How the IRA's Price Controls Could Backfire on Patients

For millions of Americans, health insurance offers a false promise. Despite paying premiums, deductibles, and copays, many still find themselves struggling to afford essential healthcare. In fact, a recent survey found that a staggering 43% of adults with employer-sponsored insurance—often considered the gold standard of coverage—find healthcare difficult to afford. This affordability crisis is poised to worsen, as the latest National Health Expenditure projections from the Centers for Medicare & Medicaid Services (CMS) reveal a troubling trend: while government spending on prescription drugs is projected to decrease, patient out-of-pocket costs are expected to rise. The projections forecast an 8.9% increase in hospital expenditures, coupled with a 1.4% decrease in retail prescription drug spending. This shift, driven in part by the Inflation Reduction Act's (IRA) price control provisions, threatens to undermine the law's intended goal of affordable healthcare and exacerbate existing health inequities. While the IRA aims to lower drug costs, its focus on price controls, rather than comprehensive patient protection mechanisms, is creating misaligned incentives that could backfire on the very people it aims to help.

The IRA's Price Controls: A Double-Edged Sword

The IRA's approach to lowering drug costs centers on empowering the government to directly negotiate prices with pharmaceutical companies. This change tackles a provision in the Medicare Part D program known as the "non-interference" clause, which previously prevented the government from directly negotiating drug prices. As a Kaiser Family Foundation (KFF) issue brief explains, "The Part D non-interference clause has been a longstanding target for some policymakers because it has limited the ability of the federal government to leverage lower prices, particularly for high-priced drugs without competitors." While this "non-interference" clause has long been a target for reform, the IRA's implementation creates a ripple effect that extends beyond simply lowering the sticker price of medications. The Congressional Budget Office (CBO) estimates that these drug pricing provisions will reduce the federal deficit by $237 billion over 10 years, suggesting a significant shift in spending away from the government. However, this shift comes at a cost. The IRA's emphasis on price controls, rather than comprehensive patient protection mechanisms, disrupts existing rebate structures that have been crucial in expanding access to medications, particularly for low-income patients and those with chronic conditions.

Programs like 340B and Medicaid rely on a system of manufacturer rebates to make medications more affordable. In essence, drug companies provide rebates to these programs in exchange for having their drugs included on formularies and made available to a large pool of patients. These rebates help offset the cost of medications, allowing safety-net providers to stretch their limited resources and serve more patients. However, the IRA's price controls could disrupt this delicate balance. By directly negotiating lower prices with manufacturers, the government might inadvertently reduce the incentive for companies to offer substantial rebates to programs like 340B and Medicaid. This could lead to higher costs for these programs and ultimately limit access to medications for vulnerable populations.

This means that programs like 340B and Medicaid, which rely on manufacturer rebates to offset costs and provide affordable medications to vulnerable populations, could be significantly undermined by the IRA's price control measures.

Further complicating the issue is the potential for pharmaceutical companies to adapt to the IRA's price controls by strategically setting higher launch prices for new drugs. This tactic allows them to recoup potential losses from negotiated prices in the future, effectively shifting the cost burden onto other payers, including patients. The CBO projects that this trend of higher launch prices would disproportionately impact Medicaid spending, placing a greater strain on a program already facing significant enrollment fluctuations and budgetary pressures. The KFF brief warns that, "Drug manufacturers may respond to the inflation rebates by increasing launch prices for drugs that come to market in the future." This means that while the IRA might appear to lower drug costs in the short term, it could inadvertently fuel a long-term trend of rising prices for new medications, ultimately impacting patient affordability and access to innovative therapies.

Hospitals: Benefiting from the System While Patients Pay the Price

The CMS projections forecast an alarming 8.9% increase in hospital expenditures, raising questions about the drivers of this unsustainable growth. A closer look reveals a troubling connection between this trend and the 340B Drug Pricing Program, a federal initiative designed to help safety-net hospitals provide affordable medications to low-income patients. The CBO's analysis of 340B spending reveals an explosive 19% average annual growth from 2010 to 2021, significantly outpacing overall healthcare spending growth. This dramatic increase is largely attributed to hospitals, particularly those specializing in oncology, which are increasingly purchasing high-priced specialty drugs through the program. As the CBO presentation states, "340B facilities benefit from the program because the difference between the acquisition cost and the amount they are paid (often called the 'spread') is larger for drugs acquired through the 340B program." This suggests that hospitals are capitalizing on the 340B program's discounts to acquire expensive medications, potentially driving up their overall spending. But are these savings being passed on to patients? Evidence suggests otherwise.

This suspicion of hospitals leveraging the 340B program for profit is further reinforced by a UC Berkeley School of Public Health study which found that hospitals are charging insurers exorbitant markups for infused specialty drugs, many of which are likely acquired through 340B. The study reveals that hospitals eligible for 340B discounts charge insurers a staggering 300% more for these drugs than their acquisition costs, effectively pocketing a substantial profit margin. This practice raises serious concerns about whether the 340B program, designed to help vulnerable patients access affordable medications, is instead being exploited by hospitals to boost their bottom line. As Christopher Whaley, a co-author of the UC Berkeley study, aptly points out, "It is ironic that some hospitals earn more from administering drugs than do drug firms for developing and manufacturing those drugs. At least drug firms invest part of their revenues in innovation; hospitals invest nothing." This highlights a perverse incentive structure where hospitals benefit financially from a program intended to help patients, while those same patients are often left facing inflated prices for essential medications and crippling medical debt.

The Affordability Crisis: A Broken Promise for Patients

This concerning trend of rising healthcare costs and shifting burdens is not limited to those reliant on safety-net programs. The Commonwealth Fund's 2023 Health Care Affordability Survey paints a bleak picture of the widespread affordability crisis facing Americans across all insurance types. The survey found that 43% of adults with employer coverage find healthcare difficult to afford, shattering the illusion that employer-sponsored insurance guarantees financial protection. These findings challenge the fundamental assumption that health insurance in the United States equates to affordable access to care. As the survey report states, "While having health insurance is always better than not having it, the survey findings challenge the implicit assumption that health insurance in the United States buys affordable access to care." This sentiment is echoed by millions of Americans who, despite having insurance, are forced to make difficult choices between their health and their financial well-being.

Even the IRA's lauded out-of-pocket (OOP) cap on Part D drug costs, while offering some relief, fails to address the root causes of this affordability crisis. An analysis by Avalere reveals that even with the cap in place, a significant number of Medicare beneficiaries will continue to face high healthcare costs, particularly those with lower incomes or specific health conditions. The analysis projects that 182,000 beneficiaries will spend over 10% of their income on Part D drug costs in 2025, despite the OOP cap. This sobering statistic underscores the limitations of focusing solely on OOP costs without addressing the underlying drivers of high drug prices and healthcare spending. As the Avalere analysis cautions, "High OOP costs are expected to result in many enrollees still facing affordability challenges in 2025." The findings from both the Avalere analysis and the Commonwealth Fund survey highlight a critical gap in the IRA's approach: it fails to adequately protect the most vulnerable patients from the financial burden of healthcare.

A Call for Patient-Centered Solutions

The CMS projections, alongside independent analyses of the pharmaceutical market and patient affordability, paint a clear picture: the current trajectory of US healthcare spending is unsustainable and inequitable. The IRA's price control provisions, while well-intentioned, risk exacerbating the affordability crisis by disrupting existing rebate structures, incentivizing higher launch prices for new drugs, and shifting costs onto patients. This shift is further compounded by unchecked hospital spending, particularly on high-priced specialty medications acquired through the 340B program. The result is a system where hospitals and pharmaceutical companies benefit, while patients—especially those with lower incomes or chronic conditions—are left struggling to afford essential care.

To be sure, the IRA includes provisions aimed at directly helping patients, such as the out-of-pocket cap on Part D drug costs and the expansion of subsidies for marketplace plans. These are positive steps towards easing the financial burden of healthcare for many Americans. However, the law's broader focus on price controls, without sufficient attention to patient protection mechanisms and the potential for unintended consequences, threatens to undermine these gains and create new challenges for those who rely on safety-net programs like 340B and Medicaid.

It's time for a fundamental shift in our approach to healthcare reform. Policymakers must move beyond a narrow focus on price controls and embrace a patient-centered approach that prioritizes affordability, access, and equity. This requires a multi-pronged strategy that includes:

• Reassessing the IRA's reliance on price controls: Instead of simply dictating prices, policymakers should explore alternative approaches that strengthen patient protections, preserve rebate structures that support broader access, and address the potential for cost-shifting onto patients.

• Tackling hospital pricing practices: Increased transparency and accountability in hospital pricing, particularly for inpatient medications, is necessary to ensure that safety-net programs like 340B are truly benefiting patients and not being exploited for profit.

• Investing in alternative care models: Promoting value-based care and investing in primary and preventive care can reduce reliance on expensive hospital stays, improve health outcomes, and make healthcare more affordable for everyone.

The promise of affordable, accessible healthcare for all Americans remains unfulfilled. We must demand a healthcare system that puts patients first, not profits. Only then can we ensure that everyone has the opportunity to live a healthy and fulfilling life, regardless of their income or health status.

Eye on 2024: Federal Action on PBMs, 340B, and Telehealth

2024 stands as a pivotal year in federal healthcare policy, potentially overshadowed by a highly contentious and partisan political landscape during an election year. The backdrop includes ongoing budget fights, looming cuts threatening vital healthcare programs, and a shifting balance of power in Congress thanks to at least one member being removed from office and a couple of high-profile resignations, further complicating the path to meaningful bipartisan legislation. Amidst this chaos, key focus areas such as reforms related to Pharmacy Benefit Managers (PBMs) and the 340B Drug Pricing Program, as well as telehealth expansion are at the forefront of potentially significant policy shifts, all while renewed attacks on the Affordable Care Act (ACA) add to the uncertainty of healthcare reform in an election year.

Pharmacy Benefit Managers: Pushing for Transparency and Market Reform

PBMs have come under increasing scrutiny in the U.S. healthcare system, particularly regarding their role in prescription drug pricing. Dominated by just three key players, PBMs face criticism for opaque pricing models and practices that may contribute to rising drug costs. The Lower Costs More Transparency Act of 2023 represents a bipartisan effort to enhance transparency in PBM operations, requiring detailed disclosure of pricing and costs. The future of this legislation depends on whether the Senate will adopt the House version or introduce its own bill, with several Senate committees recently advancing similar proposals.

Experts, including those from the Brookings Institution, caution that while increased transparency is a positive step, it may only modestly impact overall drug costs. The effectiveness of these reforms hinges on addressing the complex relationships among PBMs, drug manufacturers, insurers, and healthcare providers.

The current PBM model, often criticized for incentivizing high drug list prices through 'spread pricing,' is under review. Proposed reforms, like those in the Pharmacy Benefit Manager Reform Act, aim to eliminate spread pricing and ensure that rebates and savings directly benefit plan sponsors and patients.

Additionally, the PBM market's consolidation and “vertical integration” (or self-dealing by another name) raises concerns about market power and its influence on drug pricing. With a few firms controlling a significant market share, PBMs' market power could lead to disproportionate profits, underscoring the need for regulatory measures to ensure fair pricing and competition.

