finding 340b balance threat - ncpa
TRANSCRIPT
10/10/2017
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Finding the 340B BalanceThreat or Opportunity
Greg Doggett, CAELegal and Policy Counsel, 340B Health
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Disclosure
Gregg Doggett is with 340B Health, Washington, DC. He declares no conflicts of interest or financial interest in any product or service mentioned in this program, including grants, employment, gifts, stock holdings, and honoraria.
Learning Objectives
• Discuss the legislative and regulatory developments that address modifications to the 340B program.
• Describe the flow of patients and product through the 340B system.
• Outline the practice and profit impact of 340B contracts and patients in community pharmacy.
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Objectives
•Discuss recent developments in Washington, DC related to the 340B program
•Share the results of a recent 340B Health report on the importance of 340B contract pharmacy to 340B hospitals and their patients
Recent Developments ‐ Congress
•House Energy and Commerce (E&C) Committee Oversight and Investigations Subcommittee hearing on 340B
•E&C letters to covered entities•Potential 340B legislation?
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Recent Developments ‐ Administration
•Draft Executive Order to address high drug prices (as reported in the press)
•CMS proposal to significantly reduce Medicare Part B reimbursement to 340B hospitals for separately payable 340B drugs
• Status of HRSA 340B ceiling price and manufacturer civil monetary penalties final rule
340B Health Report on Contract Pharmacy
• To better understand how contract pharmacies help hospitals serve their low‐income and rural patients, 340B Health administered a survey to its membership in June 2017
•340B Health released a report on the survey results in July 2017: http://www.340Bhealth.org/files/Contract_Pharmacy_Report_July_17.pdf
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340B Health Report on Contract Pharmacy (cont’d)• Hospitals unanimously reported that a loss of or reduction in their contract pharmacy benefit would impair their ability to serve low‐income and rural patients
• DSH hospitals reported using their contract pharmacy benefit to support uncompensated care and provide services to low‐income patients
• 89% reported maintaining or providing more uncompensated care
• 74% reported providing services despite low Medicaid reimbursement
• 71% reported providing free or discounted drugs to low‐income and rural patients
340B Health Report on Contract Pharmacy (cont’d)
• Rural hospitals reported using their benefit to support access to care in remote areas
• 87% reported maintaining operations and keeping their doors open
• 65% reported not having their own outpatient pharmacy, which would cause them to more heavily rely on contract pharmacies to access a 340B benefit
• 60% reported relying on contract pharmacies for over half of their overall 340B benefit
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340B Health Report on Contract Pharmacy (cont’d)• Survey respondents reported using their contract pharmacy benefit to:
• Fund hospital charity care and uncompensated care
• Provide medications to homeless patients through the hospital’s pharmacy
• Provide oncology care to the community, regardless of ability to pay
• Maintain a sliding scale copayment program for un‐ and under‐insured patients and maintain a free meds program for certain uninsured patients
• Maintain a mental health clinic that provides services to low‐income inner‐city patients
• Maintain a retail pharmacy that provides free/discounted medicines to patients being discharged from the acute care hospital
340B Health Report on Contract Pharmacy (cont’d)
•Conclusion: Cuts to 340B contract pharmacies would jeopardize care for low‐income and rural patients, resulting in higher drug costs for low‐income patients and fewer overall services
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Greg Doggett, CAELegal and Policy Counsel, 340B Health
[email protected]‐552‐5859
Susan Pilch
VP, Policy and Regulatory Affairs, NCPA
10/10/2017
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Disclosure
Susan Pilch, J.D., VP, Policy and Regulatory Affairs, NCPA declares no conflicts of interest or financial interest in any product or service mentioned in this program, including grants, employment, gifts, stock holdings, and honoraria.
Who are the Industry Groups Calling for Reform of the 340B Program?• Pharmaceutical manufacturers are main parties calling for changes to 340B
• PhRMA and BIO campaigns/Coalition advocating for “reform and corrective legislation”
• The expansion of the 340B program increases the amount of discounts that manufacturers are required to provide =lost revenue
• 340 drug sales were $5.9 billion in 2010; $16 billion in 2016; and projected $23 billion in 2021
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Main Criticisms of 340B Program
• Unchecked growth with inadequate oversight
• Abuses of 340B discounts (manufacturers paying double rebates) so they offer fewer rebates in commercial plans and Part D
• No longer benefitting vulnerable and uninsured patients and simply now revenue driver
• Encouraging shift in site of care from lower cost physician offices to hospital outpatient settings
What Specific Reforms are Being Proposed/Suggested??• Clarify definition of 340B patient
• Tie hospital eligibility to safety‐net status
• Limit number of contract pharmacies (need smaller more controlled pharmacy networks)
• Require disclosure/transparency into profits of large chain owned/operated 340B contract pharmacies
• Require covered entities to share financial savings from 340B program with uninsured patients or document how they are using these funds.
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The Other Side…..
• Drug manufacturers are touting the reform of the 340B program as an approach to curbing the rising cost of prescription drugs—Diversionary tactic?
• The overall goal of the 340B program was to help the hospitals that treat the uninsured and to stretch federal resources. Money that the covered entities make on the “spread” on 340B drugs help to keep the hospitals open and running
• Hospitals use 340B savings to support other patient programs (drug addiction and untreated mental illness)
How Likely is it that the Government Will Make Big Changes to the Program???• Recent federal efforts to repeal/replace ACA AND to transition Medicaid program to a block grant system. Either of these changes would have drastic impact on low‐income patients.
• Given this dynamic, many are making the argument that now if not the time for wholesale changes to the 340B program.
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Are Government Changes Likely??
• 340B is essentially a privately funded low‐income assistance program
• 340B saves the federal government money
• Ailing hospitals tend to garner more sympathy than well‐heeled pharmaceutical companies
• 340B could be touted as way to help balance the federal budget
Are there Amendments or Modifications that might make sense?• Require covered entities to share (a minimum portion) of savings with uninsured? OR provide greater transparency into what activities are being funded with savings?
• Ensure that contract pharmacy networks/arrangements include certain percentage of independents (to provide convenient access to underserved populations)?
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Susan Pilch, J.D. VP, Policy and Regulatory Affairs, NCPA
[email protected](703) 838‐2669
Jeff Malone
President & CEO – RxPreferred Benefits
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Disclosure
Jeff Malone is the President/CEO of RxPreferred Benefits. The conflict of interest was resolved by peer review of the slide content.
340B Landscape
• Today, there are approximately 25,000 health care facilities and over 20,000 pharmacies eligible to participate in the 340B program
• 80.0% of Covered Entities have small networks, with fewer than 10 pharmacies
• About 1,000 providers have networks with 11 to 50 pharmacies, accounting for 45% of contract pharmacy arrangements
• Hospitals accounted for more than 85% of all 340B purchases
• Central‐fill mail and specialty pharmacies have become much more significant industry participants
• The biggest PBMs are becoming far more active as 340B contract pharmacies
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340B Landscape – Who Is Eligible
340B Landscape
$16.2B in 2016
26% increase over 2015
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340B Landscape
340B accounts for 5% of the US
drug market
340B Landscape
Hospitals now receive discounted
340B pricing on more than 50% of their drug purchases
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340B Landscape
As of July 2017, there were 19,868 340B pharmacy
locations.
Which grew by 2084 locations (12%)
340B Landscape
The largest chains have dramatically
increased the number of locations acting as
340B contract pharmacies.
This implies that the profits have been
substantial enough to justify this expansion.
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340B Landscape
Six large chains account for two out of three 340B contract pharmacy locations in 2017.
Walgreens remains the dominant participant, with
nearly 6,400 locations in the 340B program.
340B Landscape – CE View On Independents
Independent Pharmacies
Pros:
Flexible Willing to manage extra work (inventory)
Keeps money in the local community
Often have relationships with the Covered Entity
Cons:
Volume
Dispense fees
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340B Landscape – CE View On Chains
Chain Pharmacies
Pros:
Streamlined setup
Locations Management
Cons:
Less flexible Dispensing fees are pre‐determined
Some require use of a specific wholesaler or administrator
How 340B Administrators Are Different Than PBM’s
Roles / Responsibilities:
• Capture & Verify
• Compliance
• Tally cost and reimbursement
• Track inventory
• Order replenishment
• Reporting – reimbursements, dispensing fees, financial settlement
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How 340B Administrators Are Different Than PBM’s
Be aware, some administrators:
• Have ownership ties to a chain or wholesaler
• Steer scripts to certain chains
• Take percentage of the net profit
• Dictate a low dispense fee
• Impose DIR fees
340B Resources/ Tools For Independent Pharmacy
Websites:
• Health Resources & Services Administration (HRSA) – www.hrsa.gov
• Office Pharmacy Affairs (OPAIS) – www.340Bopais.hrsa.gov
• Apexus – www.apexus.com
• 340B Prime Vendor Program ‐ www.340Bpvp.com
• National Rural Health Association ‐ www.ruralhealthweb.org
• 340B Health ‐ www.340Bhealth.org
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340B Resources/ Tools For Independent Pharmacy
Education:
• Apexus
• University’s
• NCPA
• Consultants
• Webinars
• White papers
Steps An Independent Can Take To Participate
• Identify eligible facilities in your area
• Search HRSA database for organizations in their community
• Get to know the executive team
• Attend facility functions
• Search providers
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Why Participate
• Enhanced reputation as a prover of charitable care
• Support community health organizations
• New access initiative
• New patients
• Properly negotiated dispense fee can serve as a significant new revenue source
Jeff MalonePresident & CEO
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Amanda Gaddy
Co‐Founder, Secure340B
Disclosure
Amanda Gaddy, RPh, is Co‐Founder of Secure340B. The conflict of interest was resolved by peer review of the slide content.
