Female Announcer (00:04):
Welcome to 340B Insight from 340B Health.

David Glendinning (00:11):
Hello from Washington, DC, and welcome back to 340B Insight, the podcast about the 340B drug pricing program. I'm David Glendinning with 340B Health. This episode is sponsored by Comprehensive Pharmacy Services. CPS guides covered entities in achieving audit preparation and compliance through a robust suite of 340B solutions. Serving more than 800 hospitals and health systems, CPS implements processes that ensure clinical, operational, and financial excellence. For more information, please visit 340bexperts.com.

David Glendinning (00:47):
Our guest today is Amanda Sellers Smith, the assistant counsel here at 340B Health. We sat down with Amanda recently to discuss all the 340B-related legislative and regulatory action that has been happening on the state level. Although 340B is a federal program, it is closely entwined with Medicaid and state oversight of the healthcare marketplace, so we keep a close eye on what is happening in those areas. But before we go to that interview, let's take a minute to cover some of the latest news about 340B.

David Glendinning (01:26):
340B Health recently released our annual survey of member hospitals, and the 2020 version has compelling data that you will want to see. The good news is that hospitals continue to use their program savings to expand care and support patients, including patients diagnosed with COVID-19, diabetes and cancer, as well as those living in rural areas of the country. And the figures show these hospitals are helping make their patients healthier through improved medication adherence, reduced hospital readmissions and smoother transitions of care for those leaving the hospital.

David Glendinning (02:00):
The bad news, according to the survey report, is that all this progress is in jeopardy because some drug companies are refusing to provide 340B discounts on drugs dispensed at community pharmacies. Nearly two-thirds of hospitals say they expect to lose more than 15% of their 340B savings because of these drug makers' actions, and that's with only six companies cutting off 340B access through community pharmacy arrangements. If this problem continues or it becomes worse, nearly all hospitals say they will be forced to start cutting services that their patients need. Check out the full survey report in the show notes.

David Glendinning (02:36):
And now for our feature interview with Amanda Sellers Smith. One of the many things that Amanda does for our member hospitals here at 340B Health is to monitor and analyze 340B-related developments that are happening in states across the US. Myles Goldman sat down with Amanda to learn more about those developments. Here he is with that conversation.

Myles Goldman (03:05):
Thank you, David. I'm joined by Amanda Sellers Smith, the assistant counsel for 340B Health. Amanda, welcome to 340B Insight.

Amanda Sellers Smith (03:14):
Thanks for having me, Myles.

Myles Goldman (03:16):
And I want to start by congratulating you. For our listeners who might not be aware, we have two Amandas at 340B Health, you and Amanda Nagrotsky, and you both are attorneys, and you both work on our legal and policy team, but you are the first to be on 340B Insight.

Amanda Sellers Smith (03:36):
Yeah. I'm more surprised I'm the first Smith, honestly, because it's a much more common name than Amanda, but I'm sure you'll have Nagrotsky on here eventually.

Myles Goldman (03:45):
Absolutely. So we are here to talk today about state policy, which is a trend that really has been increasing over the last couple of years. Why do you think that is?

Amanda Sellers Smith (03:57):
I think that there's maybe a few reasons for that, Myles. So there's really two big 340B-related trends on the state level, and I think of them in terms of Medicaid policy and then PBM reform. So Medicaid, as most listeners probably know, is a state and federal government share program. So there's state policies that impact Medicaid, there's federal policies, and they work together to provide healthcare to low-income individuals. And for most states, this is the biggest expense after K through 12 education, so a really important policy area. And just 340B and Medicaid are really intertwined. They have this really special relationship where Medicaid policy oftentimes directly impacts 340B.

Amanda Sellers Smith (04:36):
So one important state policy trend we continue to see is related to Medicaid. But then this PBM reform issue is a little bit new. PBMs, or pharmacy benefit managers, they're organizations that work with health plans to provide individuals with pharmacy coverage. This could happen in the Medicaid managed care space. It could happen in commercial plans, so for example, I have a PBM. And because there seems to be a lot of criticism around PBMs, they're often seen as middlemen, policymakers really trying to target them with a lot of different policies. And sometimes that impacts 340B. Sometimes it doesn't.

Myles Goldman (05:08):
There are a number of policy issues in states throughout the nation that affect 340B, including Medicaid, as you just mentioned. Before we discuss some of those trends, I wanted to ask you how state policies could affect 340B, when we know that 340B is a federal program administered by HRSA.

