Drugmakers are continuing to lobby to shrink the drug discount program.


Aug. 28—A contentious federal rule sought by safety net hospitals recently was delayed again.

On Aug. 17, the Department of Health and Human Services (HHS) announced it would delay implementation of a final rule to punish prescription drug producers that intentionally overcharge 340B hospitals and other providers, and would also set a ceiling for 340B drug prices. The 340B program requires pharmaceutical manufacturers to offer outpatient drug discounts to safety net hospitals and other providers.

It is the latest in a series of delays for implementation of the penalty rule, originally scheduled to take effect in March and now set to go into effect July 1, 2018.

The delays are part of a Trump administration effort to curb or eliminate burdensome regulations. Seven years ago Congress ordered the Health Resources and Services Administration (HRSA) to impose civil monetary penalties (CMPs) against drug makers that “knowingly and intentionally” overcharge 340B providers.

The delay comes 10 months after a $465 million U.S. Justice Department settlement in October 2016 with drug producer Mylan for allegedly overcharging Medicaid and 340B hospitals and providers for its EpiPen auto-injectors.

The American Hospital Association (AHA) was disappointed with the continued delay of the 340B ceiling price and CMPs rule, said Ashley Thompson, a senior vice president for public policy analysis and development for the AHA.

“Given the skyrocketing prescription drug price increases that have presented hospitals and their patients with remarkable challenges, the 340B program is as critical as it has ever been in helping eligible hospitals obtain a reduced price for outpatient drugs, allowing them to stretch scarce federal resources to expand, and improve access to comprehensive health care services for our nation’s most vulnerable patients,” Thompson said.

Jillanne Schulte Wall, director of federal regulatory affairs for the American Society of Health System Pharmacists, said the delay is a “head-scratcher.”

“This isn’t a routine part of the regulatory process. While it’s true new administrations frequently review rules and regulations finalized in the last days of the previous administration, it’s unusual to see such a focus on one program,” Wall said in an interview.

“Everyone should keep an eye on what happens after the delay expires,” Wall said. “This latest delay may indicate the administration is planning to do something with 340B. What they plan to do is unclear: are they still reviewing it or will they make major changes?”

The delay is another indication of the strong lobbying efforts exerted by the prescription drug industry, said Kyle Vasquez, an attorney with Polsinelli specializing in Medicare reimbursement and regulatory issues.

“The pharmaceutical industry has expressed objections to this rule, because it creates additional administrative obligations. From a provider perspective, we’re seeing more overcharges occurring on a broad scale. The delay of this final rule creates additional challenges for providers seeking the correct 340B drug price and shows there could be some broader legislative changes or reform down the road,” Vasquez said in an interview.

Drugmaker Goals

Stephanie E. Silverman, a spokeswoman for the Alliance for Integrity and Reform of the 340B Program (AIR340B) said the trade organization that lobbies for drug makers and other patient and provider advocacy groups will continue focusing on key 340B policy priorities and “working with Congress and the administration to fix the program for sustainability.

“Three key areas for change include clearly defining a 340B eligible patient, examination of hospital eligibility criteria and restrictions on contract pharmacy arrangements,” she said in emailed comments.

Ted Slafsky president and CEO of the 1300-hospital member trade association, 340B Health, said his members are concerned about the ongoing delays.

“Since 2010 when the Affordable Care Act was enacted, Congress has called on the administration to move forward with a pricing verification system to ensure the companies were providing the correct prices for the drug,” Slafsky said in an interview.

Without such a data base, hospitals that participate in the 340B program don’t know if they’re getting the right price for the drugs they purchase, according to Slafsky.

“We are very concerned that the pharmaceutical industry may be successful in convincing the administration to block commonsense rules from going forward,” Slafsky said.

“Barring legislation, they may seek to change the law by giving the HRSA greater authority to oversee the program.”

A senior Republican Senate aide told reporters this week that bipartisan legislation is being written to give HRSA more funding and authority to administer the 340B program.

Slafsky said the amount of discounts provided through 340B amounts to only $6 billion annually of the $450 billion U.S. drug market.

He said a proposed CMS reimbursement cut in Medicare Part B for outpatient cancer and infusion drugs poses “an unprecedented threat” to 340B hospitals and patients. Aug. 21 the Advisory Panel on Hospital Outpatient Payment, which advises CMS on reimbursement issues, urged the agency to drop that draft rule, which could cost hospitals and other 340B providers $1.65 billion annually.

“We were very pleased that the advisory panel voted to ask CMS to rescind that shortsighted policy and hope that the agency follows that recommendation,” Slafsky said.

“340B is incredibly important to our member hospitals. To some of them, it’s keeping their doors open and for others it’s not closing clinics or services provided to some of our most vulnerable populations.”

Helen Pfister, a healthcare attorney with Manatt Phelps & Phillips specializing in regulatory and transaction issues, said it’s difficult to predict the impact of the pharmaceutical industry’s lobbying efforts to shrink the 340B program.

“There’s been criticism of this program from both sides for years and there is room for improvement,” Pfister said in an interview. “The tricky thing for the agency is striking the right balance and allowing the program to remain in effect, while addressing some of the concerns posed over the years.”

Delay’s Significance

Alice Valder Curran, an attorney representing drug manufacturers with the law firm Hogan Lovells, said the notice represents more than a delay.

“They [HHS] have affirmatively indicated that they want to engage in additional rulemaking and make changes in the rule,” said Curran. “Before this they only indicated they were delaying.”

Curran said drug manufacturers have substantive concerns with provisions that the Trump administration wants to hear about and explore, including the CMPs included in the rule.

“HRSA has created a process without defining what ‘knowing and intentional’ means and it’s problematic for them to codify a penalty process without defining the terms,” Curran said in an interview. “Stakeholders have raised this issue repeatedly. There are some fairly compelling problems with the current regulation.”

Curran said drug makers are concerned about the growth of contract pharmacies, which have expanded the use of 340B.

“"There’s no oversight and it is unclear to what extent contract pharmacies obtain profits under 340B because there is no visibility into contract pharmacy arrangements,” said Curran.

Curran also said that 340B generates much revenue for covered entities and drug makers would like to see greater transparency.


Mark Taylor is a freelance writer based in Chicago.

Publication Date: Monday, August 28, 2017