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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NCHS Survey - Adherence impacted by Economics

Drug Cost impact on Adherence

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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