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Threat or Opportunity?
• Walk through the 340B process
• Be clear on the benefits of 340B
• Discuss the importance of understanding the terms of the agreement and possible red flags
• Identify what it takes to have a sustainable 340B program
• Outline the impact on pharmacy profit
• Show how increased profits can be used to provide additional enhanced clinical services
How is Revenue Generated?
Covered Entity (CE) Contract Pharmacy (CP)
PARTNERSHIP
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How is the Revenue Used?
UNINSURED/UNDERINSUREDProvide medications at little or no cost for uninsured/underinsuredIncreases access, adherence and ultimately improves outcomes and decreases possible re‐admissions at the hospital
REVENUE FROM INSURED/THIRD PARTY• Expansion of primary care or specialty
services• Education and self‐management programs• Medication Management Services• Transitions of Care• Medication Reconciliation• Ensure viability of health center
340B in Action
Contract Pharmacy (CP)
Pharmacist fills RX as usual and uses their inventory
CE provides patientwith prescription
Covered Entity (CE)340B
Administrator
Claims sent to 340B Administrator for eligibility testing
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340B in Action
Pharmacy
Wholesaler
Product ordered from wholesaler
340B Administrator tracks accumulations at the 11 digit NDC level.
Pharmacy receives inventory to replace what was dispensed to 340Bpatient
Product shipped to Pharmacy
340B in Action
Contract Pharmacy passes all revenue received to theCoveredEntity minus a negotiated dispensing fee for each 340B claim.
The Dispensing Fee must be, on average, more than the pharmacy’sprofit would have been without340B!
$$ REVENUE RECEIVED FOR 340B RXs
Covered Entity (CE)Contract Pharmacy (CP)
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Why is the Dispensing Fee Important?
• The dispensing fee becomes the margin for the prescription
• KNOW YOUR MARGIN WITHOUT 340B‐ Brand and Generic
• Include your estimated rebates when calculating margin without 340B
What You Need to Know About the Agreement
• Be clear on the model• All Claims, Brand Only, Profit only
• Program model‐ “qualified prescriptions or drugs”
• Profit Only rule‐ “based upon total payment enough to cover 340B cost of drug and dispense fee’
• Determine which claims would qualify• Dispensing reports for claims written by prescribers for the CE
• Mix and number of claims
• Retail Margin without 340B (Generic and Brand) Rebates included
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What You Need to Know About the Agreement
• Compare current reimbursement to proposed 340B disp fee • The difference between 340B disp fee and retail profit is the pharmacy’s increase in profit
• Include estimated DIR fees
• Payment Terms‐ 30 days at minimum
• Termination of agreement‐ without cause
• Late Fees
• Wholesaler (important if generics are included)
What You Need to Know About the Agreement
• True up language • How are true‐ups processed?
• Claims are reversed‐ revenue returned to the pharmacy and disp fee returned to CE
• Negative impact when disp fee is more than original payment amount
• Pharmacy is paid for inventory dispensed but not replenished
• Invoice only after item has been replenished is best
• How often?• Usually 90‐120 days
• DIR Fees‐ add “recoupment of DIR Fees” or build into dispense fee
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• Pharmacy paid: $90
• Invoice cost $70• Pharmacy Profit $20
• Pharmacy paid: $90
• Invoice cost $70• Estimated Rebate $28
• True Cost of Goods $42• Pharmacy Profit $48
Pharmacy Gross ProfitGeneric‐ Assume 40% rebate
Assume a dispensing fee of $24
• Pharmacy paid: $500
• Invoice cost $475• Profit (no 340B) $25
• Dispensing fee $25 • Pharmacy net $0.00‐Not including DIR Fee
• Pharmacy paid: $500
• Invoice cost $475• Profit (no 340B) $25
• Dispensing fee $150 • Pharmacy would have made $125‐Covers any DIR fee
Brand Only Model
Assume a dispensing fee of 30%Assume a dispensing fee of $25
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Key Take‐Aways
• Know your current average margin per prescription including rebate impact for brand and generic
• Compare to proposed dispensing fee
• Is the fee more than the pharmacy would make without 340B?
• Be clear on terms and conditions of agreement
• Contract Pharmacy should be a true partner with Entity. Improved margins will offset expenses associated with adding clinical services
• Med Sync/MTM/Compliance packaging/delivery
Amanda Gaddy, R.Ph.Co‐Founder, Secure340B
[email protected]‐313‐5500