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 to 340B Insight from 340B Health.
David Glendinning (00:12):
Hello from Washington D.C and welcome back to 340B Insight, the podcast about the 340B Drug pricing program. I am David Glendinning with 340B Health. Our guest today is 340B Health senior council, Amanda Nagrotsky. We don't often have two 340B Health staff on the show back to back, but there have been some major developments in one of the key items we spoke about in the previous episode with our president and CEO Maureen Testoni. So I sat down with Amanda to find out what happened since then. Here's our conversation.
(00:51)
I am speaking with Amanda Nagrotsky, senior counsel here at 340B Health. Amanda, believe it or not, we last had you on the show more than two years ago to discuss the big Supreme Court decision on the Medicare Part B cuts to 340B hospitals. So it's been a minute. Welcome back to 340B Insight.
Amanda Nagrotsky (01:13):
Thanks so much, David. It's great to be here.
David Glendinning (01:15):
We had Maureen on the show most recently to discuss 340B rebate developments among other recent news, and there's much more to say since we spoke with her about that rebate issue. So please give us a quick refresher if you could, on how this issue emerged recently.
Amanda Nagrotsky (01:36):
This issue came up when Johnson & Johnson announced, I believe it was in August, that effective October 15th, they would be stopping paying upfront 340B discounts for two of its really popular drugs, Stelara and Xarelto. And they would be doing that when purchased by DSH hospital.
(01:56)
So instead of getting upfront discounts, DSH hospitals would be paying the full price, which for DSH hospitals and 340B is wholesale acquisition cost. And then hospitals would be submitting claims data and then waiting for J&J to validate that data and approve rebate payments.
David Glendinning (02:15):
And I know this was big news and unwelcome news for 340B hospitals when it came out. What did you hear from that hospital community about this rebate plan?
Amanda Nagrotsky (02:27):
Just a lot of concern. I mean, hospitals have told us that this would be really devastating for them. We're talking about really a fundamental change to how 340B has operated for over 30 years as an upfront discount program. And that has huge financial implications for hospitals. So instead of saving on drugs when they go to purchase them, the rebate model would instead force hospitals to basically have higher carrying costs for these shrugs until J&J approves the data and approves the rebate payments, which could take a really long time.
(03:07)
And that's a really scary prospect for safety net hospitals that are already functioning on very thin operating margins. That's assuming that J&J would pay rebates on all eligible claims, which isn't something that's guaranteed. David, a big concern with a rebate model is that it gives manufacturers the ability to deny eligible claims based on the manufacturer's determination regarding 340B compliance instead of HRSA that would typically make that determination in an audit.
(03:40)
And we've seen the terms of use for the platform that J&J selected to implement its rebate model. Those terms have really concerning language that basically give drug companies different opportunities to avoid having to offer 340B pricing. And hospitals also, in addition to the financial concerns, expressed a lot of concern about administrative burdens that would come with a rebate model.
(04:06)
So just thinking about what participation would look like, hospitals have really been talking about just all of the additional resources that it would take to do that, to develop arrangements to purchase drugs at non-340B to actually submit the data and then track it and make sure that they were getting rebate payments. And that's something that hospitals are saying is daunting, even just for one manufacturer, but then it just sort of becomes unfathomable in a sense when you're talking about the potential for more manufacturers to join.
David Glendinning (04:43):
This J&J announcement and the fallout from it prompted numerous communications back and forth about these rebates. Please walk us through all the letters that came out about this issue.
Amanda Nagrotsky (04:57):
Yeah, there have been a lot of letters. I'll start with the letter that we sent to HRSA on the eve of J&J's announcement. In that letter we urged HRSA basically to immediately announce that the 340B statute requires drug companies to continue offering upfront 340B discounts and that rebates are not lawful.
(05:20)
We've also taken our concerns about rebates to Congress and that's culminated in a letter to HHS from a bipartisan group of nearly 200 house lawmakers. I believe the number was 189. That group sent a letter to the HHS secretary, urging him to block J&J from implementing its rebate plan. And then HRSA and J&J have also been trading a couple of rounds of letters about this issue over the last couple of weeks.
