Subscribe
Share
Share
Embed
340B Insight provides members and supporters of 340B Health with timely updates and discussions about the 340B drug pricing program. The podcast helps listeners stay current with and learn more about 340B to help them serve their patients and communities and remain compliant. We publish new episodes twice a month, with news reports and in-depth interviews with leading health care practitioners, policy and legal experts, public policymakers, and our expert staff.
Speaker 1 (00:04):
Welcome 340B Insight from 340B Health.
David Glendinning (00:13):
Hello from Washington D.C., and welcome back to 340B Insight, the podcast about the 340B drug pricing program. I'm your host, David Glendinning with 340B Health. Our guest today is Meetali Desai, Director of Pharmacy Business Services at UMass Memorial Medical Center in Massachusetts.
(00:33):
Inflation Reduction Act was enacted last year, and the new law includes a major drug pricing component that will affect hospitals' 340B savings on some of the costliest drugs that Medicare covers. Meetali recently presented on this topic at the 340B Coalition Summer Conference. We wanted to hear more about how she anticipates the new drug pricing provisions will affect her hospital savings and to hear what advice she has for other hospitals that are planning to make their own projections. But first, let's do a quick recap of some of the latest news about 340B.
At least two drug companies have announced they are relaxing their restrictive policies on access to 340B pricing through contract pharmacy arrangements, in response to state laws that ban such limits. Merck and Teva said they were partially lifting their restrictions for covered entities in Louisiana, which recently enacted a 340B non-discrimination law that applies to contract pharmacies in the state. Merck also announced that it was partially lifting its restrictions in Arkansas, which was the first state to ban restrictions on 340B access through contract pharmacies. In their announcements, companies noted that lawsuits challenging both laws are pending in federal courts. The outcomes of those lawsuits could determine the fates of the Arkansas and Louisiana laws, as well as whether the companies will reinstate their previous restrictions. 340B Health members can read the full details of these developments in the show notes.
(02:19):
The Health Resources and Services Administration has released its first report from a 340B audit of a drug company for fiscal year 2023. HRSA audits 200 covered entities and five drug makers per year for compliance with 340B rules. The agency's audit of Nephron Pharmaceuticals found that the company had charged covered entities more than the ceiling price for some 340B drugs and had failed to offer some 340B drugs at the ceiling price. Nephron has been ordered to repay the affected entities and to submit a corrective action plan to the agency to prevent future violations. A link to the audit findings is in the show notes.
(03:11):
And now for our feature interview with Meetali Desai. Although some of the drug pricing elements of the recently enacted Inflation Reduction Act will not take effect for several years, the plans for their implementation are well underway. 340B hospitals and health systems already are starting to look ahead at how those federal health policy changes will affect 340B and the amount of savings that they can expect to receive in future years. I caught up with Meetali just before she presented on these issues at the most recent 340B Coalition Conference. Here's that conversation.
(03:47):
I'm here with Meetali Desai, Director of Pharmacy Business Services at UMass Memorial Medical Center. We're here in the exhibit hall at the 340B Coalition Summer Conference. We're here bright and early. The attendees are getting breakfast here. So Meetali, thank you so much for joining us and welcome to 340B Insight.
Meetali Desai (04:06):
Thank you for having me. Happy to be here.
David Glendinning (04:09):
First, please tell us about UMass Memorial Medical Center and the patients you serve.
Meetali Desai (04:15):
Sure. So UMass Memorial Medical Center is a 749-bed academic medical center, part of UMass Memorial Health, which is the largest health system in central Massachusetts. The system also includes three other DSH 340B hospitals, a number of community-based provider practices, as well as behavioral health and home health services. About 70% of the patients that UMass Memorial Medical Center serves are either Medicaid, Medicare, or self-pay patients. In fiscal year '22 alone, we had about 229 million in uncompensated care and about 20 million in community benefit. Our mission is to improve the health of the people of our diverse communities of Central New England through excellence in clinical care, comprehensive health services, teaching and research.
