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.
Narration (00:03)
Welcome to 340B Insight from 340B Health.
David Glendinning (00:12)
Hello from Washington DC and welcome back to 340B Insight, the premier podcast about the 340B drug pricing program. I'm your host, David Glendinning with 340B Health. Our guest for this episode is our own Steven Miller. Another round of Medicare price caps under the Inflation Reduction Act will affect hospitals starting in 2027. Although those changes are still six months away,
There are important financial projections hospitals should be doing now on this issue, as well as tracking some relevant drug pricing changes that are already happening. We sat down with Steve to sort through all these factors and to get his advice on how 340B hospitals should be preparing for the future. Here's that conversation. I am sitting with Steven Miller, our vice president of pharmacy services and education and a veteran of the podcast at this point.
Steve, thank you for joining us and welcome back to 340B Insight.
Steven Miller (01:12)
Thank you, David. It is great to be here.
David Glendinning (01:15)
So your title here is very appropriate for what we're talking about today, which is the effects of the Inflation Reduction Act on 340B savings. I will say it feels a little bit strange to be speaking about 2027 when we are not even halfway through 2026. But I also know there's some big things coming up next year that everyone needs to be preparing for now. So with that in mind, please remind listeners what is actually changing in
2027 under the IRA and why does it matter for 340 B?
Steven Miller (01:49)
It's important really to look ahead to 2027 now that we have a few months under our belt, so to speak, with the IRA now in 2026. And so it's implemented in January of this year. But for 2027, the program is expanding to another 15 high-cost drugs that are reimbursed under Medicare Part D.
So for 2026, there are about five conditions overall that are being treated by the 10 drugs that went into effect. When we add 15 more to 2027, we're now treating 10 conditions. Of course, all of the drugs being subject to the IRA Medicare price caps have direct implications for 340B savings and overall margins because it
you know, these drugs affect more than just part D. Overall, we expect it to be negative to the, you know, not just to 340B, but to all dispensing pharmacies. This together reinforces the need to plan now for 2027 before waiting for all of the changes to materialize as the program evolves in 2027.
David Glendinning (03:12)
Clearly there's a financial picture emerging here that everyone is trying to get into focus. So what do you see as the biggest financial factors that hospitals should be thinking about right now?
Steven Miller (03:27)
The biggest factor really is the reduction in 340B savings for the affected drugs. Some of the savings will disappear completely. And we're going to see that very shortly with a drug that was introduced on the MFP maximum fare price for 2026 by AbbVie, their cancer drug, and Bruvica. They lowered the list price for that drug down to the Medicare CAP price.
As other manufacturers engage in pricing behaviors that kind of mitigate their historic inflationary penalties due to raising their list prices year over year faster than the rate of inflation, this means that those penalties will fall away when they drop the list price. And therefore we could see
the discount, the 340B discount be limited to the statutory rate of 23.1 % for brand name drugs. This will translate though beyond the Medicare Part D reimbursement being capped at MFP to your commercial and cash pay patients as well, because now that list price has been lowered dramatically. Insurance, PBMs are going to max
the reimbursement down to that rate as well. So you will see a change in your financial savings and revenue for dispensing these drugs. There are other variables as well that could affect the financial picture for hospitals. There could be formulary decisions that could change the volume of the drugs that you use, your payer mix. So what insurance companies will actually cover and at what tier.
they'll cover those drugs could affect the financial picture. Then there could also be unique contracts that you've negotiated where you get a better price for some drugs and you may see your volume change over to that if your providers who are prescribing those drugs also change their prescribing behavior for your patients.
David Glendinning (05:45)
Okay, so there's some hospital specific factors that are at play here and I'm also picking up on some drug maker pricing behavior here as being a sort of a key variable. when it comes to that pricing behavior, what are you seeing so far from the drug companies that are affected by these IRA measures?
Steven Miller (06:05)
We are seeing a number of changes in the manufacturer behaviors, particularly as it comes to the pricing for their list price. We've looked at the drugs that are subject to the Medicare price caps in 2027, and none of them so far in 2026 have increased their prices dramatically.