As the healthcare community navigates these reforms, the focus remains on ensuring that changes in PBM operations directly benefit patients, especially those in underserved communities disproportionately affected by high drug costs.

340B Program: Addressing Challenges for Future Reforms

The 340B Drug Pricing Program, essential for providing discounted drugs to healthcare providers serving underserved communities, is at a critical juncture. Facing legal challenges and calls for reform, 340B is under scrutiny, particularly regarding its operational complexities and the definition of a 340B-eligible patient. This definition, crucial in determining who accesses discounted drugs, has been a point of contention, with legal interpretations suggesting a need for broader inclusivity, as noted in Bloomberg Law's analysis.

Advocates, including those supporting people living with HIV, recognize the program's significant impact but seek more direct patient benefits, a sentiment echoed in CANN's blog. The current model's effectiveness in providing direct patient benefits, such as reduced drug prices, is being questioned.

Efforts for greater transparency and accountability are intensifying, with state-level initiatives aiming to ensure that program savings directly benefit patients, especially those with financial barriers to medication access, as highlighted in Avalere's insights. State authority to regulate 340B, however, is still in question as Arkansas and Louisiana face lawsuits around recently passed legislation.

Amidst these challenges, 340B's commitment to aiding underserved communities remains paramount. Collaborative efforts among lawmakers, healthcare providers, and patient advocacy groups are crucial to reform the program, ensuring it continues to provide equitable access to care and addresses key issues like medical debt.

Telehealth: A Defining Year in 2024

2024 is set to be a defining year for telehealth, a sector transformed by the COVID-19 pandemic. This year will witness crucial legislative decisions that could shape the future of access to telehealth services.

At the forefront are policy decisions regarding Medicare reimbursement flexibilities for telehealth, as noted in Modern Healthcare's article. Set to expire in 2024, these flexibilities are vital for the continued viability of telehealth, particularly benefiting small practices and those in rural or underserved areas.

Another key development is the anticipated update to remote prescribing rules for controlled substances. The decisions made will crucially balance the need for accessible care with the regulation of controlled substances, impacting how telehealth can be used for medication prescribing.

As 2024 unfolds, the healthcare community faces the challenge of navigating these legislative and policy changes to maximize the benefits of telehealth in patient care and access.

Budget Battles: Critical Healthcare Advocacy Amid Congressional Challenges

The intense budget battles in Congress, underscored by proposed cuts in the House L-HHS Appropriations Bill (H.R. 5894), are central to healthcare advocacy. These cuts, amounting to $767 million, pose a significant threat to essential HIV/AIDS programs, risking the reversal of years of progress in treatment and care. These programs are not just healthcare initiatives; they are vital lifelines providing necessary medications and support to individuals living with HIV.

The Coalition on Human Needs has expressed grave concerns about potential severe cuts to non-defense discretionary appropriations (NDD) for fiscal year 2024, which could drastically impact a range of vital services. In their sign-on letter to Congressional leaders, they warn that these cuts, potentially up to 9% according to the Center on Budget and Policy Priorities, would significantly harm programs essential for public health, education, environmental protection, and more, affecting diverse communities across America. The Coalition advocates for completing the FY24 appropriations process with a bipartisan approach, emphasizing the need to protect these crucial investments that support the nation's most vulnerable populations and uphold the commitment to public health and welfare.

Any major legislative changes will be at the mercy of presidential election year politics, and the congressional balance of power will only make it harder. Issues like PBM reform, or 340B reform, and Telehealth expansion will probably receive a lot of attention via hearings and news clippings, but legislative action remains in doubt.

340B Hypocrisy: The Inconvenient Truth Behind Why We Need to Reform This Vital Safety Net Program

Brandon Macsata is the CEO of ADAP Advocacy. Jen Laws is the CEO of Community Access National Network.

The 340B Drug Pricing Program (“340B”) is probably one of the most transformative public health programs providing lifesaving supports and services to people living with HIV in the United States, second only to the Ryan White HIV/AIDS Program (“RWHAP”). As such, rigorous debate about the future of the program is not only healthy, but it is also paramount to its success. As patients (and patient advocates), it is our responsibility to demand accountability, transparency, and stability. There is universal agreement about the vital role 340B plays in improving access to healthcare. But for many – including ADAP Advocacy and the Community Access National Network – we contend that the program could be doing more…and better! The focus of the program should be on the patients, and not the Covered Entities, medical or service providers, or any other business enterprises making lots of money off it. That is the inconvenient truth behind why we need to reform this vital safety net program.

Section 340B of the Public Health Service Act (PHSA) is a Drug Pricing Program established by the Veterans Health Care Act of 1992. That year, Congress struck a deal with pharmaceutical manufacturers to expand access to care and medication for more patients; if pharmaceutical manufacturers wanted to be included in Medicaid’s coverage, then they’d have to offer their products to outpatient entities serving low-income patients at a discount. The idea was brilliantly simple. Drug manufacturers could have a guaranteed income from participation in the Medicaid program and Covered Entities could have guaranteed access to discounted medications. Congress set-up a payment system by way of rebates and discounts affording certain healthcare providers a way to fund much needed care to patients who could not otherwise afford it.

 “…to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” H.R. Rep. No. 102-384(II), at 12 (1992)

THAT is the legislative intent behind 340B. THAT is where some of us want to return 340B’s focus. THAT is why reform is coming!

Ironically, critics of the 340B reform movement – often motivated by self-preservation and protecting their ever-expanding budget and geographic footprint – are quick to attack the idea of the need for reforms. Sadly, they’re also quick to turn their criticism into personal attacks, including questioning the intentions, morals, and character of the people supporting reform. They charge, using Inspector Clouseau “gotcha” style rhetoric, that we’re in the “pockets” of the drug manufacturers because we accept their money to help with our patient advocacy and education (yet there is no “gotcha”, since this information is quite publicly available on our websites, annual tax returns, Guidestar, as well as frequent public commentary).

Isn’t it funny how the “gotcha” mentality cannot accept the obvious, that maybe our interests align with the drug manufacturers because it is in the best interest of patients. Drug manufacturers make products patients want and need. Ensuring funding flows in a way that expands patient access to medications does indeed benefit both patients and the drug manufacturers. It should be noted, this criticism tends to also neglect mentioning the interests of the entities challenging reform: anti-competitive consolidation among hospitals and pharmacies (leaving whole areas without services), increasing profits, paying for salaries unrelated to healthcare, and increasing administrative salaries are all excellent examples of why we’re left asking “Who is actually benefiting from this program?”

The truth of the matter is, aside from a growing list of patients, patient advocacy organizations, and drug manufacturers, there is a growing chorus calling for reform. Academia wants it (NEJM, Penn LDI, USC Schaeffer), economists want it (Nikpay, Gracia), national trade associations want it (NACHC, NTU), policy think tanks want it (CMPI, NAN), and even multiple news media outlets are suggesting it (Forbes, NYT, WSJ). Local activists are also increasingly fed-up with what they’re witnessing (Dinkins, Feldman, Winstead).

Dr. Diane Nugent, Founder & Medical Director of the Center for Inherited Blood Disorders, recently noted an opinion piece in the Times of San Diego, “A September 2022 analysis by the Community Oncology Alliance revealed that some hospitals participating in 340B price leading oncology medications nearly five times more than the price they paid. Another study found that hospital systems charge an average of 86% more than private clinics for cancer drug infusions.”

But speaking of deep pockets, isn’t it also an inconvenient truth that the very folks fighting reform, and fighting improving the program so patients can benefit more directly from it, are the same folks financed by big hospital systems, and mega service providers abusing 340B intent?

A question often asked by advocates learning about 340B: “So, exactly how much money are we talking about here?”

Well, we don’t really know…sort of. For Federal Grantees covered under 340B, their grant contracts require accounting of 340B rebates as part of their programmatic revenues. Those revenues are required to be re-invested in the program, which generated the income. This level of transparency is pretty much a “gold standard” that other Covered Entities (less maybe hemophiliac centers) in the 340B space are required to meet. That’s part of why we, and other advocates, are calling on minimum reporting requirements for hospitals, contract pharmacies, and pharmacy benefit managers (insurers covering medications) to begin providing some data. Clearing up the murkiness, if you will. What we do know is drug manufacturers reported more than $100 BILLION in 340B-related sales last year.

That’s concerning especially because “charity care” is declining and medical debt is a growing issue for more and more patients and their families. The Affordable Care Act mandated “charity care”, or “financial assistance”, to be offered by non-profit hospitals seeking to qualify as 340B entities but did not place any definitions behind the mandate, including any “floor” of how much charity care a hospital has to offer.

Now, in all rhetoric opposing any type of transparency in 340B, hospitals tend to conflate their “uncompensated care” and “unreimbursed care” or “off-sets” for public health programs – these don’t necessarily reflect any “charity” being provided to patients. These things should be separated when considering what benefit hospitals provide a community. And under that lens, things get kind of ugly with far too many of the 340B hospitals reporting providing less than 1% of their operating costs as charity. When reviewing how much hospitals write off in bad debt, or going after patients who can’t afford care, often far exceeding those charity care levels, we’re left asking if the “non-profit” designation is really a declaration of concentrating “profits” by way of salaries to top executives rather than formal shareholders?

That bad debt shows up for patients as medical debt. And we need to be very specific here: according to the Urban Institute, some 72% of patients with medical debt owe some or all of that debt to hospitals. Meaning, what we call medical debt is really hospital debt. The situation is unarguably bad. This year alone the Los Angeles County Office of Public Health issued a report outlining for policymakers the role and responsibility hospitals have in driving medical debt and how increasing charity care might stem this problem.

As patients, and frankly as patient advocates who represent thousands like us, medical debt isn’t an issue that can be swept under the carpet. Entire communities avoid necessary care to protect their financial interests. We’ve personally watched our friends open GoFundMe accounts to cover medical expenses. We’ve helped our loved one’s cover food and light bills to not miss a medical bill. We also well recognize how negative credit reporting from medical debt can hurt people from getting rental housing or a car loan, or even simple necessities. And when thinking about how much we don’t know about what’s behind that $100 billion price tag, the fact that patients face these concerns on the regular is pretty obscene.

We do know there are plenty of good actors in the 340B space. Particularly, Federal Grantee Covered Entities, like Ryan White Clinics and AIDS Drug Assistance Programs (ADAPs). And we know they’re generally great actors because of that transparency in reporting and the oversight offered by their grant contracts. Ultimately, we’re not necessarily asking for a whole lot more than that for literally everyone else who stands to make a buck in the chain between drug manufacturers and patients. Indeed, that trust on Federal Grantees, particularly Ryan White Clinics and ADAPs, is part of why drug manufacturers restricting 340B sales held a carve out for these Federal Grantees. (To be fair and without much public fanfare, years ago, we – as in ADAP Advocacy and CANN – helped to negotiate these carve-outs as part of our advocacy. Our relationship with drug manufacturers isn’t a one-way street as detractors might try and sell you on.

$100 billion is a lot of money! Is it too much to ask, “Why aren’t patients benefiting more directly from this ever-growing healthcare program?” Facts show that 340B revenues are soaring year after year, yet against the grim backdrop of consistently declining charity care in the impoverished communities needing the most help. To make matters worse, rising medical debt is crushing families. Patients deserve better. People living with HIV who depend on the RWHAP and 340B deserve better! And that is why we need reform.

