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Several 340B developments have occurred in the first weeks of 2023, with many more expected to come this year. In this episode, we speak with 340B Health President and CEO Maureen Testoni about her outlook for 340B. Our discussion includes her analysis of the latest in the 340B contract pharmacy dispute, the 340B advocacy landscape at the federal and state levels, and Medicare issues affecting 340B.
*Editor’s note: We spoke with Maureen prior to Bayer and EMD Serono announcing they will restrict 340B discounts. When these restrictions start in March, at least 21 companies will be limiting 340B discounts, with 14 of these companies conditioning 340B pricing on providers sharing contract pharmacy claims data.*
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 (00:13):
Hello from Washington, D.C., and welcome back to 340B Insight, the podcast about the 340B Drug Pricing Program. I'm David Glen Denning with 340B Health. Our guest today is the President and CEO of 340B Health, Maureen Testoni. 2023 already is off to a busy start with several important developments for the 340B community. We wanted to check in with Maureen to help you keep up to date on these developments and prepare for what might be ahead this year. Maureen has insights on a wide variety of topics, including new developments in the 340B contract pharmacy dispute, increasing media scrutiny of 340B, and Medicare pay for 340B hospitals. Myles Goldman sat down with her to discuss these topics and much more. Here's that conversation.
Myles Goldman (01:08):
Thank you, David. I am joined by the President and CEO of 340B Health, Maureen Testoni. Maureen, happy 2023. It's good to have you back on 340B Insight.
Maureen Testoni (01:20):
Thanks, Myles. Happy 2023 to you and I'm thrilled to be back.
Myles Goldman (01:25):
I have a lot I want to ask you, so let's start by discussing the drug company restrictions for medications dispensed at contract pharmacies. We've spoken often about this and I know there is a recent court decision on this issue. Can you tell us more about the court decision and where this issue stands overall?
Maureen Testoni (01:42):
Sure, Myles. So there are three federal appeals courts that have heard oral arguments this past October and November on the contract pharmacy issue. The Third Circuit Appeals Court, which is located in Philadelphia, is the first of these three courts to issue a decision, and their decision was largely in favor of the three drug companies involved in the case before the court. And those three are AstraZeneca, Novo Nordisk and Sanofi. The court concluded that HHS cannot require the three companies to provide discounted pricing to 340B providers through an unlimited number of contract pharmacies. The judges basically decided because the 340B statute is silent on the question of contract pharmacies, and because the record in their view shows structural clues that Congress did not intend for unlimited contract pharmacies. Therefore, the 340B statute does not compel manufacturers to deliver 340B drugs to unlimited contract pharmacies.
(02:49):
Now we at 340B Health, we strongly disagree with this decision and it conflicts with some of the lower court decisions as well, but there's a couple of things that we want to note. One, this decision does not get at the issue of sharing claims data. So AstraZeneca, one of the drug companies in this case, does not agree to provide 340B discounts to unlimited contract pharmacies when providers share the data. Therefore, this is a decision that says the manufacturers do not have to do unlimited contract pharmacy, whether you're sharing data or you're not sharing data, thereby really allowing the manufacturers, in this case, Novo Nordisk and Sanofi, to decide not to go forward with unlimited contract pharmacy when you share data. But another interesting point that was actually more encouraging was that the court acknowledged that drug companies must offer 340B pricing at all of their eligible drugs in a manner that allows covered entities to access those drugs.
(03:54):
And that has potential consequences for covered entities that do not have their own retail pharmacies or their own specialty pharmacies, as well as for drugs that are limited in distribution, the limited distribution drugs, which unless you're in the A manufacturer's network, you cannot get access to those drugs. The court seems to be saying that manufacturers may have to deliver drugs to contract pharmacies if there is no other way for covered entities to access their drugs. So, this could potentially make drugs and limited distribution more available, as well as providing access for hospitals that do not have their own retail pharmacies or their own specialty pharmacies. Now, we're waiting for two more appeals courts to make decisions and we hope those judges will agree with the lower court decisions that said the restrictions are unlawful. There is simply no way for us to tell how these decisions will come out.
(04:52):
Now, it's very possible that the three decisions, appellate court decisions will vary or will conflict with each other, which may make it even more likely of an appeal to the Supreme Court. And if the Supreme Court accepts an appeal, then any decision, frankly, would probably be about a year away. In the meantime, we are urging the Biden administration to continue to mount a strong defense of its interpretation of the law.
Myles Goldman (05:21):
And the question I think a lot of people are asking is, why do the number of restrictions continue to grow?
