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It has been an eventful summer for 340B, and we are checking in this week with 340B Health President and CEO Maureen Testoni to hear her analysis on the top 340B developments. Maureen provides updates on issues that include the contract pharmacy dispute, Medicare payment cuts, and the new drug pricing law. She also shares a preview of what may occur in the fall.
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'm David Glendinning with 340B Health. Our guest today is our President and CEO, Maureen Testoni. We regularly have Maureen on the show to discuss all things 340B, including the latest developments affecting participating hospitals and health systems.
Before we get to that interview, I encourage listeners who have not yet caught up on all the episodes we released over the summer, to do so. We have covered numerous 340B operations and compliance topics and featured useful advice for hospitals, including on data analytics, specialty pharmacy, inventory management, pharmacy technician shortages, and drug shortages. Be sure to subscribe so you receive all our new episodes the day they come out.
Now, for our feature interview with Maureen Testoni. Myles Goldman recently sat down with Maureen to discuss an eventful summer for 340B and to give her thoughts on what is set to be a busy fall ahead. Here's that conversation.
Myles Goldman (01:18):
Maureen, it's great to be speaking with you again. Welcome back to 340B Insight.
Maureen Testoni (01:24):
Thanks so much, Myles. It's really great to back.
Myles Goldman (01:27):
It's been a little while since we've had the opportunity to speak with you. Everything was just blooming the last time we spoke with you early in the spring, and now of course we're preparing for the fall. Let's start by talking more about where the 340B contract pharmacy dispute stands.
Maureen Testoni (01:45):
So at this point, there are about 18 companies out of about 600 that are restricting 340B discounts, so that's two more than the last time that we spoke. The two new ones are called Excelsis and Bausch Health.
Now, we have been working in a lot of different ways at 340B Health to try to stop these unlawful restrictions.We've been engaging with the administration, the Department of Health and Human Services. We have been very active with the courts, because there's ongoing litigation on this. We've been working very closely with Capital Hill and also very closely with our hospital members. Sadly, the new restrictions, the new companies that joined this activity this year have had a tremendous impact on the savings from 340B that providers can get.
One thing that we were able to report from a survey we did in May is the financial impact of these restrictions has more than doubled since the end of 2021. We are seeing that the larger more urban hospitals estimated that their median loss from the restrictions was more than $2 million a year, while smaller rural hospitals projected a loss of about $450,000 a year, which honestly can make the difference between staying open or closed for some of those hospitals. 10% of the small hospitals even projected $1.3 million in annual losses, so you can really understand what a big thing this is for rural hospitals.
Another thing that we learned from the survey, we asked what would happen if these drug company restrictions become permanent, and 75% of the hospital surveys reported they would need to make cuts to vital health services. I mean, there's just no way to sustain the level of services that they're providing without the 340B savings. Then we saw a third of the smaller mostly rural hospitals report that the restrictions could absolutely put them at risk of closing. That's really not a surprise when you understand the magnitude of what these cuts are.
We have been working closely with HRSA, as I said, and HRSA has sent more letters to companies, more violation letters to company and referred more companies to the Office of the Inspector General for possible fines. So, what we're seeing there is that HRSA is continuing to take steps to enforce the statute to make these companies actually reinstate the contract pharmacy discount, but we have not yet seen the Office of the Inspector General move forward with actually issuing fines. I think the fact that this is all still tied up in litigation probably contributes to that.
Myles Goldman (04:27):
We're always thinking about Capital Hill here. How have contract pharmacy discussions with Congress gone?
Maureen Testoni (04:33):
Congress is very interested in this whole issue, and so we have been working very closely with them ourselves, but also our member hospitals and health systems have been also going to Capitol Hill and working very closely and directly with their representatives and educating them about the full impact. 340B can sometimes be a little hard to understand, but hospitals have really done a great job at sharing that information, really discussing what kinds of services, how it's really affecting and going to affect them going forward.
We had a advocacy day in June where we had more than 250 hospital representatives participate and meet with members of Congress. We also saw, there was a big effort where we worked with members of Congress to sign a letter to Secretary Becerra asking for the administration to take further action, that the OIG should actually move forward with issuing fines on the drug companies. That letter was signed by a whopping 180 members of the House, and it was very much a bipartisan letter.