Amanda Sellers Smith (05:26):
So you're absolutely right. 340B is a federal program, but the way healthcare works in this country, just so many different healthcare policies have to work together and operate together. And so that's important here because each state has a lot of authority over its own healthcare marketplace. So whether that's Medicaid, on the insurance marketplace, the plans may vary by state, regulating their hospitals, regulating their credentialing providers. So there's just this huge healthcare world we exist within, and 340B is not a bubble. And so states can use their authority in different ways in any of those areas that directly or indirectly impact 340B.

Myles Goldman (06:02):
Let's start moving into some of these specific state issue trends. The first trend I wanted to discuss with you is called 340B anti-discriminatory laws that relate to the relationship between 340B-covered entities and those PBMs, those pharmacy benefit managers, you just mentioned earlier.

Amanda Sellers Smith (06:22):
So PBMs have a lot of control over pharmacy reimbursement. So when PBMs have that level of control, it can become especially concerning when it comes to 340B, because there's nothing in the 340B statute that protects 340B-covered entities from PBMs taking those 340B savings from the safety net through reduced reimbursement or discriminatory reimbursement.

Amanda Sellers Smith (06:44):
So basically the way 340B is designed is that covered entities are supposed to be able to buy drugs at a discount, but be reimbursed at the regular reimbursement rate. But some PBMs, over the last several years, have tried to actually reduce that reimbursement or cut reimbursement for safety net providers to pocket some of those 340B savings for themselves. So covered entities over the last couple of years have really looked to their state governments to try to protect them from these kinds of practices.

Myles Goldman (07:11):
Can you give us an example of a state or a couple of states that have enacted these anti-discriminatory laws?

Amanda Sellers Smith (07:18):
Yeah, absolutely. And each of the laws vary a little bit just because the nature of state government is every state's a little different on how their constitution or their statutes operate, but we're seeing these kinds of laws passed in Utah, Ohio, for example, Montana, West Virginia. So it's really just across the country and very different states, different areas that have looked at this kind of protection for the hospitals in those states.

Myles Goldman (07:44):
Some states are responding to the six drug manufacturers that are refusing 340B discounts on drugs dispensed at community-based pharmacies. What have you been seeing at the state level when it comes to this issue?

Amanda Sellers Smith (07:56):
So manufacturers' refusal to offer 340B pricing as required by federal law, this is a really concerning 2020 development. And again, 340B is a federal law, so this is one area where there is not an obvious state solution to force manufacturers to follow the federal law. But state officials have shown concern and support for providers on this. And one way that state officials, they might not be able to pass federal laws or regulations, but they can serve as key federal advocates. And we've seen this through a variety of high-profile advocacy efforts.

Amanda Sellers Smith (08:30):
So the West Virginia governor sent a letter about this issue. We also saw a sign-on letter from several attorney generals on this. And one of those attorney generals on this letter was Attorney General Becerra out of California, who happens to be President Joe Biden's pick to serve as the head of HHS. So that doesn't mean when he gets to that position, he's going to automatically go and take this fight to manufacturers, but it is good to have somebody on the record before they get to that position of leadership in support of 340B.

Myles Goldman (09:03):
We do have to discuss some of the challenges 340B is facing in some states. Before we go into the specifics, I'd like you to help us take a deeper dive into looking at why states are making changes to Medicaid.

Amanda Sellers Smith (09:16):
This is honestly the most significant policymaking area on the state level for 340B providers, and that's related to this direct connection between 340B and Medicaid. When the 340B statute was passed, Congress decided that when you purchase a drug at the 340B price, that it's not subject to a Medicaid drug rebate. So Medicaid gets rebates on much of the same drugs that 340B providers can purchase at the 340B price, but manufacturers are protected from both that 340B pricing and the Medicaid rebate on the same drug.

Amanda Sellers Smith (09:50):
So this leads to an interesting relationship between state Medicaid agencies and 340B providers, because there's this policy question of who should get the benefit of 340B or the Medicaid rebate. Historically, when we've seen Medicaid agencies making policy or state legislatures making policy on this, it's really been focusing on this administrative challenge of identifying 340B claims. So it's called a duplicate discount if a state Medicaid agency receives a Medicaid rebate on a 340B purchase drug. And so states have to be able to know if it was a 340B-purchased drug.