Read our policy reform suggestions here.

Equity in Access: Hospital Price Transparency, Medical Debt, and 340B

As part of Community Access National Network’s (CANN) 2021 blog series, A Patient’s Guide to 340B, we published a piece detailing how the decline in charity care impacts patients after seeing a provider with a particular focus on practices around debt collection and medical debt. Since then, the Biden Administration issued a directive through federal agencies for credit reporting agencies to stop reporting medical debt on consumer credit reports. The idea was an effort to reduce the impact of medical debt in other areas of patients’ lives, like securing housing or employment. Emergencies and even routine care, say a pregnancy, can after all affect a person’s financial status for years after the fact and with the ballooning nature of medical debt affecting millions of Americans, something needed to be done to better protect patients. The Affordable Care Act (ACA), in general, sought to address the financial concerns of patients, particularly with regard to avoiding necessary care for fear of the financial repercussions. These moves by President Obama’s Democratic successor were relatively predictable.

The three largest credit reporting companies, Experian, Equifax, and TransUnion, agreed in 2022 to implement these rules…sorta.

The details of those agreements and how hospitals navigate “bad debt”, or when a patient can’t afford a bill, are stickier than the rules can address without legislation. Hospitals have their own internal teams to pressure patients to pay something, even when it comes at the expense of food on their tables or paying rent, and even when those same patients are entitled to financial assistance or charity care and shouldn’t be paying anything. But once that effort fails, hospitals and other medical providers can and do “charge off” those bad debts to credit collection companies and those claims can and will continue to show up on consumer credit reports. Advocates have been pushing the Internal Revenues Service (IRS) and other agencies to do more to protect patients and consumers. All of that is part of why Representative Tlaib (D – Michigan) has introduced a bill to prohibit medically necessary care from arriving on a patient’s credit report, among other rules and limitations on how providers, credit collectors, and credit reporting entities handle medical debt.

The proposed bill, however, does not address hospital practices in running credit reports in order for patients to qualify for financial assistance – which can result in a “ding” on a patient’s credit file.

Among other efforts to reduce costs related to medical care, the Biden Administration also implemented hospital and insurer price transparency rules, with the idea that transparency might drive down costs and encourage competition regarding common medical procedures. However, there is no central database of these services hosted by the government, rather these services are posted…somewhere on hospital websites. The problem is hospitals and insurers are really, really good at abusing process and not meeting the actual intent behind these efforts. The advocacy organization Patient Rights Advocate has recently released its analysis of hospital compliance with these rules and it’s not pretty. The Centers for Medicare and Medicaid Services (CMS) hasn’t issued rules for standardizing price data and the files for these data aren’t required to be presented in a consumer-friendly fashion. Further, these rules are required to provide the list and negotiated prices relevant to a consumer and do not address considerations like rebates or their impact on accessing care, nor are these lists required to provide information on how different charity care designs might help reduce the financial burden of these services.

So other than keeping our friends in advocacy and government well-employed by analyzing thousands of lines of data, these tools are proving to be of limited use for the average consumer. And none of that addresses what happens in emergency situations, where “choice” doesn’t exist – like when you need an ambulance or when there’s one or two hospital systems in a geographic area. All the price transparency in the world won’t address consolidation in providers.

Furthermore, a lack of transparency in 340B revenues for hospitals also means a lack of transparency as to how those dollars might be used to mitigate these consumer costs and potential harms when a patient can’t pay. Similarly, with hospitals and insurers pointing fingers at labor and pharmaceutical costs as to what’s driving a crisis of unaffordable care, transparency on actual costs to provide care and treatment would allow for a more meaningful analysis of who’s really in it for the money versus serving the health needs of patients and communities.

For their part, the American Hospital Association fought the transparency rules in court and lost. Their central argument in response to the loss was that these transparency rules took away from serving patients during the height of the COVID-19 pandemics strains on hospitals – but providers don’t crunch these data, administrative personnel do.

Rules standardizing patient cost data presentation, prohibitions on utilizing 340B revenues for consolidation, and anti-competitive practices would certainly be useful for ensuring patients feel secure in accessing care they need and protecting patients from predatory practices. And that security is critically important for patients and for addressing issues around health disparities.

The reality of the matter is providers do deserve to be paid for their work and commitment to their communities and no patient is going to meaningfully argue against that. But when patients find themselves avoiding necessary care because they’re trying to save or qualify for a home or dig themselves out of debt, that’s just plain bad for those patients, their families, their dependents and care givers, the economy, and, frankly, our trust in both government and providers. Health disparities cannot be meaningfully addressed across this country without addressing the financial incentives and disincentives that drive access to care, whether it be the rural hospital crisis or medical debt.

Increasing transparency is an excellent start. Advocates and policymakers should consider to continue to explore ways to protect patient trust by way of accountability in programs and payment processes which are supposed to be about protecting patients as consumers and increasing access to care.

Tension in Tennessee: HIV Crisis Looms

Earlier this month, Tennessee announced it would begin refusing federal funding for HIV prevention activities including surveillance activities, which monitor the progress of reducing new HIV transmissions and diagnoses as well as help identify populations and geographies disproportionately affected by HIV. The funding mechanisms targeted by the state for being rejected are known as PS 18-1802 (surveillance and prevention funding) and PS 20-2010 (supporting state health departments in Ending the HIV Epidemic). The U.S. Centers for Disease Control and Prevention (CDC) announcements for recipients of these dollars show Tennessee receives about $6.2 million from PS 18-1802 and just under $2.1 million from PS 20-2010. A letter issued to subrecipients on January 17, 2023 from Dr. Pamela Talley, Medical Director of Tennessee’s HIV, STI, and Viral Hepatitis Programs, the move is supposed to “decrease its [Tennessee’s] reliance on federal funding and assume increased independence,” with an end date for those federal funds to be May 31, 2023. The same letter promises, “Other state initiatives will support all HIV prevention and surveillance staff and activities in funded metro health departments. Our goal is for new service contracts to be in place on” June 1, 2023.

It's not yet entirely clear how Tennessee will make up for the $8.3 million dollars the two funding streams offer but Governor Lee has emphasized a desire to not have “strings attached” that come with federal dollars. It’s also not clear that Tennessee can effectively have those replacement dollars and contracts in place in the less-than-six-months deadline described in the aforementioned letter.

PS 20-2010 specifically funds efforts aimed at addressing needs in Shelby County, where Memphis is situated, as a priority jurisdiction for Ending the HIV Epidemic (EHE), an initiative started under President Trump and continued by President Biden (displaying the long, historical record of bipartisan support regarding HIV). According to AIDSVu, as of 2020, 6,283 people are living with HIV/AIDS (PLWHA) in Shelby County, with 81.7% of those PLWHA whose race is identified are Black. The county’s rate of PLWHA is more than twice that of the state overall (819 vs 314 per 100,000) and the rate of new HIV diagnoses is nearly three times the rate of the rest of the state and the country at large (31 vs 11 per 100,000). The CDC’s dashboard to track EHE progress, known as America’s HIV Epidemic Analysis Dashboard (AHEAD), shows provisional data which indicates a decrease in new diagnoses (this does not mean fewer transmissions), a light increase in linkage to care rates (which could be explained by the decrease in new diagnoses), and a decrease in pre-exposure prophylaxis (PrEP) coverage in years 2020-2022. According to the U.S. Census Bureau, Shelby County’s racial demographics are 54.6% Black and 40.4% white, including Hispanic white persons. Furthermore, the CDC’s 2020 analysis of counties vulnerable to HIV outbreaks included an astounding forty-two counties in Tennessee were among the two hundred twenty top counties at risk, with Hancock County, a rural area which boarders closely to Kentucky, Virginia, and North Carolina, ranks as thirteenth most likely to experience an HIV outbreak. Separately, but certainly related, local news reported a “spike” in new HIV diagnoses in Chattanooga in November 2022.

While the state says it can best manage these dollars, there’s good reason to doubt that and to doubt that this move is not ideologically driven.

For example, the state, through reports to news outlets, has said it will emphasize prevention programming on non-profits to best serve human trafficking victims, first responders, and to prevent perinatal HIV transmission from mothers to children. However, According to Tennessee’s own epidemiological report there were zero perinatal HIV transmissions in 2019. The CDC tracks certain occupational transmissions of HIV and describes the risk associated with certain situations of exposure, which few first responders even experience. To that end, even the CDC admits “occupational HIV transmission is extremely rare” on a page that tracks occupational transmissions among health care personnel, where first responders of ilk are most likely to be at risk. According to the CDC’s page dedicated to occupational transmission, only 58 cases of confirmed occupational transmission have ever been reported in the US, with an additional 150 possible transmissions reported to the agency. Yet and still, since 1999, only one confirmed occupational transmission has occurred among health care personnel. As for human trafficking victims, there’s a bit more opacity there. Likely, those victims are already well-served by those entities already contracted by the current funding mechanisms tied to federal dollars. Limiting or shifting those resources away from well-established service providers risks harming the communities served, reducing access to care, and might run up a pre-existing injunction.

Planned Parenthood just so happens to be one of the contracted service providers for the state and has already run up against the state attempting to strip funding from the entity. In 2012, Judge William Haynes issued an injunction against the state of Tennessee from attempting to stop HIV prevention dollars going to the provider. At the core of the issue, the state through then-Governor Haslam, who committed to defunding Planned Parenthood and public statements to that effect were submitted as evidence of animus against the entity’s First Amendment protected speech and advocacy, sought to refuse grant renewal with Planned Parenthood. Planned Parenthood had responded to a request for proposals (RFP) for these dollars and had previously scored well in the grant application to independent grant reviewers at United Way, the state’s assigned administrative agent for distributing the federal awards. Planned Parenthood also had a successful track record of meeting the grant deliverables associated with the funding, which was mostly centered around condom distribution. Judge Haynes found the state did not have just cause for refusing to continue contracting with Planned Parenthood, given their score, past success with the same funding, and because Planned Parenthood’s “clientele and communities will lose important public health services on matters of grave public health concern.” The injunction still exists today, though it was issued in federal courts, not state courts, because the dollars used are federal dollars.

That said, it’s entirely clear, given the state’s suggestion these dollars will also flow through non-profit providers, if the injunction would not still apply. However, the state has since removed Planned Parenthood from its website listing contracted condom distributors.

Other changes to the state’s website include removing all mention of priority populations identified by the federal government, according to an internet archive, including the MSM (men who have sex with men) taskforce and the transgender taskforce.

The state’s transgender taskforce specifically came to Governor Lee’s attention because of right-wing attacks on Vanderbilt University medical Center’s gender affirming care clinic in later 2022. Vanderbilt receives some state dollars to provide a wide variety of care, not just HIV-related services or gender affirming care for transgender and non-binary people. Conversations with local advocates found a broad understanding the Governor’s commitment to “investigate” Vanderbilt and the entity’s use of state dollars, which would have readily disclosed the CDC’s designated priority populations to include transgender people and which entities are funded by the CDC’s grants.

Tennessee service providers funded by these federal dollars have voiced their concerns repeatedly through media interviews, some specifically pointing towards how this disruption will also be detrimental to the state’s response to the opioid epidemic.

