Wednesday, August 24, 2016

Unintended Consequences - 340B

340B, drug rebates, Affordable Care Act, Medicaid
It began with Medicaid.

In 1991, Congress passed the Omnibus Budget Reconciliation Act (OBRA 90). The goal was to enlist the aid of pharmaceutical manufacturers in lowering the cost of pharmaceuticals prescribed to Medicaid patients, and financed by the Federal and state governments. Access to manufacturers’ “best price” was the goal, to help balance the Federal budget.

Manufacturers, commercial entities all, recognized that the “best prices” were the ones on the Federal Supply Schedule (FSS); the prices paid by the Veterans Administration (VA) and the Department of Defense (DOD). There was no legislated exemption for these, so manufacturers raised the FFS prices to list price. These actions severely impacted the DOD and VA budgets, so an amendment was added to exempt FSS prices from OBRA. On June 30, 1992, this amendment expired.

Subsequently, P.P 102-585, the Veteran’s Health Care Act (VHCA) of 1992 was passed. Sections 601 and 603 establish the pricing rules for DOD and VA. Section 602 amended the Public Health Service (PHS) Act by adding a “Subpart VII, Sec. 340B” to Part D of Title III. 340B was born!

Congress created a program to offer uninsured indigent patients better access to prescription drugs by providing these drugs at discounted prices to covered entities (CE) serving large numbers of this uninsured population. Intention….give these patients better access to these drugs.

Over time, for many reasons, the program has grown exponentially. HRSA sub-regulations, the Medicare Modernization Act (MMA), and the Affordable Care Act (ACA) have wrought significant changes in the program participants and their collective behaviors. The program has outgrown its mission.

The patient definition, or its interpretation, has expanded to include all outpatients of the CE, regardless of insurance coverage. The CE list has been broadened, and now includes hospital satellite locations, sole community hospitals, and free-standing cancer centers, to name a few. In 2010, CEs were allowed to begin utilizing multiple contract pharmacies to supply these drugs. Manufacturers concerns, other than the low pricing requirements, involve diversion and double dipping.

340-priced drug, drug rebates, Affordable Care Act (ACA)Diversion happens when a 340B-priced drug is dispensed to anyone not entitled to receive it. That list includes in-patients, and any outpatient that does not fit the HRSA definition. Diversion also happens if the drug is sold or transferred to another entity. Double dipping occurs when a Medicaid claim is filed with the state for a 340B drug, thereby duplicating the Medicaid rebate. Over time, states have improved the identification of 340B claims in the Fee-For-Service (FFS) arena, and have excluded them. However, since the ACA now requires manufactures to pay Medicaid rebates on Medicaid MCO utilization, double dipping is back in focus. The Office of Inspector General (OIG) issued a report in June stating that many state methods for identifying 340B drugs may create a risk of “duplicate discounts and foregone rebate.” Since the ACA now requires manufactures to pay Medicaid rebates on Medicaid MCO utilization, double dipping is back in focus, along with the potential for “forgone” rebates.


• CEs are profiting from the system. In any economic system, if access to low priced commodities is available, organizations will find ways to maximize them. And if the penalties for non-compliance are weak and non-existent, boundaries will be pushed. Consider: A CE can legitimately purchase drugs at 340B prices, and then bill the applicable insurance company. They cannot legally bill Medicaid, but all others are fair game.

• A retail store serving as a contract pharmacy has the potential to profit from the same situation. Oversight of these institutions is the duty of the CE whom it serves. Regular audits of these entities are expected by HRSA, but enforcement is apparently not currently a HRSA priority.

• A CE can acquire a physician oncology practice to gain access to 340B pricing on those drugs.

• Patient care may be impacted clinically by moving or scheduling a procedure on an out-patient facility or status to take advantage of the cheaper medications.

These are just a few of the concerns to be considered. The 340B Program has grown into something beyond what its creators had envisioned. 

The 21th MDRP Summit includes a full day pre-conference Symposia on 340B Guidance for Pharmaceutical Manufactures. Download the agenda to see a complete list of topics here. 

About the author:

John Bliss is a contributing writer for the Medicaid Drug Rebate Program summit. He has extensive experience in the pharmaceutical industry, including AstraZeneca, Sanofi Aventis, Merck, Pfizer, Daiichi Sankyo, and Bristol-Myers Squibb (BMS). The bulk of John’s career was at BMS. When OBRA90 hit, Government Pricing took over his life. Government pricing, managed care contracting, rebates, and chargebacks continue to extend challenges and provide meaningful employment. John now works as a consultant, primarily subcontracted by other consulting firms, providing value added services to each of them and their clients.