Maureen Testoni (05:27):
So I think a really important thing to think about is what are the companies getting out of this? I mean obviously, they're trying to avoid how many discounts they are providing, and there's obviously a financial center to do that. But when we really look at the companies that are doing this and really look at the drugs that they are restricting, we found two things. One, a lot of the companies, most of the drugs they're restricting are drugs where they have to pay a very high discount and they're paying this high discount, because 340B imposes a penalty on manufacturers that hike their prices up faster than inflation. And if you keep doing that year-after-year, your discount goes from 23% up to 100%. And there are a lot of the companies that are restricting the discounts, where most of the savings that they are providing, most of the discount is relating to those drugs that have a discount of 85 to 100%.
(06:28):
Another big thing that we're seeing with the other companies, that if they don't have those kinds of big discounts, they have a lot of high-cost specialty drugs. Specialty drugs was not even an issue back in 1992 when 340B was started, but now they account for over half of drug purchases in this country and they're very expensive drugs. And what we're finding is the companies with a lot of those drugs are among the ones that are trying to restrict, because 23% of a drug that cost 100,000, is still a really big discount. So I believe they're trying to get around those situations, and that's what we're seeing in terms of the drug companies that have been coming forward. And what this means is, it completely undercuts the purpose of 340B, which is to help subsidize these hospitals that are providing a lot of care to low income and to rural patients.
(07:25):
Now, we are seeing that some of the drug companies, I think it's about 13 of them, are say, "Well, if hospitals would just give us their claims data for these 340B drugs, then we will reinstate 340B discounts." We have a lot of concerns about that legal concerns, concerns about how that information could be used. We've certainly seen in the past, that kind of information being used to try to cut reimbursement to 340B hospitals. So, that is a big concern to us. And then, we are hearing from the majority of our members who are sharing data because they just can't afford not to, that they aren't really getting all of their discounts turned on, or it'll be turned on for a period and then turned off. Everybody has different policies. Many of these policies are not made public by the manufacturers as to exactly how and when they're going to turn these discounts on or off. So it's been a huge mess, just a big disaster for the covered entities that are sharing data.
(08:26):
Fortunately, we have a lot of support in Congress about 340B. They've been putting a lot of pressure on HHS to make sure they continue in the litigation, and they've been very vocal about their opposition to the manufacturer actions. And we've seen that in statements on the floor, of the House and the Senate in language that's been included in a year end spending bill, really focusing on resolving this issue and support for covered entities.
Myles Goldman (08:55):
And, I'm glad you mentioned Congress there. Can you tell us more about the advocacy landscape at both the federal and state level here in early 2023?
Maureen Testoni (09:08):
Yeah, it's been really an interesting year looking at Congress so far in 2023. But one of the things that we have seen is that in the fall, there were two articles in national newspapers that were, it really portrayed 340B in a negative light. And, those articles were not really accurate in really explaining what 340B does and how it works. There's a growing body of research demonstrating that 340B works as Congress intended, because the 340B savings are used by hospitals that provide over three quarters of all hospital care for patients with Medicaid, two thirds of all compensated care and 340B hospitals are much more likely to treat patients who historically have encountered difficulties accessing care. So a lot of that type of information was not included in these articles at all. And so, our concern is that there could be actions in Congress as a result of these articles, and it could be things like oversight hearings, that's something that Congress does.
(10:20):
These articles could make them want to bring in hospitals to hear more about what is going on with 340B. It could potentially lead to members introducing legislation around 340B. But the way I look at it, because we have seen this kind of thing over the years, is that scrutiny really means that there's an opportunity to educate Congress, especially new members and urge them to protect 340B. And when 340B hospitals really focus on telling their Members of Congress what 340B allows them to do with specific examples, makes a massive difference in the type of support that we get from their members. Members of Congress are very interested in any type of federal program that really helps their constituents. So what is really important to do, what we really are urging our members to do, our 340B Health members to do is to complete or update, what we refer to as 340B Impact Profiles.
(11:29):
Any of our members can find those on our website. There's a manual to help you fill them out. And it's like a little chart, where you can fill out what your 340B savings are and how those savings allow you to help your community, help your low income patients, make improvements on your hospital so it can stay as a strong and vital support for your community. Our team at 340B Health can certainly help anybody who is trying to put one of these together, and we really urge you to make sure that you are sharing that with your senators and with your representatives. We urge you to invite them to your hospital as well, to show them to your hospital and show them their health, what 340B could help you do. But that is by far and away, Myles, the most important thing that can be done this year to protect 340B.