David Glendinning (05:12):
Wonderful, thank you. And we're here today to discuss the Inflation Reduction Act, or the IRA for short, which came law last year and I know that you're speaking on a panel today about that. So would you please briefly explain for us the drug pricing element of the Inflation Reduction Act?
Meetali Desai (05:33):
Certainly. So under Inflation Reduction Act, Medicare will negotiate and set maximum fair price, MFP for select drugs. The drugs will be selected based on the Medicare's growth spend. It'll start with Medicare Part D drugs in 2026 and 2027, and then Medicare Part B drugs will be added beginning 2028. Initially 10 of the drugs will be added in 2026, increasing by 15 in 2027, another 15 in 2028, and then 2029 and beyond, 20 new drugs will be added each year. Selected drugs will stay on the list unless a generic or biosimilar becomes available. The extent of the discount would depend on the age of the drug and can range anywhere between 25 to 60% off of their 2021 price. And then there is another piece, which is the inflationary penalty that manufacturers will be subject to if they increase their price at a rate higher than the inflation rate. This is similar to what we see under the 340B program and the Medicaid Drug Rebate Program.
David Glendinning (06:50):
Thank you for that explanation. We know from news coverage that this is a really big deal for drug pricing policy, something that Congress has been trying to do for a while, and of course we're interested in the 340B element. So why does this all matter for 340B hospitals and health systems?
Meetali Desai (07:09):
Yeah. Inflation Reduction Act will impact 340B hospitals in three different ways. The first and the most important one is the reduction in the Medicare reimbursements. Because all the providers and pharmacies will have access to the MFP pricing, which can be used for Medicare patients, Medicare will change their reimbursement rate to be based off of their MFP pricing. So in other words, the 340B savings that is currently created because of the large spread that exists between the 340B price and the original Medicare reimbursement will no longer exist. And therefore the size of the 340B savings will go down significantly.
(07:56):
And the second impact is relative to the 340B ceiling price going down, which is a positive impact to the 340B hospitals. This is because the MFP price becomes the new "best price" that is used in the calculation of the 340B pricing formula. So this will help reduce the 340B ceiling price resulting in increased 340B savings for commercial patients.
(08:23):
The third one is relative to the inflationary penalty under IRA. So if the manufacturers are disincentivized from continuing to raise their price at a rate higher than the inflation rate, then it would lead to an impact on the otherwise deeper 340B discounts that are created because of the inflationary penalty.
David Glendinning (08:46):
Okay. So it sounds like there will be factors that could both raise and lower 340B savings in several ways. I understand UMass Memorial modeled how all this might affect the amount of your 340B savings. So how did you go about approaching this modeling?
Meetali Desai (09:05):
Yes, we certainly did. So we utilized 340B Health's template that they've put together for measuring the estimated impact of IRA. It includes the top 10 costliest Medicare Part D drugs based on the 2020 data. So all we had to do was pull in the 340B volume for those 10 drugs at payer and NDC level and pull it from our TPAs for contract pharmacy, in-house retail and specialty pharmacy utilization data. The template then has the formulas inserted in it, which helps calculate the estimated impact on our overall 340B savings.
David Glendinning (09:45):
I'm glad to hear that 340B Health could help provide resources for this modeling. After you crunched all the numbers, what was the final figure from your analysis?
Meetali Desai (09:57):
Final figure from our analysis was an annualized negative impact of $3.5 million. This is a huge amount and note that this is just based on year one with the 10 drugs. So as more and more drugs get added to the list, the negative impact will increase year over year. This is significant for UMass Memorial Medical Center. This negative impact will definitely put a financial strain on our ability to continue to sustain the high levels of uncompensated care and community benefit that we provide to our low-income patients and communities we serve.
David Glendinning (10:36):
Okay. So projected $3.5 million just in year one under your analysis and significantly more potentially beyond that in lost 340B savings. Are there additional factors that could affect that amount once the official IRA prices take effect?
Meetali Desai (10:56):
Yes, definitely. So the final list of 10 drugs that Medicare selects for year one for MFP pricing will be released September 1st. Now that list could be different than the one that we used for our analysis. And also our analysis overstates the losses because it does not fully account for the recent updates to the manufacturer restrictions at contract pharmacies.