David Glendinning (05:52):
And I will say that all these actions also generated a significant amount of media coverage, not just by trade publications, but also some larger publications that do not always cover 340B regularly. Definitely a big deal. How did this issue resolve between the agency and the drug maker given the back and forth between J&J and HRSA?
Amanda Nagrotsky (06:16):
So it's been really interesting to see this play out over the last few weeks. HRSA sent a letter to J&J in the middle of September basically saying that, stating HRSA's position that rebates are permitted only when approved by the Secretary of HHS and that J&J hadn't requested or received that approval. And in that letter, HRSA gave J&J essentially until the end of September for J&J to come out and say that it was going to walk away from its plan and that it wouldn't implement rebates or else J&J would be subject to consequences.
(06:53)
But J&J didn't indicate that it would back off as a result of receiving that letter. And then HRSA sent J&J another letter, I think it was three days before the September 30th deadline, where HRSA very clearly said that the agency would refer J&J to the HHS office of Inspector General for civil monetary penalties, for overcharges. And HRSA said that it would begin the process of permanating the agreement that J&J has with the Secretary of HHS its pharmaceutical pricing agreement. If J&J didn't notify HRSA by September 30th that it was going to forego implementation of rebates.
(07:37)
And David, terminating the PPA is really significant and unprecedented. That would mean that if J&J's PPA were terminated, the company would lose access to Medicaid and Medicare per B coverage for all of J&J's shrugs. I can't understate how significant that is and that it would be an unprecedented step by HRSA. And then this culminated on September 30th when J&J wrote back to HRSA saying that it would forego its plan to implement rebates on October 15th.
David Glendinning (08:16):
So going right up to that deadline that HRSA had established for J&J, welcome news to hospitals, I'm sure as September ended and everyone was starting to think about what would happen come October 15th. In their final letter to HRSA about this on that date, why did J&J say it was changing course?
Amanda Nagrotsky (08:38):
Good question. J&J cited HRSA's threat to terminate its PPA as the reason essentially saying that doing that would harm patients that take J&J's drugs, but J&J maintained that it disagreed with HRSA and reiterated its position that the statute allows for rebates, but that HRSA left J&J no choice given the threat to terminate their PPA. And that J&J wouldn't proceed with implementation as a result of that. But J&J did say in that letter back to HRSA that it was reserving all of its legal rights with respect to rebates.
David Glendinning (09:19):
Okay, reserving all legal rights. So even to a non-attorney like me, that language makes it sound like this company is not giving up on its push to implement rebates.
Amanda Nagrotsky (09:30):
Yes. So David, you said that this is welcome news for hospitals and I would think that it's really important to emphasize that, that's absolutely right. This is a definite victory for hospitals in the sense that this rebate model is not going to be implemented on October 15th. But that's right, I mean the fight is not over. J&J was very clear in their letter. They emphasized that they continue to believe that rebates are legally permissible and that they are reserving their rights to impose them in the future.
(10:03)
And similar to other drug companies that we've seen push for rebates in the past for 340B, J&J in their September 30th letter to HRSA said that rebates are needed. Not only are they legal according to J&J, but they are needed to increase program integrity. And J&J also said that rebates are essentially an effective mechanism for manufacturers like J&J to comply with their obligations under a different law, under the Inflation Reduction Act. And those are positions that 340B Health disagrees with.
David Glendinning (10:38):
So you mentioned the IRA, and I know Maureen went into some detail about the connection there as well between rebates and that law. But please remind us how rebates are linked here to the IRA implementation.
Amanda Nagrotsky (10:53):
The IRA has really important implications. For 340B, it essentially entitles providers 340B covered entities to the lower of the 340B selling price or the Medicare negotiated price, what's called the MFP. But at the same time, it protects manufacturers from having to provide both the 340B selling price and the MFP on the same claim. So CMS issued draft guidance on MFP implementation that essentially allows for manufacturers to provide that lower cost for Medicare drugs through a rebate like process. And that's the concern, that opens the door for manufacturers to say that they should be able to do rebates for 340B. That's the concern. And it's a valid concern.