(12:26):
And, you also asked me about state legislatures. We absolutely encourage hospitals to share impact profiles with our state legislatures and with our state governors as well. We are seeing more activity in 340B in state legislatures recently. We're seeing 20 states already that have enacted legislation in the past years to prohibit lower reimbursement by PBMs and other payers for 340B drugs, which is fantastic. But we're also seeing a lot of work by drug companies and others to lobby for anti 340B bills, things that would limit how 340B could work and that type of thing. So, we really urge you to work with your hospital advocacy team to make sure that you are all staying on top of this and also work with your state hospital association, so that everybody can make sure that the legislators are educated about what 340B means for their communities, whether evaluating this legislation.
Myles Goldman (13:30):
Well, thank you for sharing all those important resources for members to keep in mind on the advocacy front. Switching gears now to some topics related to Medicare issues in 340B. What might 2023 bring when it comes to the intersection of 340B in Medicare?
Maureen Testoni (13:51):
So Myles, that is a really good question, because we saw Congress pass a bill that would impact how what kind of prices manufacturers can charge the government for Medicare patients. It was called the Inflation Reduction Act and it passed last summer. Some of the things that are included in that legislation is a series of provisions that would reduce the price of drugs that manufacturers can charge. Now, 340B drugs will be excluded from these new prices and will be excluded from other provisions to reduce prices, which include rebates that manufacturers are going to have to pay to the government. So, that will be helpful for 340B. There will still be the three 40 B price that hospitals will be able to use, but I do want to mention that it's important for 340B hospitals to be aware that even though 340B is excluded from these provisions, so you'll still get a price that is usually going to be lower than whatever the price, the Medicare price is.
(15:02):
340B discounts are based on a percentage. So as drug prices lower, that means the savings of 340B are going to be lowered as well, as in 23% is the brand name discount for 340B drugs, and 25% or 23% of a hundred dollars is much less than 23% of a thousand dollars. So, there will be that impact for 340B hospitals with Medicare drugs. However, there are provisions in addition to excluding 340B from the Medicare pricing provisions, there are other provisions in the statute that exclude these lower prices from impacting the 340B price for commercial payers as well. And so, those changes are also going to have an impact on 340B that is likely to offset some of these Medicare changes. So in addition to that long-term impact, which really right now is very hard to predict, because we don't really know which drugs will be chosen for these price restrictions and we don't really know, every hospital will have a different payer mix and different services that they provide. But in addition, because they're excluding 340B from a number of these provisions, we're already starting to see the government prepare for implementation.
(16:27):
And that is going to require then, 340B hospitals to do things like identify 340B drugs that they are billing to Medicare, so that those drugs can be excluded from some of these other provisions. And for some hospitals, they have been already doing that, other hospitals have not been doing that. But, that's one of the things that we anticipate more information coming out about. There's also likely to be more information coming out about how to keep the 340B drugs separate from other drugs and that type of thing. So, we're anticipating a lot of implementation. We've already met with CMS on this issue and we are going to continue to engage with them. They're very open to working with us and with lots of associations, because they realize this is going to be a lot of implementation and they really do want to make sure that they get it right.
Myles Goldman (17:20):
Well, appreciate you walking us through that, what's happening there with Medicare and want to now look at another issue related to Medicare, just overall Medicare Part B payments for 340B drugs in 2023. What is the status of that?
Maureen Testoni (17:38):
A few years ago, Medicare had cut reimbursement for Part B drugs that were filled with 340B discounted drugs. And there was a lawsuit that went all the way up to the Supreme Court and the Supreme Court decided in the hospital's favor, so that put CMS in a position of having to go back to not paying 340B providers less than non 340B providers, which they did in late September of last year. So, they did change it and 340B hospitals are now getting the full payment that a non 340B hospital would get.
Myles Goldman (18:16):
And a question related to this that, I think a lot of people in the 340B community are talking about is, what will the government do about the cuts that already have taken place prior to the Supreme Court ruling?
Maureen Testoni (18:29):
Well, that's a great question and one that we've been thinking about and working out a lot, because obviously they do have to repay, that it's very clear their actions were illegal, so they have to find a way to repay. But, it is complicated for the government to just repay lump sum amounts to hospitals. We firmly believe that they should do that, that they should pay lump sum repayments and plus interest. It's not that difficult for them to figure out exactly how much each hospital is owed. However, it's a lot of money. It's a really big thing. The government does not usually make those kinds of payments in a lump sum, and that's what CMS has been talking about is how to move forward. And the plan right now is for them to come out with a proposed rule to outline their repayment plan later this year, so that it can be made a part of their payment rates for 2024, so we're likely to see a proposed rule in July, and then a final rule in November.