We also saw for the first time ever a special order on the House floor with seven members of Congress, both Democrats and Republicans, really focusing on what is going on with 340B. How important it is, what these restrictions mean for hospitals, and it was the very first time we've ever seen a special or a whole hour like that dedicated to 340B. So, that gives you a sense of how important and how much time members of Congress are devoting to this.
Myles Goldman (06:16):
Well, that special order hour was certainly exciting to watch on C-SPAN. When we last spoke, you noted some trends you were seeing in the company's restrictions. Have those trends continued?
Maureen Testoni (06:32):
Yeah, they really have, Myles. What we're seeing is that it's very clear, the manufacturers that are participating in this that are restricting discounts, what they're trying to do, many of them, are to get out of paying discounts on drugs where the manufacturers have raised the prices of those drugs significantly over time. That's really a big focus.
The reason why they do that is because when manufacturers raise their prices higher than inflation over and over, as we've all heard about, skyrocketing drug costs, Congress included in the 340B law a penalty that will require manufacturers to pay higher 340B discounts on those drugs where they've raised the price a lot over time.
What we're seeing is the manufacturers that are participating in these restrictions, for many of them most of their drugs are subject to these kinds of discounts, so they're really trying to get out of the penalty that Congress is really trying to impose on that kind of behavior. Then the other trend is the targeting of specialty drugs, and we're still seeing that as well.
The last trend I would mention is that about half of the manufacturers that are doing this have said they will give discounts to providers that will share private claims data with them. Everybody has very great concerns about sharing this information. It can result in privacy issues, it can be used in a way that would pay 340B providers less for their drug claims. We've certainly seen some of the pharmacy benefit managers attempt to do that over the years.
So some of our hospitals are under such financial distress, as you've heard before, some are looking at potential closure, that they have shared some claims data even against their wishes, but we are consistently hearing from them what a nightmare this whole process was. That even though they're sharing the data, they aren't consistently getting the discounts or not, and so they're having to spend huge amounts of time, including having full FTEs or multiple FTEs, just focusing to track it so that they can discover when and where the discounts have been turned on or turned off.
Myles Goldman (08:45):
Well, appreciate you sharing those trends with us and highlighting them for us. We've spoken before about how the courts are another place where this contract pharmacy dispute is occurring. Where do the court cases stand now, and what is the timeline for those cases moving forward?
Maureen Testoni (09:06):
Well, Myles, there has been many lawsuits that manufacturers have filed, as HRSA has told them that they're going to have to start providing discounts. Those were all filed in one of four courts and all four of those courts have issued decisions. Some have been in favor of the government, some have been in favor of manufacturers, many had pros for both sides, and all of those decisions have been appealed. So, all of those appeals are right now sitting in front of three appellate courts.
We have filed Friend of the Court briefs in all of those decisions to help judges understand what's at stake for hospitals and their patients, and also to point out what is really going on here with manufacturers trying to target the specific drugs, target specialty drugs, target the drugs where they're being penalized for raising prices, so that we're making clear what is really going on behind the scenes on this.
One of the central issues here is whether drug companies can impose conditions on 340B discounts as they're doing now, if they're saying we'll only give you the discount if you share data with us. We think that if that is permitted, if that is the way the lawsuits go, then the whole 340B program is in grave danger. We very much share that position with the government who comment in their filings that letting the drug companies put restrictions on 340B discounts is like asking the fox to guard the henhouse.
Myles Goldman (10:43):
In terms of timeline, when will the arguments in the appeals cases take place?
Maureen Testoni (10:49):
So, the arguments in two of the appeals will be taking place towards the end of next month, the third one I don't believe has been scheduled yet. I can't say for sure when the decisions would come in. It could be in a month after that or it could be six months, or it could be later, but I personally believe that we will see the decisions on these in the first half of 2023, if not sooner.
Myles Goldman (11:16):
Well, that certainly is something we'll all be keeping an eye on. Despite everything we've discussed on contract pharmacy, there are several other issues I want to make sure we discuss, and one of those has to do with Medicare cuts. 340B hospital professionals have been following this issue of Medicare cuts to 340B drugs for several years, and there was a major development this summer from the US Supreme Court. What has happened since the court's decision?