It is currently unclear how much Tennessee’s new health commissioner, former state-Senator from Kentucky Dr. Ralph Alvarado, had a hand to play in these developments. While Alvarado officially began his duties just a couple of weeks ago, he was appointed by Governor Lee in November. Alvarado’s voting record and public statements show animus toward transgender people and abortion access, with him voting to bar transgender girls from playing on sports teams and to increase various abortions restrictions in Kentucky’s 2022 legislative session. When Alvarado was introduced to the Tennessee Senate’s Health and Welfare Committee on Wednesday, January 25, 2023, rather than the typical meet and greet type hearing, Senator Jeff Yarbro, who has a personal connection to HIV, asked Alvarado about the changes and was met with a regurgitation of the state’s letter to health departments. Alvarado is expected to return to the Committee in March, even as time ticks down.

Senator Yarbro and Representative John Clemmons have introduced state legislation which would require Tennessee to pursue and accept federal dollars “to implement programs for the prevention, testing, and treatment of” HIV. These bills largely mirror state statutes which require states pursue all federal dollars made available to state unemployment insurance funds. They make sense on the surface, if federal dollars are available for programming important to the residents of a state, the state should be pursuing those dollars first. The bills, in an already packed legislative session and a hyper-partisan atmosphere, are not likely to pass.

Additionally, Tennessee Representative Steve Cohen (TN9-D) publicized a formal request to Health and Human Services Secretary, Xavier Becerra, about redirecting funding through county health departments to circumvent the state’s moves. The request also copied the CDC’s Director, Dr. Rochelle Walensky.

As of yet, news reports seeking to touch base with the CDC on the status of these changes have found the CDC has not yet been notified of Tennessee’s withdrawal from these funding mechanisms. Without formal notification, those dollars will renew automatically at the end of the grant year.

Part of the struggle in nailing down exactly the extent of the impact refusing these federal dollars will create is the complicated structure behind providing services and funding those employees who provide those services. For many entities funded by multiple streams of federal dollars, employees, measured in grant language as “full-time equivalent” (FTE), may have related duties in which each duty under their job description is funded by separate grants. For example, in a federally qualified health center (FQHC) providing counseling, testing, education, linkage to care, and HIV treatment services, a single employee might be funded by one grant to provide counseling and testing while also being funded by another grant to link patients to care when a test comes back reactive or doing what’s known as partner notification (an activity performed with the participation of a newly diagnosed patient but designed to maintain the patient’s anonymity, if they so desire). Similarly, state disease surveillance infrastructure might employ one or two data analysts to compile data on a number of conditions, each of those conditions funded by separate grants, even though the employee doing the work is the same. So, if said analyst is examining reports on HIV diagnoses one day, another day they might be examining particular sexually transmitted infections – both activities funded by different federal grants. Surveillance activities also include things like monitoring PrEP uptake, a distinctly prevention activity.

Directly speaking to the duties which might be dually funded by multiple grants, the treatment, linkage-to-care, and re-engagement in care activities a FQHC employee might be engaging in will impact people living with HIV, not just those seeking prevention services. This does nothing to speak of health care providers or their support staff who also see their salaries dually funded. So while Tennessee’s refusal of federal prevention dollars does not directly hit funding streams tied to the Ryan White CARE Act grantees, subrecipients, and contracted service providers, PLWHA may well still an impact in the quality of treatment services provided to them due to staffing changes, including those support services which are dually funded for prevention and treatment.

Adding one last layer of complication onto matters, it is also not known how much of Tennessee’s prevention programming generates 340B revenues and savings, which would typically be directed back into prevention programming. Those dollars, if any (there are certainly significant sums involved as each grant requires the recipient, subrecipient, and contractors to propose revenue generating activities and 340B is considered a significant source of those revenue dollars), will be gone from the state’s health ecosystem. With Tennessee also pointing at redirecting dollars from other state initiatives, there’s good reason to believe some, if not all, of those suggested dollars might be from state programs generating 340B revenues. All of that means other programming benefitting from 340B rebates would then see a reduction of programmatic dollars for those programs – whichever they might be. And there’s reason to believe that might be what’s happening, if we look at what New York is proposing in terms of the state usurping 340B revenues to prop up its budget at the expense of grantee service providers who have come to rely upon those monies to meet the needs of patients. Certainly, redirecting 340B revenues to fill budgetary shortfalls from any state away from service providers who are expected to produce accounting as part of their federal grantee status does not serve the intent of the 340B program, “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive care.” In order to stretch federal resources, those federal resources must be there to begin with.

With questions remaining on exactly how Tennessee, which up until now, has not directly funded those programs which have been federally funded, advocates and service providers remain nervous about how this whole thing shakes out. Even if there were private interests ready to “save the day” by providing stop-gap funding, those same private interests cannot fund state surveillance activities. There will be a gap, regardless of efforts to fill the gaps that manifest as a result of these types of reckless moves. And those gaps, created on ideological lines and conspiracy theories, might well be something other states pick up on – a fear many advocates, local and national, have looking forward. What is clear, regardless of why one finds themselves as stakeholders in this space, active efforts to fortify both prevention and treatment funding and services are direly needed.

Without prevention properly funded, fewer people will be testing or linked to PrEP. Without testing and PrEP, fewer people will be linked to care upon diagnosis. Without diagnosis, fewer people will receive the treatment and support services necessary to achieve viral suppression. Without treatment and support services, more diagnoses will occur.

Our ecosystem is fragile and very carefully built. Removing one key component risks destroying all of our progress and returning us to a very localized version of the AIDS crisis.

2022: New Beginnings, New Changes

The Community Access National Network (CANN) ushers in a new beginning with the 2022 New Year, evidenced not only by the changing of the guard with our new President & CEO, but also with some important programmatic changes with our organization. We felt it important to share these changes with you.

Our weekly blog, previously branded as the HEAL Blog (Hepatitis Education, Advocacy & Leadership), is being repurposed to serve our broader mission “to define, promote, and improve access to healthcare services and supports for people living with HIV/AIDS and/or viral hepatitis through advocacy, education, and networking.” As such it is now the CANN Blog, and its areas of interest will focus on HIV/AIDS, viral hepatitis, substance use disorder, harm reduction, patient assistance programs (PAPs), Medicare, Medicaid, and the ongoing Covid-19 pandemic and its impact on public health. In keeping with the desire to monitor broader public health-related issues and appropriately engage stakeholders, our CANN Blog will be disseminated to a larger audience. Therefore, some of you may notice one more email in your inbox each Monday morning since we’re employing our general listserv to share the blog posts. It is our hope that you’ll deem the added email of value and thus maintain yourself on our listserv.

Additionally, our acclaimed HIV/HCV Co-Infection Watch will also be shared with our general listserv. But don’t worry, it only means one additional email each quarter! The HIV/HCV Co-Infection Watch offers a patient-centric informational portal serving three primary groups - patients, healthcare providers, and AIDS Service Organizations. The quarterly Watches are published in January, April, July, and October.

In 2022, our Groups will also be more active. Since 1996, our National ADAP Working Group (NAWG) has served as the cornerstone of CANN’s advocacy work on public policy. Whereas NAWG will continue to engage our HIV/AIDS stakeholders with monthly news updates, we will also convene periodic stakeholder meetings to discuss important issues facing the HIV community. Likewise, our Hepatitis Education, Advocacy & Leadership (HEAL) Group has served as an interactive national platform for the last decade on relevant issues facing people living with viral hepatitis. Periodic stakeholder meetings to discuss important issues facing the Hepatitis community will now complement the HEAL monthly newsletter. If you would like to join either the NAWG or HEAL listserv, then please do so using this link.

CANN will also launch its 340B Action Center this year. It is designed to provide patients with content-drive educational resources about the 340B Drug Discount Program and why the program matters to you. The importance of the 340B Program cannot be under-stated, and CANN remains committed to taking a balanced “money follows the patient” approach on the issues facing the program and advocating for needed reforms.

Finally, like most advocacy organizations, CANN is constantly evaluating whether it is safe (or not) to host in-person stakeholder meetings. Covid-19 has changed the advocacy landscape. Over the last two years our two signature meetings (Community Roundtable and Annual National Monitoring Report on HIV/HCV Co-Infection) have been hosted virtually, rather than in-person. CANN is taking a “wait and see” approach on how best to proceed in 2022 with these events. We will keep you apprised of our decision.

As we close the door on 2021 and open it for 2022, CANN looks forward to working with all of its community partners, industry partners, and you!

2021: A Year in Reflection

The end of 2021 is upon us and that makes this a timely opportunity to reflect on the work by the Community Access National Network (CANN). During an exceedingly busy news cycle, we have published fifty blogs (including this one) on a variety of topics ranging from the latest on policy and regulatory issues, as well as some personal perspectives. Our HIV-HCV Coinfection Watch and our Annual Monitoring Report tracked Hepatitis C (HCV) therapies covered under the State AIDS Drug Assistance Programs, Medicaid, Veterans Administration, as well as patient access via patient assistance programs, and other relevant news items affecting our patient community. We also conducted a community roundtable seeking to highlight the impacts of Covid-19 on public health programs aimed at addressing HIV, HCV, and substance use disorder (SUD).

Notably, CANN published the following six-part series designed to educate patients on various aspects of the 340B Drug Discount Program:

·        A Patient’s Guide to 340B: Why the Program Matters to You

·        A Patient’s Guide to 340B: Why Transparency Matters to You

·        A Patient’s Guide to 340B: Why Accountability Matters to You

·        A Patient’s Guide to 340B: Why the Decline in Charity Care Matters to You

·        A Patient’s Guide to 340B: Why the Middlemen Matters to You

·        A Patient’s Guide to 340B: Why Program Reform Matters to You

With Congress engaged in high-conflict communication, to abuse a euphemism, navigating public policy developments and pertinent issues to patients can be challenging. CANN remains committed to being an essential source of two-way communication, information, and education wherein patients write the narrative driving policy reforms and priorities. In this, we are ever grateful to the patients and caretakers who have engaged with us at every turn. Your stories matter and you are not alone in your experiences.

The diverse partnerships behind this work are critical to our success and as we end the year, we want to offer our gratitude to these essential partnerships, ranging from other patient advocacy organizations, public health associations, and industry partners.

The issues affecting our public health space of patient advocacy have not relented this year. Covid-19 has only emphasized the need to ensure these programs are effective and efficient while also highlighting the existing weaknesses and strengths of these programs. To be clear, the structural and pervasive drivers of health disparities have been named; racism, sexism, classism, ableism, and all other biases which reflect a moral justification for out ethical failings must be addressed in tandem with policy changes and adequate public health program funding in order for us to succeed in these fights for patient lives. Health equity cannot be meaningfully segregated from the policy mechanisms in which these disparities have survived in the face of another pandemic – when our collective awareness of these inequities and leverage to progress on these issues should have been their strongest and yet were not.

It’s with these things in mind, we want to leave you with the enduring sentiment that next year offers us yet another opportunity to approaches these challenges with fresh eyes and fresh ideas. We are indeed stronger together and we sincerely look forward to working with you all to move closer in realizing a world of greater access to care, fewer and smaller health disparities, and, ultimately, a more fair and loving environment in which to live our lives and raise our families.