(19:35):
Now, one thing that I would like to point out since on this topic, is that when CMS changed their rule at the end of September and they automatically repaid all the hospitals, 340B hospitals for any claims that had been submitted at that time going forward, but you still have all of 2022, prior to the end of September that they did not automatically do repayments on. But what we understand is that for 2022, 340B hospitals are allowed to request repayment from their Medicare contractors. And, we have many members who have told us that they have done so. Now, this can be a complicated, messy process because you have, hospitals typically have thousands and thousands of claims that they would have to go through, and we've had many hospitals tell us that they have sometimes been able to work with vendors to see if they could do automatic adjustment requests. And in the meantime, to try to submit manual requests in batches. That is definitely what a lot of our hospitals are doing.
(20:43):
And they have a year, in order to be able to submit those requests. So, that is something we're urging people to do and we are hearing of success from those hospitals that have started to do that.
Myles Goldman (20:56):
And that's a year from the original service day, right?
Maureen Testoni (21:00):
That's right. It's a year from the original date of service.
Myles Goldman (21:03):
In addition to hearing from the federal government on these Medicare issues, we also heard from the federal government in November about changes to the 340B Administrative Dispute Resolution or ADR process. Can you remind us of what this process is about and walk us through the new development?
Maureen Testoni (21:24):
Sure, Myles. So the Administrative Dispute Resolution process, the ADR, it was enacted in 2010 as part of the Affordable Care Act. And it was included following hearings that Congress had held on reports by the Office of the Inspector General, documenting widespread overcharging of hospitals by manufacturers for 340B drugs. The purpose of the ADR process is to have a place where 340B providers or manufacturers can have their disputes heard and decided by a panel of government officials. The disputes could be allegations by providers that they're being overcharged by manufacturers, or manufacturers could allege that covered entity is engaged in diversion, which means using 340B drugs for individuals who are patients of the hospital, or that the hospitals not complying with federal rules to prevent manufacturers from paying a Medicaid rebate for a 340B discounted drug, which is known as a duplicate discount.
(22:31):
Now, it took about 10 years for the government to finalize these regulations, to implement the ADR process, and it turned out that those regulations have proven difficult to work with, for both the providers and the government. So, HHS has now proposed revisions to those rules that aim to reduce the procedural barriers for filing a claim and make other types of clarifications that we at 340B Health firmly support. We're also urging the government to make some more changes to the rule that would allow providers to have better access and more fair access to the process. So, those comments of ours have been filed and the process for so many comments is now closed. There's no deadline by which this final rule has to be released, but we are hoping that it will come out this year.
Myles Goldman (23:25):
Well, we've spoken a lot about the year ahead and what might happen, and I know one thing we can look forward to this year are more in-person 340B coalition conferences. We have two this year. Can you share more details with us about the winter conference coming up?
Maureen Testoni (23:42):
Oh, I'd be happy too. I so enjoy these conferences. It's so many hospitals and other providers get together to talk about the latest trends in 340B, and compliance and new ways of optimizing 340B. I really enjoy it this year. We're going to be holding it in San Diego a little bit later than we usually do, so it will be March 27th to March 29th. We're expecting more than 40 sessions this year, three pre-conference workshops and several hours every day dedicated to networking. That's something that the providers that attend this event tell us again and again, is so important. And so, we've really tried to build an even more time for people to connect with each other by type of hospital, by region, by state and that type of thing. Topics we'll be discussing, it will include contract pharmacy restrictions, a lot of state issues as well. So, I really encourage people to attend this. I really love meeting with our hospital members.
Myles Goldman (24:48):
Absolutely. I'm looking forward to seeing the 340B community in sunny San Diego. Well, Maureen, appreciate you taking the time to walk us through all the different issues going on right now in 340B affecting hospitals. I feel like I said this last year, but it definitely feels like it's going to be another busy year ahead in 340B, and I'm sure we'll have you on again as the year goes on to keep us up-to-date. So, thank you again for speaking with us.
Maureen Testoni (25:17):
Yeah, thank you, Myles. It's great to be here.
David Glendinning (25:20):
Our thanks again to Maureen, for providing her analysis of the most important issues for the 340B community. We will be sure to have her on the show regularly for what is shaping up to be a very eventful year. Do you have questions about 340B based on our conversation with Maureen, or suggestions on topics we should cover in future episodes? We design this podcast to help support 340B professionals and we always invite your feedback. You can email us at podcast@340bhealth.org. If you have missed our recent episodes, we encourage you to check those out as well. They include our episode in which we opened the listener virtual mailbag to answer some of your most pressing 340B questions and an episode about how to educate your hospital colleagues about 340B. We will be back in a couple of weeks with our next episode. In the meantime, as always, thanks for listening and be well.
Speaker 1 (26:24):
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.
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