340B Program Legislative & Regulatory Update

For those of us in the 340B program trenches, it feels like we are constantly under assault from our legislatures (e.g., Senate and House bills with detrimental effects on 340B), regulatory agencies (e.g., CMS reimbursement, HHS/HRSA interpretations of the law), drug manufacturer groups (e.g., PhRMA doing anything possible to dismantle the program), and even the judicial system (e.g., courts considering the viability of the ACA). I don’t know about you, but as we have gone about our work to keep the 340B program functional for the last 28 years, there is this gnawing in the back of my head that something big could happen to 340B. Oddly enough, we have not seen a significant change in the program in quite some time. The question is, are we due for a big change or with everything else going on in the country and world, are we likely to maintain 340B in its current state? My crystal ball is currently broken, but let’s break down what we do know and where the biggest risks are today.

Judicial: The Affordable Care Act (ACA) was determined to be invalid by the lower Federal courts in December of 2018. This was a lawsuit filed in February 2018 by 20 states and led by Texas (2 states have since dropped off the case, Wisconsin and Maine). In December of 2019, the 5th Circuit Court of Appeals affirmed the lower court’s decision on the unconstitutionality of the individual mandate but did not decide on whether the rest of the ACA should also be struck down. Instead, they referred the case back to the lower courts. In an interesting turn of events, the Supreme Court has stepped in and has agreed to review the case. A request was made for an expedited review, but in January, the Supreme Court said no to an expedited review and will likely hear arguments for the case in October 2020. It is highly likely that a decision will not be made until after the presidential election. If you have read this far, and are now wondering, “okay, so what does this mean for 340B,” then let me remind you of the various changes the ACA made to 340B:

  • Most Importantly: It added the rural hospitals to 340B qualification. This includes our critical access hospitals (CAH), rural referral centers (RRC), and sole community hospitals (SCH) and of course their lower (or none for CAH) DSH% thresholds for entering the program. A repeal would mean a loss of these covered entity (CE) types.
  • Medicaid Expansion: At least for the states that took the Medicaid Expansion, this increased DSH percentages and likely allowed for additional hospitals to qualify. If we see a decrease in DSH percentage, we will see a decrease in qualified hospitals (in addition to the loss of the rural hospitals).
  • MCO Medicaid: It was the ACA that allowed state Medicaid agencies to seek Medicaid rebates on MCO Medicaid paid claims in addition to the FFS Medicaid paid claims. At least this would clear up how we handle MCO Medicaid, but it will be a large budget loss for the Medicaid program.
  • Annual Recertification: Hmm, I think this was a good thing (albeit a pain sometimes). I remember when some hospitals would lose their DSH percent but “forget” to tell HRSA. I am not sure why they would stop this, but technically it was added as part of the ACA.
  • 340B Pricing Oversight: Both the HRSA ceiling price website and monetary penalties were likely the result of the ACA. Again, I hope they wouldn’t stop the website now, but it is thanks to the ACA.

As you can see, losing the ACA will have a significant impact on the 340B program. Not a ton we can do about it, I suppose hoping the RBG (i.e., Ruth Bader Ginsburg) can maintain her health through the year would be good. Many pundits believe the current Supreme Court would likely keep the ACA intact (mostly), but a switch of one of the liberal justices for a more conservative one could change the dynamics of the Supreme Court such that a full repeal of the ACA becomes more likely.

I think I used up most of my time on that one, so what else . . .

Legislative: Although we saw a slew of bills from both the Senate and House in 2019 regarding 340B, nothing actually passed. Yes, NOTHING! To be fair, some of the bills were pro-340B, so it would have been nice to see some of them come through. However, here we are in 2020, a re-election year. The House and Senate are split Democratic and Republican, respectively, and it is unlikely we will see 340B bills being passed in this session either. One area of potential risk is around drug pricing legislation. This is a hot topic and people on both sides of the aisle have an appetite to do something. Where 340B has some risk is if any of the drug pricing bills affect the 340B ceiling price calculation and/or provide exemptions to manufacturers on 340B for participating (e.g., one of the international pricing index bills had some provisions on 340B exemptions).

Regulatory: I think this is where we will continue to see an erosion of 340B savings. On both a Federal and State level. CMS is still decreasing drug reimbursement with an ASP minus 22.5% on status indicator K drugs for most hospitals (i.e., they left out CAH and SCH that are rural for now). This is in addition to the reduction in clinical payments for off-site clinics, often referred to as “site neutrality.” States, such as California, are pushing all retail prescriptions to FFS Medicaid, where an actual acquisition cost (AAC) plus a fee is required. This is where it is critical to work with your states and ensure they are aware of the impact these decisions can have on patients and the healthcare system.

I tried to not take too many sides, rather just share what we are hearing and seeing. I would like to end on a positive note. In 2019, West Virginia, Minnesota, South Dakota, Montana, and Oregon all passed laws prohibiting discriminatory reimbursement by health plans. Nice work to those states, and there are additional states working on similar legislation for 2020. I would love to see all states pass a similar law in order to protect 340B from payors harvesting 340B savings for themselves. If your state isn’t already working on it, then maybe they should be. Now is a good time (it is always a good time) to reach out to your legislatures and ensure they are aware of how important the 340B program is to hospitals, clinics, and patients in their communities.