoing conflicts between drug manufacturers, regulators, states and covered entities enrolled in 340B programs. The absence of meaningful action by HHS Secretary Alex Azar and his department in enforcing 340B pricing, limiting or stopping distribution, and the burdensome data demands manufacturers are making, is a consistent theme in the letters and lawsuits, as hospitals struggle to serve high volumes of patients living with low incomes in their rural and urban communities. A few of the higher-profile examples include:

  • Florida state Medicaid requests manufacturers to suspend 340B pricing cutoff – The Florida Agency for Health Care Administration (AHCA), the state Medicaid department’s parent, Deputy Secretary for Medicaid Beth Kidder sent letters to five manufacturers (Lilly, AstraZeneca, Novartis, Sanofi and Merck) sharing concerns over the impact to the safety net and Floridians, stating “any program integrity action needs to be carefully assessed to ensure it does not inappropriately restrict access to care.”
  • Twenty-nine State Attorneys General Demand Action from HHS on 340 Pricing Denials – Attorneys General for 28 states and the District of Columbia, including HHS nominee Xavier Bacerra, fired off a sharply worded letter to HHS Secretary Alex Azar and HRSA Administrator Thomas Engels on December 14, signed by each of the 29 Attorneys General. The letter reminded the pair that the partnership between the states and 340B covered entities is not only a matter of public policy but enshrined into federal law. It spoke to the duty that HHS has to regulate and enforce compliance with the 340B program, the strong bipartisan support the program enjoys, and the broad agreement over the importance of access to affordable prescription drugs for all Americans.
  • HHS Sued by Hospitals and Hospital Associations Over Price Enforcement – Three hospitals and six healthcare provider associations filed a federal lawsuit against HHS on December 11, seeking enforcement of the 340B pricing program. At issue are claims that drug makers are not providing drugs at discounts to hospitals in the program as mandated by 340B guidelines. Providers and drug makers continue to battle providers’ use of contract pharmacies, which are at the heart of the lawsuit.
  • HHS Releases Final 340B Administrative Dispute Resolution Rule – Since the publication of the November 340Buzz, we’ve been eagerly awaiting the final 340B Dispute Resolution Rule to see how it changed from the version we reviewed previously. Just to recap, the ADR establishes a panel of federal employees who would resolve disputes between covered entities and manufacturers when parties were unable to resolve them through good-faith efforts. It is meant to be a last resort. Rulings by the panel would be binding unless invalidated later in a lawsuit. An important caveat: the new rule only applies to disagreements involving covered entities and manufacturers and does not properly address the current disagreement over 340B drug pricing for drugs dispensed at contract pharmacies, or the burdensome data requests, which leaves the current dilemma unresolved.

Upon careful inspection, it appears there are three significant changes to the rule since we last saw it. First, the structure of the panel that hears claims will remain as six people on two, three-person panels. The HRSA Office of Pharmacy Affairs (OPA) individual will be assigned as the fourth person on the panel, and will only serve in an advisory capacity – they cannot vote. There will be no OPA person on each three-person panel, which many individuals commenting on the rule had requested. Second, there will be specific regulations to follow regarding deadlines, namely those specified in the Federal Administrative Regulations. These fairly arcane rules may require lawyers for interpretation. Finally, there will now be a threshold for claims to reach the ADR – and that number is $25,000. Smaller claims can be bundled together to reach this threshold. The efficacy of the ADR will rest with how frequently drug manufacturers elect to appeal negative outcomes through legal channels, which will drag out the adjudication process even further.

HRSA responds to 340B Health letter

HRSA has publicly responded in writing to at least two complaint letters about the 340B program. In their response to 340B Health President and CEO Maureen Testoni, HRSA shared these thoughts, which are instrumental in understanding HRSA’s mindset:

  • “The 340B statute does not specify the mode by which 340B drugs may be dispensed. HRSA believes contract pharmacies serve a vital function in covered entities’ ability to serve underserved and vulnerable populations, particularly as many covered entities do not operate in-house pharmacies.”
  • “HRSA is continuing to review the various proposals and whether these actions by manufacturers violate the 340B statute and whether sanctions may apply.”
  • “HRSA continues to strongly encourage all manufacturers to sell 340B-priced drugs to covered entities directly and through contract pharmacy arrangements.”
  • “HRSA believes that manufacturers that refuse to honor contract pharmacy orders could limit access to 340B-discounted drugs for many underserved and vulnerable populations who may be located in geographically isolated areas and rely on contract pharmacies as a critical point of access for obtaining their prescriptions.”

CMS releases 2021 OPPS and ASC Payment System Final Rule/Insights

In spite of legal challenges coming from its 2018 adjustment of the 340B drug payment rate, CMS has maintained the program’s rate reductions. An appeal to the adjustment was unsuccessful in court.

The final 2021 OPPS and ASC Payment System Final Rule will maintain the reimbursement rate of the average sales price (ASP) minus 22.5 percent on January 1, 2021, instead of the proposed additional decrease in reimbursement. The rule does not apply to drugs with pass-through payment status or to vaccines.

In January, we’ll look back over the previous year’s events and comment on the highs, the lows and the truly significant. We’ll also catch-up on the presidential transition, review any new appointments and look for some first moves by the Biden administration to launch his policy initiatives.

We are grateful this coming new year to serve the safety net and their communities through these difficult times. As always, whatever challenges the industry faces, Sentry will be here along the way as a voice for covered entities and to support you in your effort to optimize the 340B program and serve its vulnerable patients. Let’s all make 2021 a better year for everyone!

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