Maureen Testoni (11:46):
So that was a great development, Myles, which is that the Supreme Court unanimously found that the cuts that the government put in place in 2018 and 2019 were unlawful. So, what's going to happen now is that the case is being sent back to the lower court to determine the remedy for hospitals. Typically, what the court will do is they will hear from both the government and from the hospitals and ask them to work together to determine what the remedy would be.
In the meantime, CMS is still doing those cuts, paying at the lower levels in 2022, but they have proposed that for 2023, they would like to, they intend to end those cuts. Then they're also looking for comments on how to go about preparing a remedy for hospitals. They did not move forward with stopping the cuts in 2022, they argued that administratively it was too burdensome. We disagree with that. If you're doing something illegal, you need to stop it right now. Even if it is burdensome, you shouldn't really be allowed to keep doing it.
Myles Goldman (12:58):
How should hospitals be repaid for the unlawful past payment cuts? When do you think hospitals should expect to be repaid?
Maureen Testoni (13:07):
So we have been arguing to the government, we've sent our comments in, we've been arguing that absolutely each individual hospital should be repaid what they were not paid since 2018 for these drugs. It would not be a difficult amount to figure out. They have full records of how much they paid each 340B hospital and how much they should have paid if they had used the same rate that they use for everybody else. So, we think that's how it should be.
However, what CMS is arguing is that when they made these cuts, they took the money that they would've otherwise paid to 340B hospitals and just put it back into the pot for other Medicare Part B services. Which means that as the reimbursement for 340B drugs went down, the reimbursement for all other Part B services went up. So, what CMS is arguing is if we have to repay 340B hospitals, then that means that we have to recover the extra amount that we paid for the other Part B services.
We think this is absolutely false. In our view, it's a red herring. This is not required by any statute that we've seen at all, and so we're really arguing hard against that, as are the hospital associations that are involved in the litigation arguing against that in federal court. But that is still an issue that's out there.
In terms of timing, honestly, I think it's going to be a long time before hospitals start to see repayment. So, hopefully in January 340B hospitals will immediately see the higher reimbursement being put back in place for 340B drugs, but actual repayment, just with my experience as a lawyer and participating in similar types of things in the past, it takes a while, so I could see that taking a couple of years.
Myles Goldman (15:02):
We were discussing Capital Hill earlier. Can you tell us more about the drug pricing legislation that was enacted this summer?
Maureen Testoni (15:11):
I started working at Capital Hill about 30 years ago, and this was a big thing that was being pushed even back then. Basically what's put on the books now for drugs is that Medicare will be able to negotiate prices on certain high cost drugs. So instead of just paying what the manufacturers charge and what others are paying, they're now going to be able to use their market power as a really big payer and negotiate on these prices.
It's not going to start immediately, it's going to start in 2026. It's going to start with a shorter list of drugs that are covered by Medicare Part D. Over time, it will expand and it will start to include Medicare Part B drugs. One of the important things to understand with this legislation that's different from some of the packages that were discussed in prior years is that the prices negotiated by the government are going to apply only to drugs that are used for Medicare patients.
In terms of 340B hospitals and 340B in general, in the short-term, we don't think 340B, the prices for negotiated drugs. So in other words, the formula that the government uses to determine what the discount should be for 340B, we don't think that is really going to be affected much in the short-term. However, because Medicare will be negotiating lower prices for these drugs, they'll be paying less for those drugs, and that does mean for 340B hospitals, that 340B savings for the negotiated drugs will be lower. So, that will be a financial impact for 340B hospitals.
Over time, the lower prices for the negotiated drugs could impact the 340B price for drugs, but how much of an impact there is not yet clear. We worked with Congress on some of these provisions to make sure that 340B hospitals can access the Medicare negotiated price if it's lower than the 340B price. There's going to be a lot of implementation here.
That's really the big message I want people to understand. This is not going to be something where we flip a switch and all this stuff starts happening, there's going to be a lot of public comments on this. We'll working very closely with our members to make sure that they have the opportunity to participate in this process and ensure that 340B hospitals will have a voice at the table.
Myles Goldman (17:37):
We've spoken before on the podcast about 340B research. Is there new research 340B Health members should be aware of?
