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340B hospitals breathing easier under Dem-controlled House

A year after the 340B drug discount program faced the prospect of major changes designed to curb what Republicans argued was a program that had grown way too large given its purpose, hospitals receiving the pharmacy benefit now face an easier path with Democrats controlling the House.

Last year was full of uncertainty for program participants. Many safety-net providers, such as San Diego-based Scripps Mercy Hospital, had to deal with substantial Medicare Part B reimbursement cuts for their 340B drugs as a result of an HHS move to change payment rules to reduce the discount available to participants.

“Without the program, it would be very difficult for a hospital like Mercy to continue to create the community-based access points that we do in a very underserved place like downtown San Diego,” said Anthony Jackson, regional pharmacy director at Scripps Mercy.

Jackson said the payment reduction had a significant impact on the hospital’s outpatient clinical services and threatened to cut critical areas of the hospital such as the emergency department and surgical trauma units. The hospital serves roughly 15% of San Diego’s underserved community within its downtown area.

Though 340B drugs make up less than 10% of the medications the hospital distributes, Jackson said the benefit of the program keeps small providers like Scripps Mercy afloat.

But drug manufacturers, some members of Congress and healthcare providers not in the 340B program may see the last year as potentially a turning point in how the program is viewed, meaning 340B program hospitals may still be at risk of losing the valuable discount.

“It was a record year in my opinion,” said Nicole Longo, spokeswoman for the Pharmaceutical Research and Manufacturers of America. “If you look back at the history of the program, there has not been a ton of focus on it from members of Congress—so in terms of sheer number of hearings and bills introduced, 2018 was a momentous year and it shows that members of Congress are acknowledging that there’s some problems there.”

Aside from reimbursement cuts, lawmakers introduced and considered a number of bills over the past year that called for increased oversight of program participants and more reporting requirements, as well as several that sought to impose stricter eligibility requirements for both providers and patients.

Still, the future of the 340B program looks somewhat more secure, particularly after a federal judge threw out the reimbursement cuts last month, while the long-delayed rule to impose price caps on drug manufacturers who sell to providers under the program finally went into effect Jan. 1.

With Democrats now in control of the House, stakeholders said they expected to see fewer proposals that seek to shrink the program. Many feel the focus in Washington will instead be on reforms that call for greater transparency from covered providers.

“It’s going to depend on which conversation House Democrats want to have on this issue,” said Rena Conti, associate professor of markets, public policy and law at Boston University’s Questrom School of Business. “If the larger context is drug pricing, and this is a conversation about affordability and access, then where 340B comes in is to what extent are the prices that people are paying reflective of 340B discounts, and how can the program be better used by participants to facilitate affordability and access to folks who are insured under the public programs.”

To that end, Conti saw the issue of transparency as becoming a central part of future conversations about 340B. She predicted Democrats will opt to focus on changes to the program that would help lower patient drug costs since it’s an issue likely to win support among Senate Republicans.

“I would not be surprised if (Democrats) tried to take a run at some aspect of this and seize the opportunity for bipartisan legislation,” Conti said. “Why not try to make some progress here if they can?”

Started in 1992, 340B allows certain providers to purchase drugs for outpatients from manufacturers at discounts that can range from 20% to 60% off the list price. Hospitals generally must provide care for a disproportionate number of Medicare and Medicaid low-income inpatients to become eligible for the program, which has seen an explosion of entities participating.

Entities that buy drugs through the program can get reimbursed for them through Medicare Part B at above 6% of the average selling price. Hospitals are expected to spend the money generated from the difference to expand care to their uninsured and low-income patients, but they are not mandated to pass along the savings to patients in the form of lower drug costs, a big issue raised by opponents.

Critics have argued that a lack of oversight on how providers use the savings generated through the program coupled with a lack of requirements for just how much charity and uncompensated care providers should deliver has led to allegations that some hospitals’ contributions toward improving access to care for low-income patients is too low compared with the benefits they receive from 340B.

That chorus has only grown louder as the number of hospitals that participate in 340B has grown, increasing by 60% between 2011 and 2016 from 1,465 to nearly 2,400, according to a 2018 report by the U.S. Government Accountability Office.

That report found 340B acute-care hospitals spent an average of 6.1% of their total revenue in 2016 toward providing uncompensated and unreimbursed care compared with 5.3% among acute-care hospitals not in the 340B program.

Maureen Testoni, CEO of the trade advocacy group 340B Health, acknowledged the concerns that have been raised regarding how hospitals use the savings, and she envisioned those concerns will continue to be a central part of the debate. But she contended hospitals have taken steps in recent years to provide more information detailing how they use 340B savings to benefit vulnerable patients.

The motivation behind the American Hospital Association’s 340B stewardship principle initiative, which launched in September, was answering those transparency concerns. The AHA was hoping to “stave off” future 340B regulation by voluntarily disclosing how the saved money is spent and what hospitals would have to stop doing without the program, CEO Rick Pollack said at the time.

“The signal that we have gotten from the Hill is if the 340B hospital community can do this, that certainly obviates the need for Congress to move forward,” said Tom Nickels, the AHA’s executive vice president of government relations and public policy.

For its part, Jackson said Scripps Mercy’s website already carries information about how its 340B savings are used toward community benefit.

Potential reporting requirements aside, Jackson said his biggest concern for 340B now is if HHS should cut reimbursement, which he contended would have a devastating impact on his hospital’s care offerings for diseases such as cancer, where expensive specialty drug therapies have become the norm.

“Those are the drugs that are threatened most by this change in philosophy and methodology,” Jackson said.

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