A bipartisan letter sent earlier this week by the leadership of the Senate and House committees with oversight of the 340B Program reflects both Congressional resolve to keep a focus on the program and potentially a shifting battlefield regarding potential changes in the 340B Program at the close of 2018 and entering 2019.

Senate Health, Education, Labor, and Pensions (HELP) Committee Chair Sen. Lamar Alexander (R-TN) and Ranking Member Sen. Patty Murray (D-WA) joined with House Energy and Commerce Committee Chair Rep. Greg Walden (R-OR) and Ranking Member Rep. Frank Pallone, Jr. (D-NJ) to send a letter to Capt. Krista Pedley, Director of the Health Resources and Services Administration’s (HRSA) Office of Pharmacy Affairs (OPA), which administers the 340B Program.

OPA has delayed for several years establishing and implementing certain processes key to the 340B Program, including: (1) establishing a binding administrative dispute resolution (ADR) process for resolving disputes between manufacturers and 340B covered entities, (2) providing for civil monetary penalties (CMPs) for manufacturers who intentionally overcharge for 340B covered drugs, and (3) issuing guidance on calculating the 340B “ceiling price” for covered drugs.

OPA has delayed implementing regulations in these three areas even though it has acknowledged that it has  rulemaking authority.  Moreover, it has not issued guidance in other matters important to the administration of the 340B Program and has specifically requested additional regulatory authority before proceeding. The delay in action has led some in Congress to propose legislation either to provide additional rulemaking authority to OPA, to set legislative standards for these and other matters, or both.

In their letter to Capt. Pedley, the committee leaders made clear their view that OPA already has the authority to issue regulations on the three issues outlined above, and expressed their concern that OPA was not using this authority or issuing guidance on other issues of concern to 340B stakeholders. The leaders requested that OPA take action within its existing authority. With the Congressional calendar in this election year rapidly winding to an effective close, this leadership letter suggests that key Congressional leadership wants to see OPA action before they would approve of legislative action on the 340B Program, at least in the current Congress that will adjourn no later than December.

However, 340B Program stakeholders should be aware that, while legislative action on the 340B program is unlikely in this Congress, changes may be imminent as a result of actions by the administration and state Medicaid programs. Both the White House and Health and Human Services (HHS) Secretary Alex Azar have repeatedly signaled their intention to examine and potentially address the scope of and reimbursement under the 340B Program as part of their desire to address rising prescription drug prices.

The HHS Centers for Medicare and Medicaid Services (CMS) already took a controversial action in 2018 to reduce reimbursement for 340B drugs under Medicare Part B, and the President’s “blueprint” for lowering prescription drug costs specifically included an intention to alter the 340B Program as part of an attempt to address drug pricing. In addition, the Government Accountability Office and House Energy and Commerce Committees continue active investigations into the role that contract pharmacies play in the 340B Program, with an additional report likely, and related hearings possible, later this year or in early 2019.

Not to be overlooked, in the absence of Congressional and administrative movement, several states are also pushing ahead with efforts to limit or alter reimbursement and revenues under the 340B Program. California’s initial state budget proposal for 2019 included a requirement to carve its state Medicaid out from 340B entirely—a proposal that potentially could have saved the state Medicaid program around $1.3 billion through increased rebates from drug manufacturers, but ultimately would have cost nonprofit safety-net hospitals and clinics in the state approximately $4.1 billion in 340B savings from services provided to the more than 14 million California residents covered by Medicaid expansion (the difference in savings reflecting that the federal government receives the majority of Medicaid rebates shared with the states).

As federal inaction continues to leave a vacuum regarding key aspects of the 340B Program, additional state action becomes increasingly likely.

Powers Pyles Sutter & Verville has represented safety net providers and pharmacies participating in the 340B drug pricing program since the program’s inception in 1992. Stay tuned for further developments on the 340B Program in the coming weeks and months, and contact the Powers attorneys listed below with any questions you or your entity may have regarding the 340B Program.

William von Oehsen, Principal
Barbara Williams, Principal
Peggy Tighe, Principal
Shuchi Parikh, Associate
Brad Lang, Counsel
Steve Kuperberg, Counsel

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