session #12: 340b prescription drug pricing primer
TRANSCRIPT
Session #12: 340B Prescription
Drug Pricing Primer
Joe Schindler and John Bretz
Saturday, Jan. 11 1:15 – 2:15 p.m.
Arbor Lakes
Joe Schindler
Joe Schindler is vice president of finance at the Minnesota Hospital Association (MHA). He has
several years of experience providing Minnesota’s hospitals and health systems with financial
analysis and support in the areas of reimbursement, financial policy and legislative issues. His
expertise includes policy analysis, hospital financial analysis, wage index and cost comparison
projects. He has managed MHA’s key data programs.
John Bretz
John Bretz is an accomplished health care executive with experience in health care supply
chain, distribution channel optimization, population health, strategic marketing and health care
consumerism. John spent over 25 years in executive leadership with a fortune 500 health plan
where he was responsible for 17 states. John also spent almost five years utilizing his
experience as a Black Belt Six Sigma with ICF International (large consulting company) working
in both commercial and government health care sectors as commercial health vice president.
John is now responsible for leading SUNRx’s strategic business partner relationships and
strategies for 340B pharmacy.
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340B Drug Pricing Primer
Joe Schindler Vice President of FinanceMinnesota Hospital Association
John Bretz Director of Strategic Relations SUNRx
MHA Winter Trustee Conference: January 11, 2020
Drug Pricing: A Better Mousetrap?
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Agenda
340B Overview
Regulatory, Legal and Legislative
Updates
What is the 340B drug discount program?
The 340B Drug Discount Program was created in 1992 by the federal government,
and requires drug manufacturers to provide significant discounts for outpatient
drugs to eligible healthcare organizations, also known as “covered entities.”
The program is designed to provide financial benefits to covered entities that serve
low-income and uninsured patients. This enables the covered entity to expand
healthcare services to better serve their communities, and to improve access to
more affordable medications for their low-income and uninsured patients.
The mission of Safety-Net Hospitals is to provide quality, cost-effective care for
patients and community, with respect and dignity, and without regard to ability to
pay. The 340B program helps safety-net Hospitals to generate savings which they
can use to support their clinical programs, and expand additional services into the
community in which they are located.
The goal of a good 340B provider partner is to simplify and optimize the 340B
program for Safety-Net Hospitals to maximize savings and extend savings for their
self-pay and underinsured patients in real-time.
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Section 340B of the Public Health Service Act…
Section 340B of the Public Health Service Act…
…is a federal program that allows Covered Entities
to purchase medications at a significant discount
Enables safety net providers to: “stretch
scarce federal resources as far as possible,
reaching more eligible patients and
providing more comprehensive services.”
Compliance 101
Entity compliance considerations
There are “general” compliance requirements for companies
operating in the healthcare field:
A. Having internal policies and procedures
B. Having a designated compliance officer
C. Staff undergoing effective training and education
D. Having effective lines of communication
E. Having internal monitoring and audits
F. Publicizing standards through publicized disciplinary guidelines
G. Taking quick corrective action
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Elements of the Program
Certain safety net covered entities
Certain safety net covered entities
Outpatient drugsOutpatient drugs
Price discountsPrice discountsRequired for all
manufacturers in MedicaidRequired for all
manufacturers in Medicaid
340B Program
340B Program
Eligibility Requirements - Process
Hospital designation (DSH, CAH, SCH, RRH, Cancer, Children’s, etc.)
% DSH
Registration to Participate in 340B In order to participate in the 340B Program, eligible hospitals must register with
HRSA/OPA during one of the quarterly registration periods.
Contracted Pharmacies • must also be registered once fully executed agreements are in place.
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340B Eligible Hospitals
Disproportionate Share hospitals
Children’s hospitals*
Critical Access Hospitals (CAH)*
Free-standing Cancer hospitals*
Rural Referral Centers*
Sole Community Hospitals*
* 340B eligible through Section 7101 of the ACA
Hospital Outpatient Facilities
In order for outpatient facilities to become eligible for the 340B Program:
• The outpatient facility must be an integral part of the hospital
• The outpatient facility must be included as reimbursable on the covered entity’s most recently filed Medicare Cost Report
• To register additional outpatient facilities, complete the online Register an Outpatient Facility registration at: http://opanet.hrsa.gov/OPA/CERegister.aspx
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340B Enrollment Procedure
Determine Eligibility
Enroll onlineSubmit Forms
to OPA as directed
Await decision from OPA
http://opanet.hrsa.gov/OPA/CERegister.aspx
340B Covered Drugs
• Outpatient prescription drugs
• Over-the-counter drugs (with prescription)
• Clinic-administered drugs
• Biologics (prescription)
• Insulin
• Inpatient drugs
• Vaccines
Not CoveredCovered
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340B Programs = Internally Dispensed & Contract Pharmacies
340 Program Excellence
CONSIDERATIONS:
TRANSPARENCY: Where are the
savings being used?