Author’s note: I often end certain professional meetings with telling my colleagues “Love ya’ll”. It’s a sentiment I mean to depths of my soul. I am fortunate to work with some of the most amazing people in the world – folks who share an unbridled commitment to improving the lives of those around them. It’s from this same space I wish to offer each of you reading this a moment to breathe and the same open heartedness. I want to leave you all with a short story that has shaped me in more ways than I can count, The Perfect Heart, and an encouragement to tell someone you love them as soon as you can. May this next year be gentler with us all and find us giving away more pieces of our hearts.  

A Patient’s Guide to 340B: Why Program Reform Matters to You

***This is the final report in a six-part series to educate patients about the 340B Drug Pricing Program***

The 340B Drug Pricing Program has no doubt added benefit for patients and providers, alike. The measure of this benefit, however, is shrouded by uncertainty over the lack of transparency and accountability, decline in hospital charity care, as well as the explosive middleman growth in contract pharmacies and pharmacy benefit managers. Twenty-nine years after the program’s inception, it is now unclear to both regulators and patients, both qualitatively and quantitatively, if the Congressional intent is being met.

With all the noise around whether rebate programs might encourage pharmaceutical manufacturers to raise the cost of their products, there is no conversation on how those rebate dollars are used. The lack of the requisite transparency reporting among non-federal grantee covered entities participating in the 340B program makes it impossible to distinguish between anecdotal claims of abuses versus legitimate use of these rebate dollars to the benefit of patients.

These combined situations place the future of the 340B program at exceptional risk, if only by politicization of the national conversation on medication affordability alone. That national conversation churns now, as Congress debates drug pricing legislation. Aside from notorious stump speeches about the prices other countries pay for their medications, nowhere in these discussions do we talk about payers (insurers) and the middleman dictating the at-the-counter prices of medications realized by patients. The ongoing political debate is absent of the larger impacts on safety-net programs benefitting from 340B revenue and the impact on the poorest patients among us. Without clear guidance, all patients can come to expect is more squabbling among covered entities, drug manufacturers, hospitals, and regulators. It is this type of environment in which an idealistic program finds itself at risk.

Lawmakers have reasonably argued federal regulators have not demonstrated a particular need for additional regulatory powers because the Health Services and Resources Administration (HRSA) has not adequately flexed their current oversight muscle (…much less that such would be exercised efficiently). Therefore, regulatory interpretation should be updated, specifically regarding the patient definition, and possibly with further defining “low-income” for more clarity on who the program should benefit most. To the extent of “cracking open the legislation”, there is a singular area in which lawmakers from both sides and the Biden Administration agree: the issue of transparency in reporting. Earlier this year, the Biden Administration’s discretionary budget included an ask of Congress to specifically fund greater oversight and administration of 340B, explicitly including requirements on reporting of how non-grantee entities use these dollars. In this space, where few agreements can be made found, this is one area where legislators can and should move swiftly. The data generated by transparent reporting on use of these dollars is invaluable in evaluating the efficacy of 340B in benefitting patients or otherwise meeting the intent of the program.

To the extent HRSA may need more room for rulemaking, legislators desperately need extend rulemaking authority to include allowable uses for 340B dollars and clarity on the intent of the program. Federal grantees already have to report use of these dollars while other covered entities aren’t. With executives reaping in millions of dollars, reasonable people can grow concerned these dollars are being used to prop up the profiteering and personal enrichment administrators may be enjoying at the expense of employees providing care and patients themselves. Employees of federal grantees don’t generally get to enjoy much in the way of raises and their pay is not on par with the private sector. Hardware and software systems lag in terms of keeping up with modern technology. Sustaining non-revenue generating or underfunded patient benefit programs is absolutely something many entities enjoy as a use of their 340B dollars. There is no doubt these dollars can be used to patient benefit beyond directly sharing the savings with patients, though sharing the savings is the most direct means patients benefit from 340B. Putting guardrails on allowable uses of these dollars would serve well everyone touched by the program. Frankly, anyone fighting this transparency as a suggested method of shoring up 340B in meeting its intended purpose has something to hide and deserves closer scrutiny.

As an additional area of critical need to consider, for non-grantee covered entity hospitals, records of charity care and minimum realized values in served communities should be determinative for qualification to participate as a covered entity. The current calculation of disproportionate share hospitals as 340B participants or non-340B participants by the Government Accountability Office has shown a steadier and steeper decline of charity care among 340B hospitals than among non-340B hospitals. Additionally, hospitals carry the highest issuance of medical debt in the United States, disproportionately affecting low-income patients. Part of ensuring low-income patients get the most benefit from the discount drug program was and remains the ability to extend no- and low-cost care, writing off costs of providing that care, without punishing patients for having a need. If hospitals are to receive the benefit of this program, that same benefit should be extended to patients.

Lastly, in addressing the sheer size of the 340B discount drug program, the most significant areas of growth with questionable benefit to patients are among contract pharmacies. HRSA’s recognized this potential in commentary with its 2010 final rule only to realize those cautionary concerns and integrate guidance curbing the use and growth of contract pharmacies in the no-shelved 2015 “mega-guidance”. While the mega-guidance has been shelved, the abuse of the program by contract pharmacies has not abated. Among reducing the number of contract pharmacies a covered entity may make agreements with, and other geographic requirements, lawmakers and regulators should consider establishing market appropriate flat fees associated with services and a database of fees charged by pharmacy benefits managers, contract pharmacies, and third-party administrators, similar to the 340B ceiling price database established under the Office of Pharmacy Affairs Information System. A similarly situated claims hub would also allow for greater clarity in audits, assessment of potential duplicate discounts, and (if appropriately structured and compliant with patient privacy laws) detect potential diversion.

340B is a massive program which, arguably, has not yet been realized by much of the patient population. Not doing anything in this case doesn’t mean “keeping things status quo”, rather it means leaving the program open to attack, inefficiency, ineffectiveness, and abuse.  We can and should do more to ensure patients are aware of the program, how the program is used by covered entities nearest to them, and how this critical support to federally funded health care programs might be impacted by additional health care policy reform efforts. If ensuring the health and well-being of the country is the priority of all players in this system, then its time patients know it.

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.

Sources:

• Community Access National Network (February 2019). 340B DRUG DISCOUNT PROGRAM: The Issues Spurring Discussion, Stakeholder Stances and Possible Resolutions. 340B Commission Final Report. Retrieved online at https://docs.google.com/gview?url=http://www.tiicann.org/pdf-docs/2019_CANN_340B_Commission_Final-Report-v5_03-07-19.pdf&embedded=true

A Patient’s Guide to 340B: Why the Middlemen Matters to You

***This is the fifth report in a six-part series to educate patients about the 340B Drug Pricing Program***

When the 340B Drug Pricing Program was enacted in 1992, there were a few “gaps” between the law’s statutory language and the program’s practical application. Among them was the realization that some covered entities that couldn’t afford to operate their own pharmacy. The Health Resources and Services Administration (HRSA) issued guidance to address the gap. After all, what’s the use of a discount drug program if providers can’t realize those discounts simply because they don’t have a pharmacy?

In 1996, after the urging of some covered entities, HRSA issued guidance telling covered entities and manufacturers that covered entities could contract with a single, independent pharmacy to provide pharmacy services necessary to engage the discount program. The idea was simple: create an access pipeline to the program, so it could be accessed by small providers, but not abused. In 2001, HRSA began to allow a few pilot projects, for lack of a better term, wherein covered entities would have more than one contract pharmacy. In theory, it isn’t a bad idea. Different pharmacies have different distributors, and as such supply can sometimes be an issue (i.e., natural disasters).

Additionally, it allows industrious covered entities to open the door for competition on “value added” services from contract pharmacies – such as programmatic record keeping for the purposes of 340B and/or financial reporting for federal grantees. And since the pharmacy was the one handling the purchasing and distribution of the medications to patients, that’s one less labor task for smaller covered entities to fund. In 2010, HRSA would later expand these pilot project allowance for multiple contract pharmacies per covered entity.

Sounds great, right? More patients have access to discounted outpatient medications, right?

Right? Not exactly!

Under the 340B program, patients don’t always get their share of the savings from the rebates and discounts. Arguably, it would appear everyone is directly benefiting one way or another from the program and its lucrative revenue stream, except for patients.

Contract pharmacies all want their piece of this pie, too. For example, take the dispensing fees that a pharmacy charges to fill a prescription medication. Indeed, dispensing fees for 340B contact pharmacies are so wildly non-standard a Government Accountability Office (GAO) report from 2018 found dispensing fees ranging from $0 to almost $2000 per fill on 340B eligible drugs. Those fees come out of 340B revenue, which could be supporting a patient’s ability to pay copays or the cost of a drug and instead.

Can you imagine, if you will, you’re a person living with HIV or Hepatitis C, living at about 200% of the Federal Poverty Level (FPL; 200% in 2021 is approximately $25,760 per year for a single person), but thankfully receiving insurance coverage for your medical care. Yet, co-pays and deductibles drain your finances when you could be getting your medications at no cost if the pharmacy or covered entity was applying 340B dollars to your bill? How many Rx fills would that be?

If the payer wasn’t applying a co-pay accumulator or co-pay maximizer program, the dispensing fee of two fills could mean extending your ability to access care for an entire coverage year – not just for medications, but for all health care. If the intent behind the 340B program is to extend limited federal resources, ensuring those exorbitant dispensing fees weren’t so exorbitant would certainly be one way to do it. Ultimately, 340B is a pie – when there’s more taken out, hacked at along the payment pipeline of getting medications to patients, there’s fewer resources left for patients to benefit from.

What’s more concerning about the explosive growth in the number of contract pharmacies with their hands in the 340B cookie jar, is HRSA knew when the 2010 guidance was issued that diversion and duplicate discount increases, abuses of the program, would most certainly follow. In part, because the program would grow and at such a pace that HRSA couldn’t keep up. In fact, GAO included that warning in a 2011 report, stating “…increased use of the 340B Program by contract pharmacies and hospitals may result in a greater risk of drug diversion, further heightening concerns about HRSA’s reliance on participants’ self-policing to oversee the program.”

The best part? By the “best”, I mean the worst: contract pharmacies, like non-grantee hospital entities, don’t have to show any benefit to patients for any of the dollars. Clearly, it raises questions over the legislative intent of the program and whether it is being met?

Now, contract pharmacies, like hospitals, like to massage and carefully select data to pitch answers to these concerns (there are a great number of “concerns”) by saying “we served X many 340B eligible patients”. They get around having to say if those patients realized any of those savings and benefitted from the program, without defining what they mean by “eligible”, and without defining “patient”. Contract pharmacies and hospitals get away with not having to provide meaningful information because statutory language doesn’t define “low-income” or “eligible” and regulatory guidance has an outdated definition of “patient”. Regardless of the existing language in regulation, a bona fide relationship should exist in order to call a consumer a “patient”, otherwise this is all just pocketing dollars meant for extending medication access to needy people.