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Wednesday, August 17, 2016

Election 2016: What Each Candidate Could Mean for Pharma

Election 2016
Every four years we are inundated with non-stop coverage of the presidential election, with both sides vying contentiously for control of the White House as well as Congress. Thankfully, each election year also brings us the Summer Olympics, which offer a brief but much-needed respite from the talking heads and partisan bickering. For two short weeks, Americans come together to support the heroes who motivate and inspire us all, before returning to the ones who polarize and divide us. It’s easy for all of us to rally behind Michael Phelps and Simone Biles, sharing in their successes and taking pride in the honor they bring to our country. However, reaching a consensus on Trump and Clinton is a different story.

After the Olympics are over and the kids are back in school, Government Pricing professionals will convene in Chicago once again for IIR’s 21st Annual Summit on the Medicaid Drug Rebate Program (MDRP). We will all come with our own opinions and political convictions, but we will also be wondering how our day-to-day responsibilities will be impacted by the election. Although we at Government Pricing Specialists (GPS) don’t have a crystal ball, we can compare and contrast the candidates’ platforms, and how they could change the face of GP. Here are their positions on a few GP-related issues:

The Patient Protection and Affordable Care Act (ACA)

• Clinton – Per her website, Clinton would “Defend and expand the Affordable Care Act, which covers 20 million people.”

• Trump – Per Trump’s website, “On day one of the Trump Administration, we will ask Congress to immediately deliver a full repeal of Obamacare.”

• Potential GP Impact:  

Under a Clinton presidency, if the ACA stands, the changes codified in the recent MDRP Final Rule would likely remain in effect but the “Cadillac Tax,” the excise tax on high-cost health insurance plans, would likely be repealed. 

Under a Trump presidency, the legitimacy of the Final Rule could be challenged if the ACA is repealed. However, repealing the ACA may be difficult since taking away a benefit is usually unpopular with voters. If the Republicans control both houses of Congress, it is more likely that substantial changes to the ACA would be introduced but if Democrats control the House of Representatives or the Senate, it is unlikely that we will see significant change.


• Clinton – Per Clinton’s website, she would “Fight for health insurance for the lowest-income Americans in every state by incentivizing states to expand Medicaid – and make enrollment through Medicaid and the Affordable Care Act easier.” 

 Trump – Trump has said that the Federal Government should provide block-grants to the states for Medicaid, that it should be entirely controlled by the states which he believes would reduce the fraud, abuse, and waste. 

 Potential GP Impact:

Under Clinton, if Medicaid enrollment increases, Medicaid sales would likely increase, as would the volume of Medicaid rebates. 

Under Trump, if federal funding is reduced, it could actually put pressure on manufacturers to provide more in terms of rebates. However, Trump believes that his plan to get more Americans working would actually reduce the need for Medicaid because more people would have access to health insurance through their employer.


• Clinton – Per her website, Clinton would “require drug manufacturers to provide rebates for low-income Medicare enrollees that are equivalent to rebates in the Medicaid program.” She would also “Allow Medicare to negotiate drug and biologic prices… Clinton believes that we should drive the best bargain for Americans, and especially for senior citizens, by allowing Medicare to negotiate drug prices, notably for high-cost drugs with limited competition.” Clinton also supports the idea of allowing people to “buy into” Medicare if they do not meet the eligibility requirements.

• Trump – Although he does not specifically address allowing Medicare to negotiate prices on his website, at a January rally in NH Trump supported allowing Medicare to negotiate drug prices, saying, “Drugs with Medicare, they don’t bid ‘em out… They pay like this wholesale incredible number… They say like $300 billion could be saved if we bid ‘em out. We don’t do it…”

• Potential GP Impact – A proposal to create a rebate program for Medicare, similar to the MDRP, would likely take significant time to pass and be finalized (think of the 6 years we waited for the AMP Final Rule). More likely is an extension of the Medicaid rebate to prescription drugs for “dual eligibles” (participants eligible for Medicaid and Medicare), but even that may take a bit of time. A plan to allow Medicare to negotiate drug prices with manufacturers, which both candidates support, although not the GOP at large, could require manufacturers to manage Medicare contracts similar to how they manage their VA contracts.

This election may be the most interesting one in our lifetimes, at least to date. As healthcare and health insurance become a greater part of our nation’s economy, and our own budgets, these issues will continue to receive a lot of focus. Government Pricing has always been the image of that old saying, “May you live in interesting times,” but this election year has become the poster child for it!

We look forward to the MDRP Summit to hear more on the potential GP implications of the 2016 election, and to hear your questions and comments. If you have not already registered, do so today and use code XP2158MISC to get an additional $100 off of the current registration fee. GPS will be onsite and blogging for the 2nd year in a row, so we look forward to seeing you there!


About the Authors: 
Katie Lapins & Dana Zelig Collins, Government Pricing Specialists, LLC, 303.993.6456, ;