COMPLIANCE: Covered Entity is
responsible for compliance, Policies
& Procedures, know your program.
OVERSIGHT: Hands-on approach
for program design,
implementation, and ongoing
management & communication.
PHARMACY PARTNERSHIP: Focus
on Patients
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Prescription Capture Models• All Claims
• Profit Only
• Brand Only
Dispensing Fees• Flat
• % of Reimbursement
• Gateway Administrator
Claim Capture Model
Safety Net Hospitals (non-profit)
required to provide financial
assistance to retain tax exempt
status
Taking care of patients
Leverage Patient Assistance
Programs
Can have an impact to reduce
uncompensated care
How to operationalize
Cash Programs
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Quickfacts/Minnesota - Uninsured
USA Minnesota
Population estimates, July 1, 2018, (V2018) 327,167,434 5,611,179
Housing
Median value of owner-occupied housing units, 2013-2017 $193,500 $199,700
Families & Living Arrangements
Households, 2013-2017 118,825,921 2,153,202
Persons per household, 2013-2017 2.63 2.49
Education
High school graduate or higher, percent of persons age 25 years+, 2013-2017 87.30% 92.80%
Bachelor's degree or higher, percent of persons age 25 years+, 2013-2017 30.90% 34.80%
Health
With a disability, under age 65 years, percent, 2013-2017 8.70% 7.30%
10.00% 5.10%
Income & Poverty
Median household income (in 2017 dollars), 2013-2017 $57,652 $65,699
Per capita income in past 12 months (in 2017 dollars), 2013-2017 $31,177 $34,712
11.80% 9.60%
Persons without health insurance, under age 65 years, percent
Persons in poverty, percent
Side Effect of Unaffordable Medications
Choices
Rent
Food
Utilities
Back in Emergency Room
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What is Community Benefit?
Under the Affordable Care Act, nonprofit hospitals must meet new requirements to retain
their tax-exempt status.
The ACA added Section 501(r) to the Internal Revenue Code, which contains four new
requirements related to community benefits that nonprofit hospitals must meet to
qualify for 501(c)(3) tax-exempt status.
Conducting a community health needs assessment with an accompanying
implementation strategy;
Establishing a written financial assistance policy for medically necessary and
emergency care;
Complying with specified limitations on hospital charges for those eligible for financial
assistance; and
Complying with specified billing and collections requirements.
The new ACA requirements do not include a specific minimum value of community
benefits that a hospital must provide to qualify for tax-exempt status
340B Cash Program Models
In-house/Owned Retail Pharmacy Model
• Cash Prescriptions are filled at the entity’s in-house
pharmacy
Paper-Based (or Script Pad based) Messaging Model
• 340B eligibility is noted or barcoded on the written
prescription
Retrospective Prescription Card Model
• Rx adjudicated at a defined price/subsidy, with a
retrospective true-up
Real-Time Prescription Card Model
• Automated 340B eligibility and income-level pricing in real
time at the “Point of Service”
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340B Cash Program Challenges
• In-house pharmacy access: limited hours, weekends &
geography
• Contract pharmacy directed:
• Control
• Don’t know 340B eligibility or price at the “point of service”
• Lack of real-time patient “visit” information (e.g., a patient who walks
directly from the clinic to the pharmacy)
• Difficulty communicating daily 340B pricing with the pharmacy
• Difficulty communicating patient income levels and the corresponding 340B
sliding scale pricing
• The 340B price is not always the lowest price for the patient
• Must integrate cash 340B orders with 340B replenishment
340B Prescription Savings—Real Time Processing
340B Card Use
• Distribute prescription Cards
to uninsured (w/income tier)
• 340B eligibility determined
by PBM in real time
• PBM applies “Lower of”
pricing (340B, Network, UC)
• 340B claims are accumulated
& replenished
• Financial invoicing between
stakeholders
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How it works: The Uninsured Prescription Discount Card
Regulatory, Legal and
Legislative Concerns
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Regulatory
Annually, the Centers for Medicare &
Medicaid Services (CMS) establishes Medicare
payment policies for the next year
In the fiscal year 2019 outpatient final rule,
CMS established a payment cut of 28.5% to
hospitals participating in the 340B drug
discount program
Savings were redistributed through an
enhanced base payment rate
Court Rules Health & Human Services’ Payment Cut Was Unlawful!
On 12/27/18 a federal judge ruled in favor of the AHA and hospital plaintiffs saying that the Department of Health and Human Services “adjustment” by nearly 30 percent of 2018 Medicare payment rates for many hospitals in the 340B Drug Pricing Program was unlawful.