All this lack of transparency fees assessed against the program could easily be solved with merely requiring contract pharmacies to establish a “flat”, reasonable dispensing fee and to describe what those fees actually cover. If the contract pharmacy is providing an additional navigation benefit to patients or an in-house location for a federally qualified health center, reasonable people can see fees being slightly elevated to cover additional costs. However, those costs should be outlined like any other contractor would be expected to do in any other contract for service. Most hospitals already have their own in-house pharmacy, they shouldn’t be contracting that service out and thus giving room for inappropriate 340B related rebate claims. And if HRSA just does not have the capacity to meaningfully audit 340B claims and the use of these dollars, they could at the very least make more room for the other mechanism in the statute for audit: manufacturer-originated audits. That’s right. The statutory language of 340B anticipated HRSA wouldn’t be able to keep up if the program was successful or even particularly abused. So, legislators reasoned if manufacturers were taking a cut of their potential profits through discounts and rebates, manufacturers should be able to audit the claims seeking those discounts and rebates to make sure everything was in line. When a retailer offers a discount to veterans, they typically require proof of veteran status. Why would medication discounts be any different?

In the end, if contract pharmacies don’t have anything to hide, then they need to stop hiding so very much. There are enough hands in the 340B cookie jar that patients are being squeezed out and left with crumbs. When legislators ask “is the intent of the program being met?”, these are the questions on their minds. Patients should have them on their minds as well.

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.

Sources:

• Community Access National Network (February 2019). 340B DRUG DISCOUNT PROGRAM: The Issues Spurring Discussion, Stakeholder Stances and Possible Resolutions. 340B Commission Final Report. Retrieved online at https://docs.google.com/gview?url=http://www.tiicann.org/pdf-docs/2019_CANN_340B_Commission_Final-Report-v5_03-07-19.pdf&embedded=true

• Fein, J. Adam (2020, May 19). Copay Maximizers Are Displacing Accumulators—But CMS Ignores How Payers Leverage Patient Support. Drug Channels. Retrieved online at https://www.drugchannels.net/2020/05/copay-maximizers-are-displacing.html

• U.S Government Accountability Office (September 2011). DRUG PRICING: Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement. GAO-11-836. Retrieved online at https://www.gao.gov/assets/gao-11-836.pdf

• U.S. Government Accountability Office (June 2018). DRUG DISCOUNT PROGRAM: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement. GAO-18-480. Retrieved online at https://www.gao.gov/assets/gao-18-480.pdf

• Office of the Federal Register (1996, August 23). 61 FR 43549 - Notice Regarding Section 602 of the Veterans Health Care Act of 1992; Contract Pharmacy Services. GovInfo.gov. Retrieved online at https://www.govinfo.gov/app/details/FR-1996-08-23/96-21485 

• Office of the Federal Register (2010, April 5). 75 FR 10272 - Notice Regarding 340B Drug Pricing Program-Contract Pharmacy Services. GovInfo.gov. Retrieved online at https://www.govinfo.gov/app/details/FR-2010-03-05/2010-4755

A Patient’s Guide to 340B: Why the Decline in Charity Care Matters to You

***This is the fourth report in a six-part series to educate patients about the 340B Drug Pricing Program***

A cornerstone argument in favor of the 340B Drug Pricing Program centers on so-called charity care rates of the participating Disproportionate Share Hospitals (DSH). Those covered entities, specifically DSHs, should be able to leverage their 340B dollars to extend care and out-patient medications to offset losses from uncompensated care. In the ideal, offsetting the costs associated with charity care to provide more care to low-income patients is noble and moral and just, and one society should support. The problem occurs when charity care is wrapped up or conflated with all “uncompensated, unreimbursed care” because a significant portion of uncompensated care is written off as bad debt, and that debt all too often gets reported to patients’ credit reports. Whereas charity care is care provided at no cost or debt to the patient. Moving forward, we must not confuse, conflate, or combine generalized uncompensated care with charity care.

The argument from the American Hospital Association is narrowly focused to present the rosiest picture, touting the totality of charity care provided by 340B DSH covered entities ($64 billion in of 2017, the latest available data as of the AHA’s statement). It ignores 340B participating hospitals have seen a steady decline in both charity care and uncompensated care, according to the Government Accountability Office’s 2018 report. The AHA’s own data reveals the same thing, despite exponential growth of the 340B program, largely attributed to hospitals and contract pharmacies. Unlike Federally Qualified Health Centers (FQHCs, a type of federal grantee entity in the 340B program), which are required provide care “regardless of ability to pay”, hospital systems, in large part, have a much more extensive debt collection program; they are not necessarily beholden to rules regarding debt collection practices. FQHCs, as an example, may be required to seek debt payments from internal billing specialists, but don’t generally have contracts to sell the bad debt to collections companies or report to credit bureaus. Furthermore, they are prohibited from doing so in certain circumstances.

While the Affordable Care Act (ACA) prohibited certain types of hospital-originated debt from being reported to credit bureaus, it doesn’t stop the hospital from selling the debt and then the collection company reporting the debt. Indeed, hospitals are notorious for reporting medical debt and sending bills to collections. If 340B dollars are meant to offset some of these expenses, with program growing about 23% per year, why does the Census Bureau report that about 20% of Americans are under some form of medical debt? Why has that medical debt grown from $81 billion in 2016 to $140 billion in 2019?

The ACA required non-profit hospitals to offer charity care programs, and the vast majority of hospitals across the country are non-profit hospitals. Adding insult to injury, that tax designation and the requirement to offer charity care hasn’t stopped these “non-profit” hospitals from chasing after low-income patients and further impoverishing them. A recent Kaiser Health News “An Arm and a Leg” podcast dove into just one state’s effort to tackle an epidemic of “non-profit” hospitals suing patients as a result of medical debt. The effort found a massive coalition of 60 entities, including a nurses’ union, and startling data supporting the need for Maryland’s now-passed “Medical debt Protection Act.”

Data included notation of almost 150,000 lawsuits against patients over the last 10 years, making almost $60 million from patients who would otherwise automatically qualify for charity care, and hospitals negotiating with for state funds to support charity care taking in $119 million than they actually gave out in charity care. And that’s just in one state. Indeed, according to information behind this report, Johns Hopkins – a 340B hospital – alone raked in $36 million more from this state-funded charity care support than they spent. While Maryland already had certain patient protections from these predatory practices on the books, too few patients knew about those protections and the state awarded these dollars without ever investigating the existing status of bad debt to charity care ratios. All the paper in the world written into the law is meaningless if affected people and corporations are not made to be transparent and held accountable.

Access to care, and freedom to access care, are two different things. Access to care being an open door, and freedom to access care is the freedom to walk through that door without fearing a dire financial consequence. While some special interests may argue the program is critical to hospitals extending access to care, their rhetoric lacks practical application when patients don’t have the freedom to access that care without fear of acquiring life-altering debt. The fear of medical debt keeps people away from seeking care. In fact, one of the most immediate and meaningful ways to tackle the country’s medical debt crisis would be for 340B covered entities to share the savings with patients. A patient’s medical debt reported to their personal credit file can, and does, perpetuate cycles of poverty; it is harming patients’ wealth, health, and overall well-being. If 340B dollars are supposed to be aimed at ensuring access to care, then concerns over medical financial toxicity shouldn’t be discounted.

Hospitals, in large part, though not universally, have seen a significant decrease in uncompensated care due to the ACA’s expansion of Medicaid. With more patients qualifying for Medicaid, meaning an ability for providers to be reimbursed where none previously existed, hospitals should be able to shift their uncompensated care burden from bad debt to patient financial assistance and charity care programs.

On the other end of decreases in charity care provided by 340B hospitals, are truly magnificent non-profit hospital chief executive officer compensation.  In a 2019 hearing, CEOs admitted to having salaries in the millions of dollars per year range – that’s before bonuses. They also admitted to holding more money in reserves than they generally need in order to operate safely or not run the risk of running out of funding. Other instances of concern from this hearing include a hospital group using their 340B dollars to acquire a stand-alone oncology center. Typically, when these types of purchases are made, patients experience an increase in costs of care and sometimes experience a reduction in ability to access care due to an increase in patient load without subsequent staffing support or their provider’s office is physically moved as part of the consolidation effort, reducing a patient’s ability to physically get to and from office visits.

In addressing potential reforms that would benefit patient experiences, increase the sense of freedom patients feel to access care, and improve program efficacy, policy and law makers should both distinguish between generalized uncompensated care and charity care in annual financial reporting and 340B related audits and require a threshold of charity care for hospitals seeking to qualify for the 340B program. If hospitals are dissatisfied with their Medicare or Medicaid reimbursement rates and what that means for boosting their bottom line, they would do well to send their lobbyists after reimbursement dollars rather than disingenuously justifying their pilfer effort to rob 340B of its noble cause. Either way, it’s time these entities see requirements tied to their dollars, including rules around charging off debt against low-income patients.

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.

Sources:

• American Hospital Association (September 2020). 340B Hospital Community Benefit Analysis. Retrieved online at https://www.aha.org/guidesreports/2020-09-10-340b-hospital-community-benefit-analysis.

• American Hospital Association (December 2017). UNCOMPENSATED HOSPITAL CARE COST FACT SHEET. Retrieved online at https://www.aha.org/system/files/2018-01/2017-uncompensated-care-factsheet.pdf.

• Bennett, N., Eggleston, J., Mykyta, L., & Sullivan, B. (2021, April 7). 19% of U.S. Households Could Not Afford to Pay for Medical Care Right Away. U.S. Census Bureau. Retrieved online at https://www.census.gov/library/stories/2021/04/who-had-medical-debt-in-united-states.html.

• Community Access National Network (February 2019). 340B DRUG DISCOUNT PROGRAM: The Issues Spurring Discussion, Stakeholder Stances and Possible Resolutions. 340B Commission Final Report. Retrieved online at https://docs.google.com/gview?url=http://www.tiicann.org/pdf-docs/2019_CANN_340B_Commission_Final-Report-v5_03-07-19.pdf&embedded=true

• Committee on Energy and Commerce, Subcommittee on Oversight & Investigations (2017, October 11). EXAMINING HOW COVERED ENTITIES UTILIZE THE 340B DRUG PRICING PROGRAM. U.S. House of Representatives. Retrieved online at https://www.govinfo.gov/content/pkg/CHRG-115hhrg27577/html/CHRG-115hhrg27577.htm.

• Kliff, S. & Sanger-Katz, M. (2021, July 20). Americans’ Medical Debts Are Bigger Than Was Known, Totaling $140 Billion. The New York Times. Retrieved online at https://www.nytimes.com/2021/07/20/upshot/medical-debt-americans-medicaid.html.

• U.S. Government Accountability Office (2018, June 18). Drug Discount Program: Characteristics of Hospitals Participating and Not Participating in the 340B Program. GAO-18-521R. Retrieved online at https://www.gao.gov/assets/gao-18-521r.pdf.

• Weissmann, Dan (2021, October 7). PODCASTS – ‘An Arm and a Leg’: How One State Protects Patients From Hospital Lawsuits. Kaiser Health News. Retrieved online at https://khn.org/news/article/podcast-an-arm-and-a-leg-how-one-state-protects-patients-from-hospital-lawsuits/?utm_campaign=KHN%3A%20First%20Edition&utm_medium=email&_hsmi=168013149&_hsenc=p2ANqtz-_sXa4onkYlNPYAtzOv-Hn4b_y9OgQhBcwhnxYvtugSLuAXK1sYZ1_OWiArpRr29-YxGGpHZCZ9t4IhZVASXKpQZ-lS5A&utm_content=168013149&utm_source=hs_email.