It ranges from no price increase at all for 2026 to the highest rate was at 6%. Most of the manufacturers that raised prices were in the 2 % 4 % range. So really not enough to invoke penalties for 2026. Those where there is a little bit of a decrease in the 340B price
We think that's going to be temporary and probably pretty small until the changes to the list prices take effect in the future. If the manufacturers for 2027 drugs do what those did for 2026 that dropped their prices dramatically, then you're going to see a significant decrease in the 340B savings. Half of the manufacturers for the 2026 drugs, so five of the 10,
lowered their WAC or wholesale acquisition cost price significantly, some all the way down to MFP as I talked about the example with AbbVie's and Bruvica. Altogether, the variability that hospitals see now and will continue to see is something we all need to plan around for the future.
David Glendinning (07:53)
Okay, so variability or variation picking up on a bit of a theme here. You've mentioned that a few times. So would you say one of the bottom lines here is that hospitals really can't necessarily rely on their current savings levels under 340B when they're planning for 2027?
Steven Miller (08:12)
You are absolutely right. Today's savings are likely temporary for those drugs in the future. The adjustments that we just spoke about really, we are expecting those to sharply reduce the amount of the 340B discounts and budgeting for the future is key here. If you don't change how you're budgeting for the drugs subject to the Medicare price caps, it's likely you're gonna be
short on your budget. And the finance department doesn't like to see that. So that uncertainty and variability really emphasizes the need to be conservative and flexible when you're doing your financial planning and budgeting. If you've already budgeted, I highly recommend that you have a serious conversation with the finance team because they need to know that what was already done may not be what you see.
in 2027.
David Glendinning (09:13)
The way you've been describing some of these changes are indicating to me that some of the effects we will be looking at are ripple effects for lack of a better term. So I'm thinking they're not happening all at once. Can you explain some of the timing of how these pricing changes affect 340B?
Steven Miller (09:31)
It's a little bit complicated because the formula and the timing, if you will, and how the 340B ceiling price is calculated results in a two quarter lag basically. So if a manufacturer changes a price at the beginning of the year, we're not going to see the effect of that change in the list price on the 340B price until the beginning of July.
So it delays that visibility into the full impact of the pricing changes at the list price or the whack price level. There are other factors that will also sometimes come into play. Best price is one of those and that will come into play for the Imbruvica drug that we just talked about that becomes best price. When we spoke about, we could see instances where
the 340B discount is all the way down to the statutory minimum, which is 23.1%.
David Glendinning (10:38)
Everything we've been talking about, a significant amount of variability, some potentially big swings ahead when it comes to 340B savings from all these IRA effects, whether direct or indirect, how do you think hospitals should be thinking about the range here, about the best case versus the worst case scenarios?
Steven Miller (10:58)
So the best case scenario is the manufacturer does not make any substantial changes to their list or whack price. basically status quo, things move along the way they have and we don't really see an impact for that reason. Worst case scenario though is the scary one and that's where we anticipate that all of the drugs subject to the Medicare price cap
for the current year that we're talking about, which would be 2027. And we did this for 2026 as well. All of those are then lowered to the maximum fair price value. And so the 340B savings completely evaporates. Or we see that maximum discount on non-MFP dispenses or non-
Medicare dispenses be the 23.1 % at most. That is a short version of how we describe the best case versus the worst case.
David Glendinning (12:11)
And of course, as you mentioned, the IRA is not just starting in 2027. These Medicare Part D price caps actually went into effect January 1st of this year. What lessons can hospitals take from what they have seen so far in 2026?
Steven Miller (12:28)
The first one is you really need to monitor the list pricing continually because that can change at any time, although it doesn't change that often. So it can be somewhat tedious. The ceiling prices change at the beginning of every quarter and you especially want to mark the MFK drugs or have a special list that you look at those in the ceiling price database.
so that you can see the effect of any changes on the ceiling price up or down, because it can go either direction. We anticipate it going up, the ceiling price going up, which reduces your savings. Those will go down. But 2026 is only a preview, and already CMS has posted that four of the 10 drugs that are subject to the Medicare price caps today will drop off the list.
at the beginning of 2027. We don't know how that will translate to the 2027 drugs until CMS posts a new list, which will show the end dates for those, any drugs that might be dropping off the list. Another important thing to think about is the 2028 list. that list has already been posted by CMS. We don't have prices.
but we know the drugs that will be subject to the price caps. And another important change for 2028 is that some of those drugs are paid by Medicare Part B as in boy. And that is an important distinction because those are medical claims, which is a different data set and different coding that hospitals are gonna have to pay a special attention.
to as those drugs subject to the 2028 price caps come into play. All this means a lot of monitoring. You're gonna have to monitor data sets. You're gonna have to monitor purchasing. This is not a one-time analysis.
