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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.
Narration [00:00:04]:
Welcome to 340B Insight from 340B Health.
David Glendinning [00:00:13]:
Hello from Washington D.C. and welcome back to 340B Insight, the premier podcast about the 340B drug pricing program. I'm your host David Glendenning with 340B Health. Our guest today is 340B Health President and CEO Maureen Testoni. We speak with Maureen several times a year and we recently had her back in the booth to cover what has been a jam packed fall season for 340B developments. Here's our conversation. Maureen, thank you for being back on 340B Insight.
Maureen Testoni [00:00:45]:
Thank you David. I'm really happy to be back.
David Glendinning [00:00:49]:
You were last on the podcast back in May, so obviously a few things have happened since then. What has been happening in 340B since we last spoke with you?
Maureen Testoni [00:00:59]:
We talked about the potential for rebates last time and we have seen since then HRSA release guidance on a rebate pilot. We're also seeing the administration moving towards possible cuts to Medicare reimbursement for 340B drugs covered under Medicare Part B for 340B hospitals. And if they do decide to do that, we would see that those cuts as early as 2027. And then we've been seeing all year states enacting additional 340B laws with both positive and negative outcomes for 340B providers.
David Glendinning [00:01:41]:
Yes, I know you spoke at length about rebates the last time you were on, but as you mentioned, there's now this HRSA rebate pilot program in the mix. So where do we stand as of today with that pilot?
Maureen Testoni [00:01:53]:
So HRSA came out with guidance on this pilot. They asked people to submit comments, which of course we did. Manufacturers and others did as well. And HRSA also announced that the application process for manufacturers that want to be able to implement a 340B rebate model as of today, all nine of the manufacturers of the 10 drugs that are subject to the price caps, the Medicare price caps under the Inflation Reduction act did submit applications to HRSA because they want to move forward with a rebate program. What this means is that we will get information on whether or not HRSA approved all nine or just some of the nine at some point soon. HRSA was expected to make a decision in mid October. It does not appear that HRSA has notified manufacturers of their decision provide presumably due to the government shutdown. So that is definitely a complication for implementation of this rebate plan because if we're going to go forward with it and the effective date is January 1, HRSA requires manufacturers to provide at least eight weeks of notice to covered entities so that they can prepare.
Maureen Testoni [00:03:17]:
I'm still expecting and hoping for information on this by early November because I know the government really wants to implement this.
David Glendinning [00:03:26]:
I will say, as I often do, that this is the situation as we're speaking here today. Certainly there are many people hoping the government shutdown ends soon, but as you say, it might not. So are 340B hospitals just in a wait and see situation right now as we approach early November?
Maureen Testoni [00:03:46]:
Well, David, in some ways they are because we don't, you know, we don't have all the information we need. But honestly there is a lot of information that's out there already that hospitals can really be studying and doing other things to prepare for 340B rebates. So beacon is going to be the vendor for all of the nine drug makers that plan to implement rebates. So we are aware of that. Beacon has been releasing FAQs. They've been communicating with third party administrators. Navigation. Now we have seen some things on the website that are a little surprising.
Maureen Testoni [00:04:24]:
For example, drug makers are list there that covered entities will be required to submit data that was not included by HRSA in their rebate guidance. And that data pertains to your invoices for the drugs you purchase because the manufacturers want to see that you purchase the drug because before you dispense the drug. So this is a reminder to everybody out there, the rebate plan for these 10 drugs is not a replenishment model. You are buying the drugs ahead of time, you dispense them and then you can request a rebate. Manufacturers want to see the price that you paid to confirm that you did pay WAC or other commercial price. They do not want to have to pay rebates months after you dispense the drugs because that can impact their ability to set to meet their own government requirements for setting drug pricing. Another issue that we saw that's new on the Beacon website is a provision that suggests that they will give you up to seven days after the dispense to be able to purchase the drug. Again, we did not see that in the rebate pilot, so we don't know if that has been approved.