In its ruling, the court held that “the Secretary’s rate adjustment at issue here does not affect a single drug or even a handful of drugs, but rather potentially thousands of pharmaceutical products found in the 340B Program … when viewed together, the rate reduction’s magnitude and its wide applicability inexorably lead to the conclusion that the Secretary fundamentally altered the statutory scheme established by Congress for determining ... reimbursement rates, thereby exceeding the Secretary’s authority.”
In addition, the court noted that to the extent the Secretary disagrees with the way in which Congress crafted the 340B program, “he may raise his disagreement with Congress, but he may not end-run Congress’s clear mandate.”
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Legal Update
340B OPPS LAWSUIT
• Judge ruled in favor of AHA and hospital plaintiffs saying CMS exceeded its regulatory authority
• $1.6 billion in cuts to 340B hospitals in CY 2018 OPPS rule violated the Administrative Procedure Act and exceed the agency’s statutory authority
• Question of proper remedy
• CMS extended the cuts into FY2020 and plans to appeal the decision
340B Legislative Proposals
Moratorium on new 340B DSH hospitals & child sites for current DSH hospitals and new reporting requirements
Require 340B hospitals to report their low-income utilization rate for outpatient services
Require all 340B DSH hospitals to become SAFE ready facilities
340B User Fee
Increase the DSH threshold to 18%
Require additional reporting for 340B hospitals
Create a 340B Administrator
Narrow the definition of eligible 340B patient
Give HRSA more regulatory authority
Require 340B hospitals to provide discounted drugs to certain low-income patients
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Health Care Remains a Focus
Comprehensive healthcare legislation being
considered with no direct implications on 340B
Senate HELP Committee and Finance Committee have
both passed major health care bills which are
expected to be considered by the full Senate this fall
Medicare rebate and 340B
Drug pricing bill expected to be unveiled in the House
340B continues to be raised and could be included in
broader health care legislation
Key Theme is TRANSPARENCY
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Lawmakers Call for Transparency
“340B is a law that says drug discounts could –
should go to help low-income people. Why
shouldn’t hospitals be required to report that
same information to HRSA?”
Sen. Lamar Alexander (R-Tenn.)
Chairman, Senate HELP Committee
June 18, 2019
Concerning Provisions
Hospitals drug costs compared to
revenue received
Comparison of revenue to charity care
at every individual child site
Low-income utilization rates of
outpatient health services for each
child site
How patients are charged for drugs
depending on self-pay vs. co-payment
Fees paid to contract pharmacies and
how fees are determined
Payer mix for each child site
HELP Committee Proposal
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116th Congress
Oversight, investigations and subpoenasNo repeal and replaceGridlock with exception of bipartisan efforts340B legislation not likelyDrug Pricing Guns vs. butter debateMessage votes Legislative graveyard
Communicate the Value of the 340B Program
Disclose Hospital’s 340B Estimated Savings
Continue Rigorous Internal Oversight
AHA 340B Good Stewardship Principals
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340B Health - Impact Profile
Easy-to-use template that helps
you tell your 340B story
You can complete on your own
or with 340B Health’s assistance
Hundreds of hospitals have
created an Impact Profile
Survey How Hospitals Use 340B Savings
*Results based on survey of 340B Health members conducted in November-December 2018.
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Survey How Hospitals Use 340B Savings
*Results based on survey of 340B Health members conducted in November-December 2018.
Questions / Comments
Bonus slides follow
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CMCS Informational Bulletin
NEWSFLASH - NEW Guidance from CMS
1/8/20 – CMS issues Informational Bulletin on Best
Practices for avoiding 340B Duplicate Discounts in
Medicaid
Identify number of best practices that states are
encouraged to consider
In response to two OIG report which encouraged
CMS to inform states about ways they could identify
claims for duplicate discounts and enhance overall
state compliance
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Best practices that state Medicaid programs may consider
Using the 340B Medicaid Exclusion File (MEF)
Developing Strategies with Contract Pharmacies
Options for Medicaid Reimbursement for 340B Drugs
Purchased by Covered Entities
Using 340B Claims Identifier Options
Including 340B Duplicate Discount Provisions in
Medicaid Managed Care Contracts
Providing Claims Level Data to Manufacturers
Using Specific Medicaid BIN/PCN on Medicaid
Managed Care Plan Identification Cards
Insulin – Historical review of price
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How can 340B help provide access to uninsured for Insulin?
Retail Price
$300/vial
340B Price
$40/vial
“Insulin has become hyper-expensive, and the market has gone up significantly over the last
10 to 15 years. Lowering the price of the drug from more than $300 a vial to about $40 a vial
makes a major difference for these patients.
*Source 11/26/19 – 340B Health – 340B Provides better access to diabetes treatment