A Patient’s Guide to 340B: Why Accountability Matters to You

***This is the third report in a six-part series to educate patients about the 340B Drug Pricing Program***

The word accountable is defined as “being required or expect to justify actions or decisions.” Accountability is often broadly discussed on a variety of levels about governmental and social issues, and the 340B Drug Pricing Program is certainly no exception. The 340B program exists to address the health care needs of a segment of society – social needs. As such, program accountability is of paramount importance since patient health depends on it.

Accountability in use of 340B dollars follows the benchmarks of transparency in reporting: federal grantees are required by contract to demonstrate patient benefit in use of program dollars and non-grantee covered entities are held to no such standard. Without fiscal transparency, non-grantee entities cannot be held accountable for their use of these revenues. The Health Resources Services Administration (HRSA) largely selects covered entities for audit based on a selection of “risk” characteristics. While some criticism of manufacturers is warranted in terms of accountability, manufacturers have only one statutory requirement. That requirement is to provide discounts or rebates on qualifying medications to covered entities. HRSA selects manufacturers for audit based on complaints from covered entities. Areas of complaint about manufacturers typically consist of overcharging a covered entity, not making a particular medication available, or not being transparent about the “ceiling price” of a drug.

To be fair, the statutory accountability requirements of 340B program are…limited and…vague. However, according to a 2020 report by the Government Accountability Office (GAO-20-108), the Health Resources and Services Administration (HRSA) severely lacks meaningful oversight, uniform assessment and request standards, and, as with many other reports, finds HRSA’s administration of the program to be largely inadequate.

As an example, GAO identified HRSA audits from 2017 and 2018 reviewed less than 10% of all non-governmental hospitals enrolled in the program. HRSA primarily relies upon hospitals to self-attest their eligibility. Of the selected hospitals participating in the GAO review, 18 submitted documents that would constitute a government contract – any description of a community program – and when HRSA found these instances, allowed the hospitals to avoid getting in trouble by acquiring contracts with retroactive applicability. All of that meaning, these hospitals in question did not experience any reprimand for failing to provide programming to low-income people but they got to enjoy the perks of unaccountable 340B dollars until they got caught. At the rate HRSA reviews these entities, it’s possible for a non-compliant or otherwise non-qualifying entity could go an entire decade soaking up dollars meant for patients in needs.

While HRSA’s annual 340B audits are primarily targeted toward covered entities, drug manufacturers are also audited to ensure they’re not charging covered entities more than they should be for 340B medications, to ensure drug manufacturers are not discriminating against covered entities, and make sure drug manufacturers are making sure their products are made available in compliance with the 340B program. Manufacturers represent about ten percent of annual audits, while covered entities represent about 90 percent and there are about 900 drug manufacturers participating in the program (dramatically less than covered entities). To be fair, GAO concluded HRSA also needed to provide clearer guidance to drug manufacturers regarding what qualifies as an acceptable distribution restriction due to anticipated or actual supply shortages and to provide specific guidance as to what constitutes “discrimination” of covered entity participants.

This issue of defining discrimination is developing and playing out in “real-time”. In May of 2021, HRSA announced notification letters sent to 6 manufacturers regarding their new policies requiring additional reporting from covered entities with contract pharmacies (as opposed to in-house pharmacies). HRSA’s interpretation of statutory language (“…shall…each covered entity…”) as non-discretionary on the part of manufacturers. In essence, if an entity is registered with HRSA for the program, a manufacturer is required by law to offer medications at ceiling price or below to that entity, regardless of any potential for a covered entity to use program dollars outside of the intent of the program. While skepticism of non-grantee use of these dollars may be warranted due to lack of transparency in use of these dollars, diversion, or duplicate discount concerns, given that federal grantees are already required to report use of these dollars to their federal funders, a more narrowly tailored policy directed exclusively at non-grantee covered entities would be more appropriate to address the interest needs of manufacturers, the public, and program stability. However, given HRSA’s interpretation of the statutory language, even such a proposal might run the risk of rubbing regulators wrong. At the time of this writing, at least one of the manufacturers has sued the Department of Health and Human Services to prevent any monetary penalties related to these letters from being imposed. A judge has dismissed the government’s opposition to the suit in June of 2021. And on September 22, 2021 HRSA issued letters to the manufacturers in question, stating the issue had been referred to the Office of the Inspector General.

Lack of transparency means less accountability. Patients are better served when 340B-related dollars remain within the same geographic area they were generated by the covered entities. After all, if serving low-income patients means serving community and getting usable revenue required to be used on low-income patients, those dollars should be put back into the same community in which they were generated, right? But covered entities with large networks and multiple covered entity sites aren’t required to show those revenues are reinvested in the same area they were generated. For instance, monies made off the health and illness of an Atlanta community should not be spent to buy up profit generating imaging machines in a well-to-do suburban area outside of Los Angeles. But, without both transparency and accountability, 340B dollars can easily become a slush fund of revenues for any industrious non-grantee covered entity.

Indeed, many large contract pharmacies offer software programs to covered entities as a measure of their own “transparency” with internal reporting but the real goal is to show the covered entities “here’s how you can make more 340B dollars” – but at a cost of providing the service and without uniform assessment metrics. That means the contract pharmacy can tilt the experience of a patient by applying pressure to the covered entities very subtly through software programs telling the provider, “You can make more money off this patient by prescribing…”. Advocates have very good reason to be suspicious of contract pharmacies associated with (or even owning) pharmacy benefit managers who, then, can very easily provide programming that targets their profits over ensuring rebate dollars make it back to a patient.

Statutory clarification could greatly benefit the intended purpose of the 340B program – ensuring low-income patients get the care they need by taking a few, simple steps, specifying reporting requirements that mirror existing transparency and accountability found among grantees. Additional oversight is needed in numerous areas, all designed to further benefit patient access to care and medications. Among them, non-grantee entities should be required to report how 340B dollars are being used, by which payer source a claim is generated, how much charity care a non-grantee entity provides, and how much revenue is generated from pharmacy sales (and how much is generated from 340B sales). Patients might not understand the nuances behind the program complexities, but they do understand when they cannot access the care they need and deserve. If the purpose of the 340B program is to expand access to care and medications, then why not go that extra mile?

Congress could go a great deal further to ensure these billions of dollars serve patients, rather than the interests of shareholders in private hospital systems or propping-up senior management compensation packages, or other non-medically-related expenses. Congress could also opt to provide for additional minimum requirements in order to qualify as a covered entity – especially with regard to private hospitals providing a certain percentage of charity care.  

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.

Sources:

• Community Access National Network (February 2019). 340B DRUG DISCOUNT PROGRAM: The Issues Spurring Discussion, Stakeholder Stances and Possible Resolutions. 340B Commission Final Report. Retrieved online at https://docs.google.com/gview?url=http://www.tiicann.org/pdf-docs/2019_CANN_340B_Commission_Final-Report-v5_03-07-19.pdf&embedded=true

• Health Resources Services Administration (September 2021). 340B Drug Pricing Program – Program Integrity. HRSA Correspondence to Stakeholders 2021. U.S. Department of Health & Human Resources. Retrieved online at https://www.hrsa.gov/opa/program-integrity/index.html

• Lagasse, Jeff (June 2021). Judge dismisses HHS Challenge of AstraZeneca's 340B Contract Pharmacies Lawsuit. HealthCare Finance. Retrieved online at https://www.healthcarefinancenews.com/news/judge-dismisses-hhs-challenge-astrazenecas-340b-contract-pharmacies-lawsuit

• U.S. Government Accountability Office (December 2019). 340B DRUG DISCOUNT PROGRAM: Increased Oversight Needed to Ensure Nongovernmental Hospitals Meet Eligibility Requirements. GAO-20-108. Retrieved online at https://www.gao.gov/assets/gao-20-108.pdf

A Patient’s Guide to 340B: Why Transparency Matters to You

***This is the second report in a six-part series to educate patients about the 340B Drug Pricing Program***

All public-private partnerships require transparency to instill confidence in program function, private business operations, and government accountability. Transparency is an essential part of the equation; it brings us more accountability and more effective programs. It helps to identify areas of improvement in operations or enforcement, as well as limiting waste, fraud, and abuse. The 340B Drug Discount Program is no exception because transparency ensures investments into patient access to medications for critically vulnerable populations are reaching patients. Transparency – in every programmatic aspect – serves the public interest and is, frankly, just good government. It builds confidence in the efficacy of the program and good will of the participating entities.

In general, under the 340B program, those entities receiving federal grant funding – known as “federal grantees” – under other programs (i.e., federally qualified health centers, Ryan White HIV/AIDS clinics, hemophilia centers, and others) receive a great deal over oversight on how they use their discounts and rebates from 340B, though that oversight comes as part of their fiscal reporting under those other programs. For non-grantee covered entities, oversight is primarily dependent on audits and self-attestation of compliance and corrections to issues. With non-grantee covered entities lacking dedicated oversight like federal grantees, there’s a lack of transparency in how those entities qualify under the program and how those entities are using 340B-generated revenues to benefit low-income patients.

Regardless of program, dollars meant to serve low-income patients are often scarce. As such, patients lose when the investments needed to support and expand services for vulnerable populations are directed elsewhere (outside of the community those dollars originated from or for-profit building purposes). Patients lose out on funding support that keeps programs stable, ensures access to critical health programs nearest to them, and ultimately threatens to destabilize a program relied upon by the federal government and community stakeholders to keep clinic and hospital doors open.

At the inception of the 340B program, legislation such as the Patient Protection and Affordable Care Act did not exist, and only 29 million people nationwide were enrolled in Medicaid. Fast forward to 2018, Medicaid rolls had grown to 72 million people – meaning in all but the hold-out “non-expansion states” nearly any hospital in the country might qualify as a “disproportionate share hospital” – a situation 340B never considered at inception. The development and growth of the program was analyzed in a 2018 report issued by the U.S. House of Representatives’ Committee on Energy & Commerce.

According to a Government Accountability Office report (GAO-21-107) about 80% of current covered entities are federal grantees and 20% of covered entities are hospitals. However, many of these entities, especially hospitals operate multiple sites – not all entities are created equal in terms of generating program revenue. Of the approximate 37,500 covered entity sites participating in the program, about 75% of those sites are hospital affiliated with hospitals, not federal grantees. Hospitals are able to qualify specifically because of the low threshold of “disproportionate share” of low-income patients who can now afford to seek care thanks to Medicaid expansion – even if the hospital entity is generally well off enough to not actually need those dollars in order to provide care. In order to better understand how these changes have impacted growth and qualification of the program, “disproportionate share” may not be the best formula to ensure 340B dollars are helping those who need it most. Particularly, given the decreasing share of charity care certain hospital entities have offered over the years, evaluating charity care percentages and qualifying patients by income and payer type (self-pay, Medicaid, private insurance, etc.) may be more accurate in ensuring entities are actually serving low-income communities.

To be clear, “charity care” is a specific type of “uncompensated care” – or when patients receive care but can’t pay their bills. Unlike other types of uncompensated care, whereby providers may send a patient’s bill to a collections company, charity care releases the patient from a portion or all of their financial responsibility. Typically, charity care is limited to those who have to choose between putting food on their table and seeking preventative care like mammograms or having to decide in what life-saving neonatal care a family might need. Given the intersection of race and poverty in this country, charity care is a critical, even if anecdotal measure of how much a hospital is invested in their local community and combating community health disparities like pregnancy-related mortality.