Maureen Testoni [00:05:43]:
The manufacturers have a pretty broad range for denying these claims and that is really important to remember. They appear to be able to deny rebate claims for violating their contract pharmacy restrictions. I'm not exactly sure how that works because I don't know that HRSA could really adjudicate that. They also say that they will deny a rebate claim if they have already paid a rebate to another provider for that claim. Again, that appears to be a very tricky one, you know, because you don't know who else claimed to be able to claim the rebate for that drug or why they would, why that would happen. But you're going to want to make sure that you have impeccable records to demonstrate that that claim really pertains to your facility. They will also have, you know, be getting a lot of data which they're making clear that they, you know, know, intend to use to be able to evaluate which providers they should be requesting audits for duplicate discounts and diversion. Although they are not permitted to deny a rebate claim based on their concerns that it could be subject to a duplicate discount or diversion.
Maureen Testoni [00:06:56]:
Another big thing is the potential for delays in getting your rebates either to denials or just some other reason, because many manufacturers ask for more time in their commas to HRSA to pay rebates more than the 10 days from when they receive your data. And that's obviously a huge concern because even if everything works perfectly, hospitals are going to be floating millions of dollars to drug makers and spending a lot of money on, you know, administration of the program separately. You know, litigation on the whole rebate issue is, is still ongoing. You know, the manufacturers sued HRSA in the fall because they believe they can do a rebate without having to follow HRSA's rules. So it will be interesting to see how that goes.
David Glendinning [00:07:41]:
Clearly, the information from Beacon shows still a lot that appears to be happening under the hood, so to speak, as we move toward January. So what else can hospitals be doing in the meantime as they await more info coming out on rebates?
Maureen Testoni [00:07:57]:
So I think hospitals, with the information that is on the Beacon website now for the 340B rebates you can start preparing for for the January 1st effective date. I would probably start by talking to your third party administrators and what you want to know is what are their plans for implementing this if the information on the Beacon website is correct? Because what you want to know is what will be the role for you, for the hospital staff in order to make sure that this goes as smoothly as possible so that you can evaluate what your risk is in terms of having to float money and to manufacturers, how to maintain your inventory, et cetera. And then you can pass that information and work also with your finance department so that you are well prepared for what the financial impact can be. Another thing that will be happening at the same time is that CMS will be implementing the IRA's Medicare price caps on the 10 drugs that would be covered under both the rebate program and and the ira. Now, for the ira, unlike with the rebate program, the Medicare price caps apply only to the 10 drugs when they are covered by Medicare Part D. Again, that is not true for Medicare 340B rebate. All of those 10 drugs that you purchase for outpatient use, you will have to purchase at WAC and wait for a rebate. But for those hospitals that have, for example, open door pharmacies, you will have non 340B drugs.
Maureen Testoni [00:09:33]:
And those non 340B drugs will have to follow to the extent that they are dispensed to Medicare Part D patients. You will have to follow the IRA rules for this, which means that your pharmacies will need to register, and I'm hoping that many of you did that over the summer. And then you will need to buy your drugs at wac, although there is some room to negotiate a different price with the manufacturer. And you'll want to make sure that you are signed up with Beacon to be able to keep track of what is going on with your claims. But for your 340B drugs, there will be an issue of timing. If you are able to get your 340B rebate data to the manufacturer before the MFP claim gets to the manufacturer, you will receive your 340B rebate and you will not have to worry about receiving the MFP refund. But there could be some situations where the mfp, the data gets on the MFP gets to the manufacturer first before you've submitted your claim for a 340 rebate. In that situation, you're likely to be paid an MFP rebate and then you would still be owed a small amount to make the to reach the difference between the MFP and and the 340B discount.
Maureen Testoni [00:10:56]:
So you will need to be watching both of the platforms to make sure that you are staying up on all of this information.
David Glendinning [00:11:05]:
Okay, so hopefully hospitals will be as prepared as possible for the new year. And it certainly sounds like there will be resources out there to help them do that. So what about after January 1st? What do hospitals need to be thinking about when this is actually all in effect?