(11:41)
I mean, it's not a coincidence that the two drugs that J&J selected for its rebate model are on CMS's list of drugs that are subject to negotiation under the IRA starting in January, 2026. In response to that guidance from CMS, we have called for CMS to develop a retrospective method for identifying 340B claims like the model that's used in Oregon to prevent Medicaid duplicate discounts. And CMS just recently released its final guidance on how the agency will implement Medicare drug price caps beginning in 2026 under the IRA. And we are in the process of evaluating that guidance.
David Glendinning (12:21):
You had said earlier that hospitals might have won this round, but it's evident that the broader fight over rebates is not over. So where does this debate go from here?
Amanda Nagrotsky (12:33):
This whole concept of rebates for drug companies isn't new. We have seen the drug industry working, attempting to turn 340B, changing it from the upfront discount program that it's been for over 30 years into this back-end rebate program that we just saw J&J try to implement. So Kalderos for example, they're a drug industry consultant. They have tried to get HRSA to approve a rebate model. They did that a few years ago, but HRSA didn't approve it.
(13:03)
And Kalderos has ongoing litigation right now in federal district court in Washington D.C over the right to impose rebates, and we should be getting an update on where that lawsuit stands. With HHS and Kalderos, there's a possibility that they might enter into an agreement to settle the case. The case has been on pause. Pending resolution of lawsuits by a drug company is challenging HRSA's ability to take enforcement action against restrictive contract pharmacy policies.
(13:37)
And the D.C that was not considered those cases issued its ruling earlier this year that the 340B statute doesn't categorically prohibit drug companies from imposing conditions on the distribution of drugs to covered entities. So in light of that ruling, we're waiting to see how HHS and Kalderos decide to proceed with that Kalderos case on rebates, but we continue to see Kalderos promote its rebate model.
(14:04)
And I think, David, it's important to note that HRSA's enforcement letter against J&J that we were talking about earlier was based on HRSA's position that J&J's rebate plan was unlawful because J&J hadn't received HHS approval. So that leaves the door open for drug companies to ask HHS, HRSA to approve a rebate model.
David Glendinning (14:30):
I know this is one of many areas of 340B that you and the rest of the legal and policy team work on here at 340B Health, but it certainly is a big one. How will 340B Health and the 340B hospitals be advocating as these issues are being pondered?
Amanda Nagrotsky (14:51):
We will continue to advocate against drugmaker policies, promoting rebates, or really any condition that limits access to 340B pricing. I mentioned the DC circuit ruling, and I think it's important to note that while that case was decided largely in favor of the drug companies that were imposing contract pharmacy restrictions, those conditions could be found to violate 340B under the court's decision if they were found to be so onerous that they essentially or effectively raise the price of 340B drugs above the statutory ceiling price or cut off all access to 340B pricing for a certain drug.
(15:35)
We're continuing our efforts to urge the administration to take action against more onerous drug company policies that effectively would cut off access to 340B pricing or are incredibly burdensome, including any proposed strategies to turn upfront 340B discounts into rebates. We recently sent a letter to the Department of Justice urging the government not to agree to any negotiated settlement in the Kalderos case that I mentioned that could limit HRSA's ability to stop drug companies from implementing rebate models.
(16:08)
We think it's clear that rebates are unlawful under the 340B statute and of course would cause immense financial and administrative harm on the safety net hospitals. And we're collecting more information to that effect and we will continue working with administration officials and lawmakers to highlight concerns with rebates and of course, use all advocacy and legal options that are available to us to protect 340B.
David Glendinning (16:36):
Amanda, we appreciate you taking the time to bring us up to date and up to speed on all these big items. We mentioned in the previous episode that these developments tend to move fast, so I will repeat my previous advice that everyone visit the show notes to see if we have anything new to say even after sitting here speaking with you. So thank you again for being with us today.
Amanda Nagrotsky (17:01):
Thank you, David.
David Glendinning (17:02):
Thanks again to Amanda Nagrotsky. Please do check the show notes to see some of the numerous letters and other communications that went out over the past few weeks as this rebate issue heated up. And if you have not yet listened to Maureen Testoni's most recent check-in with us, please do so as she covered much more than just rebates.
(17:24)
If you have not subscribed to the show, I urge you to do that as well so you can hear these episodes the day they come out. We will be back with our next episode in a few weeks. In the meantime, as always, thank you for listening and be well.
Speaker 1 (17:43):
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.