David Glendinning (11:21):
And speaking about those restrictions, your access to 340B savings on those 10 drugs that very well could be on that first list already have been limited, correct?
Meetali Desai (11:33):
That is absolutely correct. At the time we performed this analysis, XTANDI was the only drug that was not restricted at contract pharmacies. However, recently, Astellas, the drug manufacturer, has announced restriction on that drug as well. Other than that, majority of the drugs on the list, although restricted at contract pharmacies, remain available to those hospitals that chose to share claims data via 340B ESP portal and UMass Memorial was definitely one of them. However, in the last couple months or so, those manufacturers have eliminated that option to share claims data. So as of right now, we don't have access to all 10 drugs at our contract pharmacies.
David Glendinning (12:17):
What advice would you have for other 340B hospitals or health systems thinking of doing their own modeling on how the IRA prices will affect their 340B programs?
Meetali Desai (12:30):
The first thing I would say is that make sure you're able to accurately identify all Medicare payer plans because that's a critical component of this analysis. We definitely had challenges identifying all those payer plans and we had to work with our specialty pharmacy payer group as well as our retail pharmacy PSAO, to identify all the BIN, PCN group numbers associated with the Medicare payer plans and apply it to our contract pharmacy data as well.
(13:02):
The second thing I would say is that you need to take into account the evolving nature of the contract pharmacies. I'm optimistic that we will be able to regain access to 340B pricing at contract pharmacy by 2026. That's just because I'm an optimistic person. But if we do, then obviously the impact will be large because the contract pharmacy will also be impacted by the Inflation Reduction Act. And therefore our analysis that we performed partly accounted for that impact that we will see on the contract pharmacy business.
David Glendinning (13:36):
So certainly a lot to think about when it comes to the contract pharmacy dispute and the implementation of these IRA provisions. After going through your full analysis, what do you see as the main takeaways of the IRA for hospitals?
Meetali Desai (13:52):
IRA will have a significant financial impact on 340B hospitals. And like I said, the negative impact is likely going to go up year over year as more and more drugs get added to the MFP list. The extent of the impact will depend upon the hospital's payer mix, service mix, and the utilization of those drugs. For us, one single drug, Enbrel, which only accounted for 11% of the total volume, contributed to about 57% of the total negative impact. So just shows how your servicemen consent utilization will have a significant impact on the overall negative hits that you'd see.
(14:37):
And lastly, even if the contract pharmacy restrictions continue 2026 and beyond, Inflation Reduction Act will have an impact on hospitals relative to our utilization of drugs at our own retail and specialty pharmacies.
David Glendinning (14:54):
Well, Meetali, this has been very interesting speaking to you about this Inflation Reduction Act and its impact on 340B. I know is a topic that many of our listeners are interested in and interested in seeing where everything goes with this. So thank you for sharing this information about how UMass Memorial Medical Center did its modeling on this, and thank you for sharing your perspective on that with attendees here at the 340B Summer Conference.
Meetali Desai (15:20):
Thank you for having me, David.
David Glendinning (15:22):
Our thanks again to Meetali Desai for sharing such practical information on how UMass Memorial Medical Center is planning for the Inflation Reduction Act. We appreciate the opportunity to help our hospital members project how much of a 340B impact the IRA will have on them. As we learn more information from the government on how it will implement the drug pricing changes in the new law, we will revisit this topic for future episodes.
(15:49):
Did you miss our previous episode with 340B Health's Steve Miller on the annual recertification process? If so, be sure to listen to that now. This year's recertification window is open until September 11th, and Steve has some best practices for hospitals to follow as they navigate that process. We will be back in a few weeks. As always, thanks for listening and be well.
Speaker 1 (16:18):
Thanks for listening to 340B Insight. Subscribe and rate us on Apple Podcasts, Google Play, Spotify, or wherever you listen to podcasts. For more information, visit our website at 340bpodcast.org. You can also follow us on Twitter @340BHealth, and submit a question or idea to the show by emailing us at podcast@340bhealth.org.