Maureen Testoni [00:11:22]:
So one of the most important things from my view, is that we are really paying close attention to how this 340B model is working. HRSA has said, look, if this is not working, if the rebates are taking way too long to reach you, if a Lot of your rebates, you know, way more than you would expect, are being denied. Those could be signs that that drug manufacturer needs to be removed from the rebate program. And HRSA has made clear that that's what they intend to do. But they're only going to be able to do that if they get information from covered entities. So we are putting on our website a way to let us know about any problems at all that you're having, as well as materials to let HRSA know. And also, HRSA is going to be evaluating this whole process because this is a rebate pilot. It's supposed to be in place for a year, after which HRSA is going to evaluate whether to continue it and perhaps even expand the number of drugs, and that would be subject to it.
Maureen Testoni [00:12:22]:
We don't know exactly what HRSA is going to look at for that evaluation, but there is no question that they will look at covered entity concerns and harm that covered entities may experience under this rebate program. Now, maybe, you know, this is there's going to be no problems and maybe it'll be really smooth and easy, although still more expensive for covered entities because they have to wait for the rebate and instead of getting it at purchased. But let's make sure we're all prepared and you've assigned who it is who's going to have to report and track all these problems so that we can get the information quickly and HRSA can take action quickly if needed.
David Glendinning [00:13:01]:
Thank you for filling us in on rebates. I know there's so much ground to cover there. You mentioned possible Medicare cuts to hospitals to 340B hospitals. Where would those be coming from?
Maureen Testoni [00:13:12]:
So the Trump administration released an executive order earlier this year directing CMS to survey hospitals on drug acquisition costs, with the goal of using the results of those surveys to set payment rates for Medicare Part b drugs in 2027. Now, many of you may remember that a few years ago in the first Trump administration, CMS reduced reimbursement for 340B drugs and not for other drugs for a period of 2018-2022. And the Supreme Court said, yeah, you know, this is illegal, and CMS should not have done this because they're clearly required under the statute to do a survey before making cuts. So now CMS has come out with a proposed rule for outpatient prospective payments, and they have said that they're going to do a survey. We certainly oppose the survey because we believe it's going to be targeting 340B drugs and perhaps go all the way down to actual acquisition costs, which would be a steeper cut than we saw in the prior administration. But it does seem like they are going to go forward. One thing that we're really watching for, because CMS hinted at that this time, is whether they will try to have some kind of of punishment or fine or something for hospitals that do not complete the survey. That was not the case last time, and I'm not sure what authority they would have to do that.
Maureen Testoni [00:14:49]:
But they did talk about that in the proposed rule. We'll be looking closely to see if that is the direction that they go. Once they get this information, they will then use that to base cuts on reimbursement. And even though they are collecting data from all hospitals, my opinion is that they're really Planning to target 340B hospitals for cuts to drug reimbursement.
David Glendinning [00:15:15]:
As you said, we have seen a lot of 340B activity going on in state legislatures as well. So what have state houses and governors been up to recently on 340B bills?
Maureen Testoni [00:15:27]:
So there's still amazing amount of action on 340B in states. You know, and this is very new for states. We're seeing two big issues now. One relates to contract pharmacy protections to prohibit the manufacturers from limiting the use of contract pharmacies. And the other one pertains to reporting about 340B on a lot of different measures, like, you know, levels of charity care, what you're spending on which drugs, and that type of thing. So right now there's almost 20 states and that have contract pharmacy protection laws in place, which is fantastic. And those states have seen a number of manufacturers stop their contract pharmacy restrictions so they are able to purchase at 340B prices, many more drugs than they were before their states passed those laws. However, there's a small number of drug makers and their, and pharma, their association that have sued to block all of these statutes.