Amanda Sellers Smith (10:25):
So this can be challenging, particularly for Medicaid managed care claims, but we've really seen that policy debate shift into this current focus on that debate about who should receive the benefit here, because you can only get the 340B purchase price or the Medicaid rebate. And that really does lead to some policy development where the state thinks that they could do a better job with those funds, with that Medicaid rebate, than the provider is able to do with the 340B savings. So it really becomes an important advocacy area for providers to be able to show the state why the benefits should remain with them.

Myles Goldman (11:00):
You keep mentioning, Amanda, how this is a conversation states are having about who should receive the financial benefit, the covered entity or the state. Can you help give our listeners some background on Medicaid that affects this conversation?

Amanda Sellers Smith (11:16):
So when we think about Medicaid, it's not just one big program, but there's different moving parts. So you have Medicaid fee-for-service or Medicaid managed care. And Medicaid fee-for-service is basically when the Medicaid agency pays for each healthcare service that the beneficiary receives. But Medicaid managed care is closer to what you think of as a commercial insurance plan in that the Medicaid agency pays a rate to a plan, and then that plan provides coverage for the Medicaid beneficiary. And then under each, you also have your pharmacy benefit.

Amanda Sellers Smith (11:48):
And so states have to have policies related to these various types of drugs that are provided under the various types of Medicaid type plans. And so the Centers for Medicare and Medicaid Services, or CMS, they do have a rule that requires Medicaid fee-for-service payment for retail drugs, so that one subset category. And that has to be based on actual acquisition cost reimbursement plus a professional dispensing fee.

Amanda Sellers Smith (12:16):
And there's no such requirement on the federal level for Medicaid fee-for-service physician-administered drugs or any Medicaid managed care organization 340B drugs. And states, they really viewed this in a way that, for when you're using 340B to purchase a Medicaid managed care retailed drug, the state does not get that Medicaid rebate, but then they also don't have this federal actual acquisition pool.

Amanda Sellers Smith (12:40):
So how do they really make up for that loss that they're seeing? How do they go after that Medicaid managed care benefit? And this is really significant because, at least according to the Kaiser Family Foundation, a really respected health organization, as of July 2018, over two-thirds of all Medicaid beneficiaries received their care through Medicaid managed care.

Myles Goldman (12:59):
I appreciate you sharing that background with us, Amanda. Can you now share some examples of how states are approaching this policy debate?

Amanda Sellers Smith (13:07):
One way that we've seen this is through the transfer of the pharmacy benefit from Medicaid managed care organizations to fee-for-service. So I mentioned the pharmacy benefit. That's your retail drugs, remember. So by doing that, by transferring that pharmacy benefit, you're now bringing the Medicaid managed care pharmacy benefit, the retail drugs, into that fee-for-service space. So the reimbursement is then triggered for the actual acquisition cost reimbursement.

Amanda Sellers Smith (13:32):
So that's one way that a state can go and grasp that 340B benefit for themselves. And we've seen this happening in California. We've also seen New York and some other states that have looked to implement this type of policy. And it's a really big deal for 340B providers because oftentimes, your Medicaid managed care plan is going to negotiate with the provider the reimbursement rate. And that opportunity to negotiate is lost when the fee-for-service rules apply, at least for the retail space.

Amanda Sellers Smith (14:00):
But another interesting development we've started to see is that states are choosing a single Medicaid PBM to set Medicaid managed care reimbursement. This trend is something that started completely unrelated to 340B, that you saw pharmacy benefit managers coming under the gun in different states because states were looking at what they were paying to Medicaid plans and saw that PBMs were really pocketing money that was intended for providers.

Amanda Sellers Smith (14:29):
So this was a huge ordeal in Ohio, and the Ohio legislature, after this attorney general report, decided no, we're going to really reign in the Medicaid PBM for managed care plans. And so we're going to do that by having this process where the state selects a single Medicaid PBM, we set Medicaid reimbursement. And so again, unrelated to 340B, but the big concern here is you have a single PBM that sets reimbursement. What happens if they set reimbursement at actual acquisition cost? Because then you have this obvious cut to reimbursement for providers.

Amanda Sellers Smith (15:03):
And so that's something that was a huge advocacy ordeal in Ohio, and you actually saw Ohio advocates be able to successfully pass an anti-discriminatory reimbursement law that also applied to the Medicaid managed care plans. So they were able to advocate with the legislature, show why this would be harmful to 340B providers and still have that single Medicaid PBM that did not result in actual acquisition cost reimbursement.

