Grow­ing pains

In­sur­ers and PBMS want in on 340B sav­ings

Modern Healthcare - - THE WEEK IN HEALTHCARE - Jaimy Lee

Ex­pand­ing the num­ber of providers and phar­ma­cies that are el­i­gi­ble to par­tic­i­pate in a fed­eral drug dis­count pro­gram has led to in­creased con­gres­sional scru­tiny and a move by some in­sur­ers and phar­macy ben­e­fit man­agers to cap­ture a share of the sav­ings tra­di­tion­ally re­served for the par­tic­i­pat­ing providers.

The 340B pro­gram is in­tended to give qual­i­fied providers, such as hos­pi­tals with dis­pro­por­tion­ate shares of low-in­come and unin­sured or un­der­in­sured pa­tients, dis­counts of an es­ti­mated 20% to 50% on out­pa­tient drugs. The sav­ings can be used to main­tain and fund ser­vices and treat pa­tients.

How­ever, in the last year, some PBMS and pri­vate pay­ers have started to re­duce 340B drug re­im­burse­ment rates to con­tracted phar­ma­cies in or­der to pocket part of the sav­ings usu­ally re­im­bursed to providers, ac­cord­ing to Safety Net Hos­pi­tals for Phar­ma­ceu­ti­cal Ac­cess, an as­so­ci­a­tion that rep­re­sents 800 hos­pi­tals that qual­ify for or par­tic­i­pate in the 340B pro­gram.

The Gov­ern­ment Ac­count­abil­ity Of­fice re­ported sim­i­lar find­ings in a Septem­ber re­port, not­ing that a few cov­ered en­ti­ties said that the abil­ity to gen­er­ate 340B rev­enue from pri­vate in­sur­ers was de­creas­ing be­cause of re­duced re­im­burse­ment rates from in­sur­ers. When in­sur­ers pay less for a 340B drug, the dis­count yields less rev­enue for providers.

The is­sue is one rea­son that the trade group op­posed Ex­press Scripts’ pro­posed merger with Medco Health So­lu­tions, a deal that would com­bine two of the three largest PBMS in the U.S. The or­ga­ni­za­tion told the Fed­eral Trade Com­mis­sion that even though Ex­press Scripts and Medco have not re­duced reim- burse­ment rates to 340B phar­ma­cies to date, fur­ther con­sol­i­da­tion in the PBM mar­ket will “in­crease the risk of dis­crim­i­na­tory re­im­burse­ment of 340B phar­ma­cies.”

“Faced with los­ing a sub­stan­tial amount of their busi­ness, 340B phar­ma­cies would have no choice but to ac­cept what­ever re­im­burse­ment terms are of­fered by the com­pany, de­priv­ing cov­ered en­ti­ties of the sav­ings they need to ful­fill their safety net mis­sion,” the SNHPA said in the Feb. 23 let­ter to FTC Chair­man Jon Lei­bowitz.

The is­sue also prompted the trade group to con­tact Ex­press Scripts last year with an of­fer: If the com­pany for­mally agreed not to en­gage in the re­duced re­im­burse­ment prac­tice, the safety net hos­pi­tals would with­draw plans to pub­licly op­pose the deal with Medco, ac­cord­ing to a Dec. 2 let­ter that Ex­press Scripts sent to Sens. Or­rin Hatch (R-utah) and Charles Grass­ley (R-iowa).

Ex­press Scripts wrote that it would “never agree” to back away from “rou­tine con­tract ne­go­ti­a­tions which re­sult in greater re­tail phar­macy dis­counts on be­half of our clients, in­clud­ing the fed­eral gov­ern­ment through the Medi­care Part D pro­gram.”

Greg Doggett, the SNHPA’S as­so­ci­ate coun­sel, con­firmed that the trade group had con­tacted Ex­press Scripts with con­cerns about po­ten­tial re­im­burse­ment rate re­duc­tions. He said the as­so­ci­a­tion also con­tacted the Health Re­sources and Ser­vices Ad­min­is­tra­tion, the HHS di­vi­sion that over­sees the 340B pro­gram, in Au­gust about Ar­gus Health Sys­tems’ use of a con­tract ad­den­dum that limited re­im­burse­ment for 340B drugs. Ar­gus pro­vides in­for­ma­tion man­age­ment ser­vices to PBMS, man­aged-care or­ga­ni­za­tions and drug man­u­fac­tur­ers. A sim­i­lar let­ter, Doggett said, was sent last Septem­ber to Op­tumrx, the PBM sub­sidiary of Unit­edHealth Group. Wil­liam von Oehsen, the as­so­ci­a­tion’s gen­eral coun­sel, said safety net hos­pi­tals are “very, very con­cerned that this trend will evis­cer­ate the pro­gram.”

The num­ber of cov­ered en­ti­ties par­tic­i­pat­ing in the pro­gram has nearly dou­bled over the last decade, from 8,605 in 2001 to 16,572 in 2011, ac­cord­ing to the GAO. The num­ber of par­tic­i­pat­ing hos­pi­tals rose from 591 in 2005 to 1,673 in 2011, with dis­pro­por­tion­ate­share hos­pi­tals now pur­chas­ing 75% of all 340B drugs, the GAO found.

The Pa­tient Pro­tec­tion and Af­ford­able Care Act ex­panded 340B el­i­gi­bil­ity to in­clude crit­i­cal-ac­cess hos­pi­tals, free-stand­ing can­cer hos­pi­tals, ru­ral re­fer­ral cen­ters and sole com­mu­nity hos­pi­tals. Also in 2010, HRSA is­sued guid­ance that al­lows cov­ered en­ti­ties to con­tract with more than one phar­macy. The GAO noted that “some stake­hold­ers we in­ter­viewed, such as drug man­u­fac­tur­ers, have ques­tioned whether all of these hos­pi­tals are in need of a dis­count drug pro­gram.”

In­creased par­tic­i­pa­tion in the pro­gram has trig­gered con­cern with some law­mak­ers.

Last week, Rep. Joe Pitts (R-PA.) and Sens. Michael Enzi (R-wyo.), Grass­ley and Hatch re­quested in­for­ma­tion from the Biotech­nol­ogy In­dus­try Or­ga­ni­za­tion, the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica, SNHPA and Apexus, the com­pany that man­ages the 340B prime ven­dor pro­gram. The let­ters cite the GAO’S as­sess­ment of fed­eral over­sight of the pro­gram as “in­ad­e­quate” and overly re­liant on “self-polic­ing.”

ISTOCK

Pres­sure from in­sur­ers, PBMS is cut­ting into 340B sav­ings to providers.

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