Maureen Testoni [00:16:34]:
But so far those requests have been denied and the decisions have really been going in favor of states. And this is despite significant, I mean, significant advocacy against these bills directly by drug manufacturers in all the states that are considering them. So in addition to contract pharmacy laws, we've also seen a dramatic increase in states enacting laws for 340B hospitals to report on various measures around how they're using 340B, how much money they're getting from 340B and in what ways. So Colorado was the first to enact provisions banning the use of 340B savings for CEO bonuses, lobbying, and similar types of areas. Now, I don't doubt very much that any 340B hospital was using 340B savings for those purposes in the first place. But what this will do is require a lot more tracking by 340B hospitals to make clear that there were no 340B savings that were used for those purposes. But a more concerning proposal to restrict how you can use your 340B savings appears in a bill that was introduced in Michigan that would restrict 340B money to being used only for patient services or for community benefits by the hospital. And that is a big restriction.
Maureen Testoni [00:18:05]:
It could potentially result in barring spending on items like capital improvements that benefit patients. So we are concerned about measures that would restrict how hospitals can use 340B. And I should emphasize hospitals are in 340B only by demonstrating every single year that they are serving a daily disproportionate share of low income patients. So they're already proving that to be in 340B, which would seem to make these restrictions on how to use 340B definitely unnecessary.
David Glendinning [00:18:44]:
At the top of the show this time, you did not mention Congress as a key topic. But are we seeing anything on 340B from Capitol Hill lately?
Maureen Testoni [00:18:52]:
So, David, although the government is shut down, members of Congress, you know, in the Senate and the House are still working. And in fact, we are seeing some discussions of 340B, including 340B hearings. Recently, the chairman of the two committees, one on the House, one on the Senate, responsible for 340B oversight, asked the Congressional Budget Office to look at 340B, at the growth in 340B spending. And CBO released their report about a month ago or two months ago, listing what they view as causes of the growth, as well as how they believe 340B may cause extra spending by the federal government. One is just regular marketplace increases in prices as well as high increase in prices by certain drug classes that the 340 entities usually use because of the types of services they provide. They're also saying that vertical integration among hospitals. So those are hospitals that open a new clinic or that, you know, purchase a physician practice. That type of integration they believe is responsible for growth in 340B.
Maureen Testoni [00:20:17]:
They also say that 340B incentivizes providers, 3, 4B providers to prescribe more drugs or more expensive drugs. And then the last one is contract pharmacy, because that was expanded 10. And then CBO says, okay, when you look at these factors, these could all result in higher government spending because the vertical integration can allow hospitals just to charge more more for services. Obviously, if hospitals are prescribing more and more expensive drugs, that's going to have an impact on how much money Medicare spends on drugs or Medicaid or other federal programs. But CBO also acknowledged that they just don't have any data. But if you reduce 340B, that could also have implications. Like for example, if people really are getting more services, which they are, and that is helping them stay healthier, then perhaps it's reducing healthcare costs and down the line. So and they said we don't know and that could be a factor in some cases.
Maureen Testoni [00:21:25]:
SIBO does a great job providing, you know, the varying positions taken by well respected researchers with other ones, like the issue of prescribing more drugs that was much more limited and tended to focus on research that would support that, that kind of a conclusion. So that is something that is likely to be discussed in Congress. The Congressional Budget Office reports to them and they really are more likely to rely on their conclusions or look at their conclusions than they are other types of government entities.
David Glendinning [00:21:59]:
So certainly so much going on in the world of 340B and with everything going on in the remaining months of 2025, I'm reasonably confident we'll have you back on the show again before too long. So thank you again for being here today to get us up to speed.
Maureen Testoni [00:22:14]:
Thank you. Thank you so much. David and I always look forward to being on your show.
David Glendinning [00:22:19]:
We thank Maureen Testoni again for joining us today and being such a regular feature on the show. As always, please check out the Show Notes for more member only content about all the issues that Maureen discussed today. And if you have not signed up yet for the 340B Coalition winter conference, please do so today to take advantage of early bird registration discounts. You can find out all the conference info@340bwinterconference.org we will be back in a few weeks with our next episode. In the meantime, as always, thanks for listening and be well.
Narration [00:22:56]:
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.