David Glendinning (14:42)
Yes, I know hospitals do not want to be caught flat footed by all the changes coming in 2027. So maybe you could expand upon that a little bit. What practical steps should the 340B teams be taking now?
Steven Miller (14:55)
great segue to really the detail that hospitals need to provide to their financial team, particularly the CFO needs to understand the modeling and what the changes might affect for the budget, particularly you want to engage leaders in both finance and pharmacy and the organization. All of those leaders really need to understand how the
Medicare price caps fit into the bigger picture. Remember, these are high volume, high cost drugs. So they have an impact. You also want to really take a very close look at how you're using these drugs for your patients. So your volume, because that is going to give you a perception of your exposure to the changes and the financial picture. Looking at the ceiling prices, every
quarter and monitoring overall price changes for wholesale acquisition cost. Your wholesalers probably can help with that with reporting, but you want to have those reports in hand so that you can do your own analysis. And then you want to be able to adjust your strategy. Different hospitals may have a different tolerance or motivation to adjust strategies based on some of these things that are happening in the
the pricing and access arena, but as new data emerges, it may become imperative to do that. So you wanna be flexible as well. The last thing I wanna mention is many hospitals support patient care services through 340B savings. As 340B savings are affected or impacted, you absolutely wanna make sure you've got secure
funding or support from maybe other areas for your patients that are relying on those services.
David Glendinning (17:00)
We've had a couple of past episodes where we spoke about using 340B Health's IRA calculator. That was in advance of all the 2026 caps, but now I understand it has been updated for 2027. How does this calculator help member hospitals with all of this financial modeling that you've been speaking about?
Steven Miller (17:21)
The calculator is a tool and it puts all of the data in one place. As drugs are added and the maximum fare prices are announced and the WAC prices change, we update the calculator. We try to limit that to once a year to be able to give hospitals, member, 340B Health member hospitals a way to do this modeling.
That's easy. All they have to do is input their volume and their non-340B prices and that shows them the change in what they're going to anticipate. Obviously, it's an estimate because volumes can change and pricing can change in the future after the calculator is published. So it's not an absolute thing, but it's a great tool for projecting savings in the future.
It also will help with the budgeting piece that we spoke about.
David Glendinning (18:25)
I know you're also asking member hospitals not just to use the calculator, but also to tell us what numbers that calculator produces for them. So why is it so important for hospitals to share their projections with 340B Health?
Steven Miller (18:39)
I'm glad you asked that question, David, because I really want to shout out to hospitals that this information is so very important to advocacy. First, though, it is confidential information. There's 10 questions, if I remember correctly, that ask for specific cell data in the calculator itself. And that gives us
the ability to aggregate and provide trends, for example, or total impacts over X number of hospitals that really strengthens the messaging that we put into our advocacy efforts, not only for the IRA and MFP and all of the things that are going on there and getting the rebates, but also
Overall advocacy for 340B as manufacturers continue to claw back savings from safety net providers. So as we have information from a broad range of hospitals and hospital types and sizes, that also goes into this broad representation that 340B Health, like no other 340B organization can do.
for its hospital members on the national scene.
David Glendinning (20:06)
I know this is a very complex topic, but also very important one. So we appreciate you cutting through all the complexity on this and getting to what really matters. Of course, we'll be sure to include links in the show notes to the calculator and the instructions for our member hospitals so they can crunch all these numbers and confidentially report what they find at 340B Health. Steve, thank you again for being here.
Steven Miller (20:31)
You are more than welcome.
David Glendinning (20:33)
Our thanks again to Steven Miller for explaining why there is no time like the present to be thinking about 2027 Medicare price caps and their potential 340B effects. If you are a 340B health member hospital, please be sure to visit the show notes to find out how you can access the IRA calculator that Steve talked about and the link for confidentially sharing your projections with 340B health. We very much appreciate all the hospitals and health systems that have shared their helpful data so far.
We will be back in a few weeks with our next episode. In the meantime, as always, thanks for listening and be well.
Narration (21:12)
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.