Maureen Testoni (17:46):
Yeah, Myles, the research is a huge focus for 340B Health, because that is really what allows us to put the information in front of policy makers that we use to help protect the program. In fiscal year 2020, which is the year that COVID overtook the nation's hospitals, 340B disproportionate share hospitals on average saw operating margins drop by 74% from the prior year, which brought them squarely in the red on average.
Now subsequently the government did issue some COVID assistant, which certainly helped, but did not bring those hospitals out of the red at all on average. But despite the fact that they saw that they took such a financial hit, the other thing that we were able to see is that 340B disproportionate share hospitals increased by nearly 10% the amount of uncompensated care that they provided.
So uncompensated care includes charity care, it includes bad debt, and bad debt is usually write-offs for people that just can't afford to pay their bills. In total, they provided 67% of the nation's uncompensated care, despite making up only 44% of all hospitals. I think one aspect of this that is really important. The data for this particular study we actually took from Medicare cost reports, so it's a very objective source of data.
Myles Goldman (19:21):
So, one of the big events that took place between the last time we spoke with you and now here was the 340B Coalition Summer Conference which took place last month. How did it go and what were your big takeaways from the event?
Maureen Testoni (19:36):
Myles, it was great. It was so fantastic to see so many people in D.C. for the first time in three years. We had nearly 2,000 attendees in total, one of our biggest events ever. The attendees come from all over the country, they represent all different kinds of stakeholder groups. So all the different types of providers that participate in 340B were there, and it allowed us, what we can do at that conference, one of the biggest things is the networking.
We can talk to one another, we can strategize on what is going on, for example, with the restrictions that drug companies have imposed. How do we work through all the different things that the companies are throwing at us? I myself hosted two roundtables for providers to really just focus on these kinds of things, like what is really going on with all these different restrictions and with sharing data, what you have to do. What are people seeing?
One of the common themes that we talked about is the need to advocate for 340B, and particularly making sure that policy makers understands how 340B supports the healthcare safety net. In my 12 years with 340B Health, that has been the number one thing that has helped turn around the discussion on 340B is when providers are able to put on paper and talk about we get this much from 340B, and it allows us to provide these different services.
Not a dollar for dollar comparison, but something that is very concrete that says with 340B, we're able to have this much on compensated care, we're able to provide these kinds of clinics for diabetes, for different types of disease states. When people can be very clear about how 340B helps them, it really makes a difference to policy makers.
We also had an opportunity to celebrate 340B's 30th anniversary, the one that's coming up soon in November, and to really remind ourselves how remarkable 340B has been over the past 30 years. The way healthcare has changed and how much 340B has really been able to help patients in a very real and meaningful way.
We held a 30th anniversary reception at the conference, and we had speeches by pharmacists. One of whom was Nicole Shoquist with JPS Health Network in Texas, and we had Logan Yoho from Hopewell Health Centers in Ohio. They've really been able to talk about how much it meant on what they've been able to do.
I think that's really important that right now with the manufacturer restrictions there is conflict about 340B, but I think it's important for all of us to focus on how many patients have really been helped by 340B over the past 30 years, and so how much of a contribution to the healthcare safety net 340B is.
Myles Goldman (22:41):
Well, it's certainly exciting about the 30th anniversary. It was certainly great to be in that room with people celebrating. I will say too, we'll be talking more about the 30th anniversary on this very podcast as we approach November, and I'm sure we'll have you back on soon to give us another update. Thank you as always for coming on and walking us through all the latest developments in 340B.
Maureen Testoni (23:03):
Thank you, Myles. I really appreciate the opportunity to do this.
David Glendinning (23:07):
Our thanks again to Maureen Testoni for coming back on the program to inform our listeners about the dynamic 340B landscape. We are sure she will have even more to say the next time we have her back on the program.
In the meantime, we encourage those of you who are 340B Health members to sign up for our upcoming webinars. Visit the show notes to register for our panels on 340B activity in the states, the Inflation Reduction Act's drug pricing provisions, and the latest 340B updates from the field. We will be back in a couple of weeks with our next episode. As always, thanks for listening and to be well.
Speaker 1 (23:50):
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 at 340B Health, and submit a question or idea to the show by emailing us at podcast@340bhealth.org.