340B Targeted in Trump Administration Drug Push

Other federal drug policy changes could come through administrative action.

May 15—Hospital advocates and others raised concerns about impacts of the Trump administration’s recently announced initiative to address rapidly rising drug prices in part through policy changes to an existing drug discount program.

President Donald Trump recently unveiled a blueprint to lower prescription drug prices. The range of actions include some administrative steps that the U.S. Department of Health and Human Services (HHS) could take immediately and more in-depth efforts that would require congressional action.

One area that is expected to require congressional action drew immediate concerns from hospital advocates. The administration’s report traced the recent growth in the 340B discount drug program, which requires drugmakers to sell pharmaceuticals at a steep discount to qualifying hospitals while the hospitals receive the full price from payers.

The administration’s report noted that the 340B program covered more than $16 billion in drug sales in 2016, or nearly 400 percent more than in 2009. And it made the case that those discounts were fueling overall drug price increases.

“The additional billions of dollars in discounted sales and the cross-subsidization necessary may have created additional pressure on manufacturers to increase list price,” the report stated.

The 340B policy changes raised in the report included:

• Changing the definition of patient
• Changing the requirements governing covered entities that contract with pharmacies or registering off-site outpatient facilities
• Revisiting current mechanisms for identifying and preventing duplicate discounts
• Bolstering oversight or claims standards to prevent duplicate discounts in Medicaid and other programs

The administration appeared to be quickly advancing its ideas to change 340B by issuing a request for information for feedback on a variety of changes, including changing the definition of patients and moving oversight of the program from the Health Resources and Services Administration (HRSA) to HHS. Critics of 340B have said HRSA lacks authority to oversee the program.

Those ideas followed recommendations in Trump’s proposed FY19 budget, which suggested mandating that 340B benefits be shown to help patients, especially low-income and uninsured populations.

Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, said his group performed an analysis of Trump’s budget proposal to eject hospitals from 340B if they provided charity care to less than 1 percent of their population.

“That almost exclusively affects hospitals in Medicaid expansion states,” Bach said at a May 14 Capitol Hill briefing. “States that didn’t expand just have larger numbers of uninsured.”

Analysts have said many 340B changes that the administration is discussing would require legislative action. And Congress appears to be considering changes, with the Senate Health, Education, Labor, and Pensions (HELP) Committee conducting a hearing May 15. Testifying were officials from the HHS Office of Inspector General (OIG) and the Government Accountability Office.

Sen. Lamar Alexander (R-Tenn.), chairman of the HELP Committee, said he was trying to determine details about 340B, including how much revenue hospitals garner from the program and how much of the savings they were using to help low-income patients.

“It very well may be that most are using the savings to benefit low-income patients, as intended, or it may be that the other activities meet an important public objective,” Alexander said at the hearing. “It’s hard to know until we have more information.” 

Existing Senate bills targeting 340B include legislation that would implement a two-year moratorium on allowing additional hospitals and hospital outpatient departments to participate as well as stricter eligibility criteria for hospital outpatient sites.

Hospital advocates pushed back shortly before the hearing with a letter to congressional leaders.

“Given the importance of this program to safety net providers and the patients they serve, we caution that legislation that includes changes to the 340B Program could negatively impact patients,” wrote 340B Health, which advocates for hospitals in the program. “Efforts to alter the Congressional intent of the law or otherwise dramatically narrow the 340B Program would ultimately decrease access to affordable quality health care for vulnerable populations.”

Hospitals in the program already are reeling from 340B cuts that began Jan. 1. The Centers for Medicare & Medicaid Services reduced Medicare payment for drugs acquired through the 340B program from the average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. The administration’s new drug proposal noted the policy is expected to reduce Medicare beneficiaries’ out-of-pocket drug costs by $3.2 billion over the next 10 years.

Hospital advocates have filed a legal challenge to the 340B cut. The challenge was initially rejected by a federal judge in December but is now under review and could be revived by a federal appellate panel.

Meanwhile, a bipartisan group of nearly 200 members of the House of Representatives has co-sponsored legislation to reverse the cuts.

Sen. Patty Murray (D-Wash.), the ranking member of the HELP Committee, joined them in vigorously defending the program at this week’s hearing.

“340B is critical for safety-net providers that care for patients with the greatest needs and fewest resources,” Murray said.

Sen. Susan Collins (R-Maine), noted at the hearing that revenues from the program were responsible for the positive operating margins of several hospitals in her state.

Administrative Steps

The administration could act on its own to implement other provisions of a new drug price strategy.

For instance, it could prohibit “gag clauses” that insurers use to prevent pharmacists from telling patients when drugs they need would be cheaper if paid for in cash than through their insurance.

Other administrative steps could include allowing Medicare Part D plans to adjust coverage mid-year when the price is increased for a generic drug without competition; directing the Food and Drug Administration to require pharmaceutical companies to state their list prices in direct-to-consumer advertising; and developing value-based payment pilots in Medicare to base payments to drug companies on the effectiveness of drugs.

Those regulatory options are being considered amid the administration’s recent proposal to delay—for the fifth time—until July 2019 regulations that would set 340B ceiling prices and establish civil monetary penalties for manufacturers that knowingly and intentionally exceed those limits. Hospital advocates cite continuing evidence—including an OIG report—that manufacturers have overcharged safety-net providers.

Murray blasted the administration for delaying the drugmaker penalty rule and for withdrawing another “mega guidance” HRSA rule that would provide more clarity for the program. Among provisions of the mega guidance was a clarification of the program’s definition of qualifying patients.

“Instead of improving that draft and working with stakeholders to develop a path forward, the Trump administration took a giant step back and withdrew that guidance—abandoning the effort completely,” Murray said.

HRSA already has the authority to provide hospitals with drug-ceiling prices but has not done so because of delays in finishing a database, said Ann Maxwell, assistant inspector general for evaluation and inspections at OIG.

Debra Draper, PhD, director of the healthcare team at GAO, said her office’s ongoing analyses of 340B includes comparing the characteristics of 340B and non-340B hospitals and how those characteristics have changed in recent years as the program has grown.

“Deciding what the intent of the program is would go a long way to helping with creating the necessary guidance and regulations that are needed for the program,” Draper told senators.

Legislative Steps

The administration would require congressional action for other elements of its new drug price plan.

For instance, statutory changes would be required to reduce or eliminate the use of rebates that pharmacy-benefit managers negotiate in secret with drug companies.

Additionally, the plan proposed paying different prices for the same drug, depending on the condition being treated. Drugs can have different levels of effectiveness for different conditions.

The plan also discussed having the Medicare Part B program identify drugs for which prices could be negotiated by pharmacy-benefit managers.

Critics of the administration’s plans said they were insufficient to lower the overall price of drugs, as evidenced by surging stock prices for drugmakers after the policy proposals were released. But Bach cautioned that it is too soon to know whether the changes will have a large impact.

“We’re just going to have to see what kind of follow-through they’re planning on,” Bach said.

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Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare