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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 [00:00:12]:
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 for this episode is Meetali Desai, the Director of Pharmacy Business Services at UMass Memorial Medical Center.
David Glendinning [00:00:32]:
Meetali is also a board member of.
David Glendinning [00:00:34]:
340B Health and is a return visitor to the show we last had her on in August 2023 to speak about a 340B health resource that hospitals can use to project the effect of Medicare price caps under the Inflation Reduction Act. Now that we are closer to the implementation date of these caps, we wanted to have her back on to discuss a key update to that projection tool. But before we get to that interview, let's do a quick recap of some of the Latest news about 340B. Another federal district court judge says the government has pre approval authority over 340B rebates. This decision from the U.S. district Court for the District of Columbia means the drug company Johnson and Johnson cannot unilaterally replace upfront discounts with back end rebates. J and J has appealed the decision to the same appellate court considering appeals of a similar decision for several drug makers that came from another judge on the same lower court. J and J is asking for its case to be consolidated with those cases on an expedited schedule.
David Glendinning [00:01:46]:
That means the U.S. court of Appeals for the D.C. circuit may issue a decision on the rebate issue as early as this fall. 340B Health and our member hospitals Genesis Healthcare System and UMass Memorial Medical center remain intervener defendants in all the cases and will be filing arguments with the appeals court on why drug maker rebates should be blocked from taking effect. Check out the show notes for more information about this latest decision. And if you need a refresher on the rebate issue, please be sure to listen to our recent episodes featuring Amanda Negrotsky, Maureen Testoni and Shanna Carr. And now for our feature interview with Meetali Desai with UMass Memorial Medical Center. When we last spoke with Meetali, we knew Medicare would be setting maximum prices for 10 drugs starting in 2026 under the inflation Reduction act, but we did not yet know what Those drugs were. 340B Health recently updated its IRA calculator to include the latest data on those drugs that will be capped starting this January.
David Glendinning [00:02:56]:
And as UMass Memorial Health was one of the health systems that has used this calculator. We wanted to hear more from her about that process and the results. Here's that conversation.
David Glendinning [00:03:06]:
I am speaking today with Meetali Desai, who is Director of Pharmacy business services at UMass Memorial Medical Center. Meetali, this is your second time joining us, so I will say welcome back to 340B Insight.
Meetali Desai [00:03:21]:
Thank you David. It's great to be back.
David Glendinning [00:03:25]:
You were last on this show nearly two years ago, believe it or not, and at the time we were discussing.
David Glendinning [00:03:32]:
The Inflation Reduction act, specifically the provisions.
David Glendinning [00:03:35]:
Designed to limit what Medicare will pay for certain drugs. And of course the IRA is still very much in play and we are much closer to when those price caps will take effect. So this is a good time to check back with you and see how the 340B community is preparing for these major pricing changes to take effect. But before we get to that, please remind us what we should know about UMass Memorial Medical center and the patients you serve there.
Meetali Desai [00:04:05]:
UMass Memorial Health we're the largest healthcare provider in central Massachusetts and the only academic health system in the state that is outside the city of Boston. Our health system comprises of five hospitals, one of which is the academic medical center. But we have four community hospitals as well. We have a behavioral health agency and one of the state's largest physician groups. We have about 2 million outpatient visits annually. Four of the five hospitals qualify and participate in the 340B program under the DISH category. As far as the patient populations that we serve, about 70% of our patients are either Medicaid, Medicare or our self pay patients. So we have pretty high public payer mix and our mission is to improve the health of our diverse communities through through excellence in clinical care, comprehensive health services, teaching and research.
David Glendinning [00:05:13]:
And for those who need a refresher or who have not yet turned their attention to it, please go over the background again of the drug pricing caps in the Inflation Reduction Act.
Meetali Desai [00:05:25]:
Under Inflation Reduction Act, CMS selects a set number of high cost drugs and subjects them to maximum fare pricing. We call it MFB pricing and this MFB pricing could be a discount of anywhere between 25 to 60% compared to those drugs 2021 pricing and these drugs are selected based on Medicare's gross spend and are the ones that don't have a generic or a biosimilar available. This law goes into effect January of 2026 where in 2026 we're going to see 10 Medicare drugs that will be subject to MFP pricing and then we'll see another 15 added to the list in 2027, as well as additional 15 in 2028. And then beginning January 2029, we'll have 20 additional drugs added each year. And while in 2026 and 2027, the drugs that will be subject to MFP pricing will be limited to Medicare Part D Drugs, beginning in 2028, we will see Medicare Part B drugs also be part of that mix of the drugs that get selected.
David Glendinning [00:06:47]:
Okay, January 1, 2026 is a big date circled in red, at least for this aspect of the Iraq. So this maximum fair price, or mfp, or price caps, if you want to call them that, how will that affect 340B hospitals and other covered entities?
Meetali Desai [00:07:06]:
I will say there was good news and bad news, right? So I'll start with good news. The good news for the 340B covered entities is that there is a potential in some cases for the 340B ceiling prices to go down. Now, this is because the MFP pricing will become the new quote, unquote, best price, which is used in the formula for calculation of the 340b price. And therefore, you know, the acquisition cost of the three for the covered entities would go down. And especially in case of commercial payer mix or commercial payers, I should say if they continue to reimburse us at the current rates, then obviously the margin on the 340B drugs would go up for the 340B covered entities. Now, I have to say there is this provision within the law which you'd shout out to 340B health who advocated for this, where because the provision in this law allows the 340B covered entities to purchase these IRA drugs at the pricing the lower of the two, meaning if the MFB pricing is lower, then, you know, the 340B covered entities could still buy it at the MFB pricing. But if the 340B pricing is lower than the 340B covered entities could use that pricing. Now coming to the bad news, right? On the flip side, what's going to happen is Medicare, in case of Medicare specifically will be reimbursed at the MFP pricing.
Meetali Desai [00:08:37]:
Now, this pricing is obviously much lower, as we discussed, compared to the current, you know, pricing and therefore the current reimbursement rates. So the overall margin on the Medicare patients for these drugs will be significantly reduced. So Medicare, you know, prescriptions are where we are going to see the huge hit in 2026 and commercials where we could potentially see some gains if the 340B pricing is lower.
David Glendinning [00:09:06]:
So there's a bit of potentially Complicated math that goes into projecting all this. I was in English major in college myself. But fortunately we have people here at 340B Health who are much better at math than I. And 340B Health has an IRA calculator.
David Glendinning [00:09:24]:
That it recently updated.
David Glendinning [00:09:26]:
So can you walk us through what's new in this calculator?
Meetali Desai [00:09:29]:
So I was particularly very excited for this calculator. It was most awaited, especially since the first calculator gave us a good rough estimate of what we should anticipate and huge shout out again to 340B Health for putting this together. Now this new calculator brings it to the next level because now we know what 10 drugs have been selected by CMS for round one of meaning 2026. We have the actual MFP pricing that CMS published on this versus the previous calculator was, you know, using an estimated MFP pricing based on, again, a lot of research that 340B Health had put into it. And also, you know, we have the current 35 BC line price that's inserted into the calculator for us to get a much better estimate of, you know, what we should anticipate in terms of projections or IRA impact. And then the new piece, which is the most important piece that I feel all covered entities need to be aware of, is there is this scenario two within the calculator that allows you to calculate or project what your potential impact from IRA could be if the drug manufacturers decide to lower their list prices significantly to avoid some penalties.
David Glendinning [00:11:00]:
Let's talk more about that last point you made about prices going down to avoid penalties. That, you know, pricing behavior does seem like it could be an important part of the equation here. So why would a drug company make the decision to lower prices in response to the ira?
Meetali Desai [00:11:19]:
Yeah, so the drug makers currently are already subject to outside of ira. They have already been subject to this inflationary penalty, if you will, in terms of the significant 340B discount that they have to offer on those drugs. So in other words, if the drug manufacturer increases the price of their drug at a rate much higher than the inflation rate, then they have to pay a significant discount on the 340B side as well as in case of Medicaid rebates. Now under ira, that same sort of penalty would now apply for Medicare. So this becomes even more significant of a hit for them because now they're going to deal with 340B, Medicare, Medicaid, so it becomes huge for them. And so they might be incentivized because of IRA to reduce their list price closer to that MFP cap pricing so that they don't have to pay that penalty. This would potentially result in that scenario where the list price is significantly discounted. And therefore what happens for 340B hospitals is that they're no longer going to see that significant 340B discount on those drugs, and therefore the 340B ceiling price could go up.
David Glendinning [00:12:38]:
Okay, that sounds to me like a pretty big wildcard that might get played out during this whole process. How did UMass memorial go through this updated calculator? And what did the results show when you did that?
Meetali Desai [00:12:53]:
Yeah, so we inserted the 340B volume data, and it's basically something we already have available in our TPAs for our in house retail pharmacies, our specialty pharmacy as well as contract pharmacies. But this time around, we use the 340B volume data only for our in house retail and in house specialty pharmacy, and excluded contract pharmacies for the reason that all 10 drugs that are selected for MFB pricing for 2026 are subject to manufacturer restrictions at contract pharmacies. So we kept contract pharmacies out of that mix for now, but we pulled the 340B volume at payer level. And specifically we had three categories. One is Medicare, the other one's commercial, and the third one being Medicaid, MCO and ACO plans. So we plugged in those numbers. Everything else was already kind of inserted into the calculator. The calculator then showed us the results based on our volume.