Amanda Sellers Smith (15:30):
So I know I've been rambling on about these really complex issues, Myles, but really what it comes down to, a lot of the trends we're seeing in the state are states thinking they'd be better off with the financial benefit of the Medicaid drug rebate or the pass-through pricing of 340B through actual acquisition cost reimbursement and taking that money out of the safety net back to the state.

Myles Goldman (15:51):
Are there state policies that prohibit providers from using 340B drugs for Medicaid beneficiaries?

Amanda Sellers Smith (15:58):
Yeah. Myles, that's another trend that we've also seen in various states. This other kind of policy bucket is referred to as mandatory carve-outs. And that's when the state says, "You can't use 340B drugs for your Medicaid patients," or "You can't use your drugs for your Medicaid patients under certain scenarios." So these mandatory carve-outs, sometimes it's just a blanket carve-out, no 340B drugs for Medicaid beneficiaries. And we've seen that in Delaware, South Dakota, New Hampshire, a variety of different states. But what we've started to see, what might start to become a trend, is not this blanket carve-out, but seeing more targeted mandatory carve-outs.

Amanda Sellers Smith (16:38):
So for example, in Massachusetts, we've seen this policy development related to partial carve-outs, and that's just for high-cost drugs. So the state determines there are these high-cost drugs that we really want that Medicaid drug rebate on. And so for those drugs, you cannot use 340B. And we've also seen in Louisiana, for example, they have this interesting set up about how the state purchases hepatitis C drugs for their Medicaid patients. And so in Louisiana, you cannot use 340B drugs for Medicaid beneficiaries for those hepatitis C patients. So it's maybe not a complete blanket, the state wants the rebate for all drugs, but for just these high costs for very specific situations.

Myles Goldman (17:19):
You mentioned how state leaders earlier were advocating on the contract pharmacy issue. And so was hoping we could talk a little bit more about how our listeners can be advocating for 340B at the state level.

Amanda Sellers Smith (17:33):
One of the key takeaways from that, I think, is that it's an opportunity to be really good advocates and show your state agency or your state lawmakers why that benefit should remain with the covered entity, how you're using your savings in line with program intent, the real importance of 340B. This becomes challenging because every state operates a little differently. Some states you may be able to go online and figure out exactly how your state legislature works. Some it's the wild, wild West. It takes an advanced degree in that state to figure out exactly what's going on with their lawmaking.

Amanda Sellers Smith (18:06):
But just finding those folks who maybe could be allies or advocates and making sure that they're educated on 340B is something that becomes increasingly important, whether it's, again, your federal Congress person, state lawmakers, Medicaid agencies, or even just down to, Myles, you're in communication, so maybe you agree with this, but your local media, just to make sure that anytime somebody hears 340B, one of the things that first comes to mind is how 340B providers are doing all of these great things and why that program is important.

Myles Goldman (18:36):
Well, definitely always agree on making sure you're reaching out to local media to share your 340B stories through op-eds and other media activities and social media. So it's really important though, it sounds like, that people should at least be aware, our listeners should be aware that their state legislature might operate at different times of the year that's a very different calendar than Congress.

Amanda Sellers Smith (18:59):
Every state is different. And so I'm on my education soapbox. So some of the people that are really important to educate are whoever does state level advocacy for your organization, just that they know that 340B exists so that they know they have this trigger, that if they hear 340B come up, that they know, hey, I should go tell my pharmacy folks or my finance folks that I heard this 340B thing's coming down the bend.

Myles Goldman (19:23):
Amanda, it's been great to dive in with you into the different state policies that are affecting 340B over the last couple of years. Thank you so much for taking the time to speak with us today.

Amanda Sellers Smith (19:37):
Thank you, Myles. And hopefully we didn't scare too many people off about state level policy-making. It's really a great opportunity to get the 340B message out there.

David Glendinning (19:47):
Our thanks again to Amanda Sellers Smith for her keen insights into the state activities that affect 340B hospitals. If you are a member hospital with questions or information about what might be happening in your state, please be sure to connect with Amanda to chat about it. As always, we welcome your episode ideas and feedback as we plan out future episodes of 340B Insight. You can email us at podcast@340bhealth.org. We'll be back in a couple of weeks. As always, thanks for listening and be well.

Female Announcer (20:24):
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 at 340bhealth and submit a question or idea to the show by emailing us at podcast@340bhealth.org.