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Last Week in 340B: the Revival [not] of the 340B Mega-Guidance, Another Senate Hearing, and the Trump Blueprint to Lower Drug Prices

On Wednesday May 9th, I was floored when the Administration released the Spring 2018 Unified Agenda of Regulatory and Deregulatory Actions, which contained this nugget: by December 2018, HRSA will publish its 340B Omnibus Guidance. Readers of our blog know that, as we predicted, this so-called Mega-Guidance was withdrawn in January 2017 without ever seeing the light of day. Within a day, the Unified Agenda was reposted with references to the so-called 340B Mega-Guidance removed, and HRSA acknowledged that its inclusion in the Unified Agenda was an error. The 340B Guidance remains shelved. 

By Friday May 11th we were digesting the Trump Administration’s Blueprint to Lower Drug Prices and the significant role 340B plays in the various Blueprint provisions.  Monday brought a speech by the HHS Secretary and his Request for Information (RFI) on the Blueprint, which also highlights 340B. Tuesday May 12th brought a Senate hearing on 340B, and the promise of yet another Senate hearing as additional GAO reports examine 340B operations.

So what does it all mean for 340B?

Senate HELP Committee Hearing

The two witnesses at the Senate hearing were Dr. Debra Draper from GAO and Anne Maxwell from HHS-OIG; both of these individuals testified at the 2015 House hearing on 340B and their testimony repeated familiar themes. Dr. Draper acknowledged HRSA had improved auditing of covered entities, but indicated that 200 audits per year was likely insufficient given the size of the 340B Program. Dr. Draper also stressed that clarity was needed on two points: who was eligible to receive a 340B drug as a patient, and what covered entities were eligible to purchase 340B drugs.

Ms. Maxwell testified about OIG’s ongoing concerns about 340B Program integrity, including HRSA’s failure to implement a mandated secure pricing system to ensure providers are accurately charged for 340B products, and the failure of Congress to provide legal authority for state Medicaid programs to access 340B prices. Ms. Maxwell also noted that HRSA’s delayed regulation of the calculation of manufacturer ceiling prices meant that HHS-OIG had no means to take action if a manufacturer overcharged a covered entity for a 340B drug. Both witnesses stressed the need for congressional action to provide HRSA with broader authority to regulate activity within 340B.

The Senators’ questioning of the witnesses illustrated the lack of clear consensus over the purpose of the 340B Program, including whether covered entities should be required to provide 340B drugs to patients at or below the discounted 340B prices. Several Senators bemoaned HRSA’s shelving of the 340B Mega-Guidance, despite the witnesses’ testimony that legislation was necessary for the Guidance to be effective. Senator Elizabeth Warren took another tact, honing in on the Administration’s continued delayed implementation of the HRSA rule on ceiling prices. Senator Warren ironically juxtaposed the rhetoric in the Administration’s Blueprint attacking high drug prices, with the Administration’s continued unwillingness to enforce a regulation that attempts to control manufacturer overcharging in the 340B Program.

HRSA did not appear at the hearing, but the Chairman stated there would be a later Senate hearing involving HRSA testimony. Dr. Draper also stated that the GAO is not done with its focus on 340B. This summer, GAO anticipates publishing two reports on 340B. The first report will be specific to 340B contract pharmacies, and will examine financial arrangements; the second will be specific to 340B hospitals, and will compare the characteristics of 340B hospitals to non-340B hospitals.

Trump Administration Blueprint on Drug Prices

The basic question surrounding the Administration’s Blueprint to lower drug prices is whether the Administration is long on rhetoric but short on substantive action. Specific to 340B, the administration sees “further opportunities” for 340B reform, but outside of touting the Medicare Part B reimbursement cut that went into effect in January 2018, no specific “opportunities” were mentioned. Instead, the Blueprint raises a myriad of questions to which it seeks input, such as whether growth in the 340B program has been cross-subsidized by price increases in the private sector.  Interestingly, the Administration asks whether expanding regulations or changing the qualifications of the entities/patients eligible for 340B would “help refocus the program towards its intended purpose,” without ever defining that purpose.

Secretary Azar’s comments on Monday were more pointed, largely targeting manufacturers and pharmacy benefit managers. He went into more detail with the RFI, referencing the President’s 2019 Budget that proposes 340B reforms “to ensure that the benefits derived from participation in the program are used to benefit patients, especially low-income and uninsured.”  However, like the budget document itself, the RFI provides no details on those reforms. Instead, the RFI doubles down on future input, seeking comments on a broad range of topics affecting 340B, including cross-subsidization, potential eligibility requirements, and how to prevent duplicate discounts.

What Comes Next? 

There will be at least one more Senate hearing on 340B. But what about actual legislative action?  My personal view is that when it comes to 340B, there does not exist the necessary consensus to get a bill out of both houses of Congress and onto the President’s desk.

What does that mean for the future of 340B?  Given the Administration Blueprint and RFI claiming the Medicare Part B reimbursement cut for 340B drugs as a “victory” against high drug prices, I still see Medicare reimbursement as the vehicle for future attempts at 340B reform. I also believe that we will not see any specifics on that vehicle until there is a decision from the Court of Appeals on the pending legal challenge to CMS’ reimbursement cut.

Moreover, in the days following the publication of the RFI, Secretary Azar’s rhetoric has become more inflammatory. On Tuesday May 15th, CMS published enhanced data on drug pricing, accompanied by a chart highlighting double digit increases in the prices of a number of commonly used drugs since 2012. The Secretary has also publicly ruminated on the possibility of folding Medicare Part B into Part D, and giving plans broader authority to negotiate discounts in the combined programs.

So what will happen next? The real answer is that as of yet, there are more questions than answers.  

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About this Author

Ellyn Sternfield, Mintz Levin, Law Firm, Washington DC, Health Care Law Attorney
Special Counsel

Ellyn has more than 30 years of legal experience, with an extensive background in the field of government health care enforcement.

Ellyn’s experience enables her to provide valuable insight to clients facing potential state or federal investigations, or who have general compliance concerns. Ellyn currently represents a variety of health care product and service providers in federal and state administrative, civil, and criminal matters around the country. She conducts internal reviews and investigations for clients concerned about potential compliance issues. Ellyn advises clients on...

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