Meetali Desai [00:13:58]:
The results were, especially in case of scenario two, pretty significant. Well, cover scenario one for us where we saw about $3 million of net negative hit based on the current volume of drugs processed through our in house pharmacies. And keep in mind, this is after factoring in the gains that we would see potentially on the commercial side if the commercial payers obviously continue to reimburse at the same rate. And then if you look at the scenario two, which is again the scenario where drug manufacturers could potentially reduce the prices, the list prices on those drugs to avoid the inflationary penalties, then that scenario two figure is pretty significant to the extent that it's scary to look at.
David Glendinning [00:14:46]:
Okay, so a $3 million net negative impact, potentially much more depending on drug maker behavior. Some of these unknowns that you mentioned, that all sounds like a potentially significant financial hit for your hospital, especially knowing what we do about the margins you operate on. So what will that estimated negative impact mean for UMass Memorial?
Meetali Desai [00:15:11]:
The fact that, you know, dish hospitals especially the ones like us that, you know, have very high public payer mix, have razor thin margins if any to begin with. And you know, we're truly in this financial situation right now. You know, not just in Massachusetts, many hospitals are in this situation, but I'm sure across the nation where there are so many, you know, cuts servicing in terms of reimbursement cuts and so many potential cuts that we are expecting in terms of Medicaid cuts, et cetera. Overall, the financial situation isn't good. The potential of any such impacts that are not only going to last in 2026, but will significantly improve or increase, I should say, in terms of impact over the next few years will strain our ability to care for the patients in need. You know, we have significant levels of uncompensated care and the community benefits that we provide to our patient population as well as the subsidized healthcare services that we provide, pretty significant. And you know, this impact such as this kind of put a question mark on whether we would be able to sustain them at the same level that we are able to provide at this time.
David Glendinning [00:16:29]:
Meetali, this has been very informative for our listeners. What advice would you have for other 340B hospitals and health systems that are preparing for Medicare price caps to take effect?
Meetali Desai [00:16:41]:
Yeah, so I will say that obviously IRA is a very it's a topic that I feel like everybody knows something about, but there are so many unknowns and people are not necessarily well equipped to calculate the impact, potential impact of it. And that's where this calculator is so helpful to come up with some estimate of what ballpark figure should we expect as the potential impact of this law. And so I would highly encourage everybody to use this IRA calculator that 340B Health has made available. The results that you produce from the calculator would be very important to share with your senior leadership, your C suite, so that they could prepare for that potential impact because these could be pretty significant based on your drug mix, your payer mix and other factors. It's important for the leadership to be aware of it and budget based on whatever scenario they choose to. As 340B Health has been, you know, mentioning in their bulletins is it's important to share the results with 340B Health as well because 340B Health has done a wonderful job always in terms of educating the policymakers on how some of these, you know, laws have direct or indirect impact on 340B program and you know, how that impacts the 340B covered entity's ability to continue to provide uncompensated care and there's various community benefits that they provide to their communities and be able to sustain them at the same level. So I highly encourage everybody to use the calculator, share the results with their leadership as well as 340B Health.
David Glendinning [00:18:25]:
Meetali, thank you for coming back on to chat about all this as we start to stare down that January 1st key implementation date. And thank you for going through the calculator yourself and sharing the data and.
David Glendinning [00:18:39]:
Being such a champion for it.
David Glendinning [00:18:40]:
We appreciate all you do.
Meetali Desai [00:18:42]:
Thank you. I really appreciate 340B Health's efforts always in, you know, helping us stay informed and be best equipped with all the necessary data to be able to prepare for such impacts and policy changes.
David Glendinning [00:18:59]:
Our thanks again to Meetali Desai for sharing the latest news on the revised IRA calculator and her advice for how other 340B hospitals can use it. If you are a 340B Health member, you can access the calculator and learn how to confidentially share your results by visiting the show Notes if you are attending the 340B Coalition Summer Conference and are listening to this episode on the day it came out, please plan to come by the exhibit hall on Tuesday or Wednesday to meet the podcast crew. And if you're lucky, you might see us in action interviewing a guest whether you are attending the conference or not. If you have a good 340B story, we would love to help you tell it. Please email us at podcast@340bhealth.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 [00:19:52]:
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.