The 340B program’s statutory language is largely silent on how these revenues dollars may be spent and because of that, there’s little to ensure these dollars are actually going to benefit patients instead of hospital networks or pad executive pay. Patient advocates have long crowed about the need for non-grantee covered entities to meet the same transparency requirements federal grantees are required to meet. Indeed, one of the biggest challenges facing the 340B program is better understanding how these dollars are spent. Now, typically, where statute is vague, government agencies tasked with managing programs have the regulatory power to make rules and the man power to enforce them. That’s just not the case with 340B and the Health Resources and Services Administration (HRSA) has repeatedly stated a lack of surety in its ability to regulate beyond guidance and frequently cited an inability to expand auditing capacity due to lack of funding. So much so that President Biden included $17 million in his budget request to strengthen and expand oversight of the program specifically in terms of auditing how 340B revenues are generated and spent among on-grantee covered entities.

Given the program’s growth, there’s reason and need to further clarify the intent of the program, cemented into unambiguous statutory language to reflect the country’s health care landscape of today and ensure the revenues generated are actually helping patients and not padding executive pockets. In our next blog, we’ll discuss the accountability processes currently in play for covered entities and manufacturers and the glaring holes in that part of the oversight “net”.

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here 2018 report.

Sources:

• Centers for Disease Control & Prevention (2020, February 4). Infographic: Racial/Ethnic Disparities in Pregnancy-Related Deaths — United States, 2007–2016. U.S. Department of Health & Human Services. Retrieved online at https://www.cdc.gov/reproductivehealth/maternal-mortality/disparities-pregnancy-related-deaths/infographic.html

• Community Access National Network (February 2019). 340B DRUG DISCOUNT PROGRAM: The Issues Spurring Discussion, Stakeholder Stances and Possible Resolutions. 340B Commission Final Report. Retrieved online at https://docs.google.com/gview?url=http://www.tiicann.org/pdf-docs/2019_CANN_340B_Commission_Final-Report-v5_03-07-19.pdf&embedded=true

• House Committee on Energy & Commerce (2018). Review of the 340B Drug Pricing Program. U.S. House of Representatives. Retrieved online at https://republicans-energycommerce.house.gov/wp-content/uploads/2018/01/20180110Review_of_the_340B_Drug_Pricing_Program.pdf

• King, Robert (2021, June 1). From 340B to a public option: 4 healthcare items you may have missed in Biden's budget. Fierce Healthcare. Retrieved online at https://www.fiercehealthcare.com/hospitals/from-340b-to-a-public-option-4-healthcare-items-you-may-have-missed-biden-s-budget

• U.S. Government Accountability Office (December 2020). DRUG PRICING PROGRAM: HHS Uses Multiple Mechanisms to Help Ensure Compliance with 340B Requirements. GAO-21-107. Retrieved online at https://www.gao.gov/assets/gao-21-107.pdf

A Patient’s Guide to 340B: Why the Program Matters to You

***This is the first report in a six-part series to educate patients about the 340B Drug Pricing Program***

In 1992, Congress struck a deal with pharmaceutical manufacturers to expand access to care and medication for more patients: If pharmaceutical manufacturers wanted to be included in Medicaid’s coverage, they’d have to offer their products to outpatient entities serving low-income patients at a discount. The idea was brilliantly simple; drug manufacturers could have a guaranteed income from participation in the Medicaid program, and “covered entities” could have guaranteed access to discounted medications. Congress set-up a payment system by way of rebates, affording healthcare providers a way to fund much-needed care to patients who could not otherwise afford it.

This payment program is little known but, now it is significantly large. It is the 340B Drug Pricing Program.

“At the inception [of the 340B program], these entities [Hemophilia Treatment Centers (caring for all patients with both bleeding and clotting disorders), Ryan White Clinics and FQHCs were specifically identified] were the prime targets to benefit from the  three major goals of the initial PHS pricing program: first, that pharmaceutical products would be purchased at markedly reduced 340B pricing; secondly, the discounts would be passed on to the payors and finally that a small, reasonable, percentage would go to the entity itself, to sustain Covered Entities to care and expand diagnostic and clinical services.”
– Dr. Diane Nugent, National Commission on 340B (2018)

Initially, covered entities were exceptionally restricted, including but not limited to federally qualified heath centers (FQHCs), Ryan White HIV/AIDS clinics, hemophilia treatment centers, and only one category of hospitals, so-called “disproportionate share hospitals” (DSH). DSH is a hospital entity that provides a “disproportionate” number of low-income patients, evaluated quarterly and calculated through a formula dictated by statute. Of these entities, those receiving federal grant dollars under any number of federally funded programs are called “federal grantees”.

Federal grantees are required by statutory language to certain transparency in how they spend their 340B-related revenue. In trade, participating drug manufacturers are also required to be transparent in their contributions to the program.

In addition, federal grantees are required to be transparent and accountable regarding their 340B-generated dollars by their federal grants, not by the statutory language of the 340B program. That means every dollar a federal grantee generates is held accountable to serving the needs of low-income patients. How these dollars may be used from grantee to grantee may look a little different but they’re still required to fit within the guardrails of the grant and, for many federal grantees, the most direct way of achieving this goal is sharing the savings with patients at the pharmacy counter. By its very nature, 340B’s purpose is to reduce the amount of tax dollars spent on these grants by providing an avenue of program revenue, and thus support existing efforts to provide care for the most vulnerable.

Over the years, covered entities have expanded to include contract pharmacies, family planning centers, children’s hospitals, critical access hospitals, rural referral centers, freestanding cancer centers, and sole community hospitals. From 1992 until about 2001, participation in the program by covered entities was fairly static – it didn’t grow or change in any massive quantity. After 2001, covered entities able to access the 340B program began to grow at an exceedingly fast pace, with even more growth among “covered entity sites” and the greatest amount of growth among contracted pharmacies. This was reflected in 340B sales, as well. According to the Drug Channels Institute, 340B purchases grew from about $2.4 billion in 2005 to more than $38 billion in 2020.

In general, 340B-related income looks like an insurer reimbursing the cost of a medication for a patient to a covered entity, a pharmacy filling the medication at the rebated cost with addition of a minor dispensing fee, and the covered entity keeping the excess as savings. Covered entities are allowed spend those excess funds in particular ways which qualify as “expanding access” to medication or care. For entities applying those funds directly to outpatient medications, this is known as “following the patient” or “sharing the savings”. Other uses may include anything that directly impacts access to or quality of care for low-income patients. Notable examples may include technology upgrades to be in-line with patient security and best practices in extending scarce human resources (i.e. how efficient care can be delivered to patients), acquiring new care technology to provide care not previously available (i.e. imaging and x-ray machines), and infrastructure like mobile medical units in order to bring care to patients rather than bringing patients to care or opening new locations in order to be more accessible to their served communities. 340B prohibits covered entities on double dipping on discounts or applying rebate dollars to inpatient medications or to a particular patient that does not qualify as low-income (“diversion”).

That patient getting their share of the savings makes a great deal of sense. Indeed, a Government Accountability Office report (GAO-18-480) of selected covered entities stated of 55 interviewees, 30 reported providing low-income, uninsured patients on 340B dispensed medications and all “30 covered entities providing patients with discounts reported providing discounts on the drug price for some or all 340B drugs dispensed at contract pharmacies. Federal grantees were more likely than hospitals to provide such discounts and to provide them at all contract pharmacies.” Patients realize the savings of the rebate program immediately. Benefits of the program which may be less recognizable to patients for a similar report from 2011 (GAO-11-836) included funding a non-revenue-generating case management program, patient and family education programs similar to guidance pharmacists provide on medication interactions, and transportation to and from care appointments. All of which are critically necessary in terms of creating a safety net of accessible care for vulnerable communities and patients.

For more information on the issues facing the 340B Drug Pricing Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here 340B Drug Pricing Program.

Sources:

• Community Access National Network (February 2019). 340B DRUG DISCOUNT PROGRAM: The Issues Spurring Discussion, Stakeholder Stances and Possible Resolutions. 340B Commission Final Report. Retrieved online at https://docs.google.com/gview?url=http://www.tiicann.org/pdf-docs/2019_CANN_340B_Commission_Final-Report-v5_03-07-19.pdf&embedded=true

• Hasan, Shiraz, and Sofi Peterson (2021, April 16). 340B Drug Discount Program Growth Drivers. IQVIA. Retrieved online at https://www.iqvia.com/locations/united-states/blogs/2021/04/340b-drug-discount-program-growth-drivers

• Health Resources & Services Administration (2021). Sec. 340B PUBLIC HEALTH SERVICE ACT. U.S. Department of Health & Human Services. Retrieved online at https://www.hrsa.gov/sites/default/files/opa/programrequirements/phsactsection340b.pdf

• U.S. Government Accountability Office (2011, September). DRUG PRICING: Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement. GAO-11-836. Retrieved online at https://www.gao.gov/assets/gao-11-836.pdf

• U.S. Government Accountability Office (2018, June). DRUG DISCOUNT PROGRAM: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement. GAO-18-480. Retrieved online at https://www.gao.gov/assets/gao-18-480.pdf

340B Drug Discount Program: Here’s What Patient Advocates Need to Know

The 340B Drug Discount Program for years has had little attention, aside from a few Congressional Hearings. As we cited last month in a blog, 340B program purchases has more than quadrupled in the last decade, now exceeding Medicaid’s outpatient drug sales. This growth has disturbed the bargain made between manufacturers, providers, and lawmakers in 1992, often leaving patients out of the benefit meant to be gained by the program.

Because 340B is an exceedingly nuanced payment system design, lawmakers have been reluctant to touch the issue – fearing a need to “crack” into the legislation, lacking agreement on how to proceed, and having to balance interests that are often in conflict – preferring to leave the management of issues arising around 340B to the Health Services Resources Administration (HRSA), which then has the unfortunate duty to remind lawmakers, the agency’s statutory authority is limited, and their budget is not large enough for more meaningful oversight. As administrations change, so do the perspectives on how to ensure the intent of 340B, making sure poorer patients can afford and access outpatient medications and the care required to acquire those medications, is captured in how the programs actually operates. Leaving us with the current situation of competing interpretations and interests heading to the court system to find answers and settle disputes.

Part of this program growth is driven by hospitals as a type of “covered entity”; a 2015 analysis showed the program having grown from about 600 participating in 2005 to more than 2,100 hospitals in 2014. In fact, a 2018 Government Accountability Office report found “charity care” and uncompensated care provided by hospitals receiving 340B revenue had steadily been decreasing over the years. The Affordable Care Act has something to do with that – in extending Medicaid eligibility, the Medicaid qualified population grew and as enrollment grew, so did the amount if “disproportionate share” of Medicaid patients certain hospitals served. Ultimately, this meant more hospitals qualified for the 340B Drug Pricing Program than had prior to the ACA.

Another reason for program growth is an expansion of definition of “covered entities” to include contract pharmacies – which have grown as an industry – used by federal grantees like federally qualified health centers (FQHCs) and hemophiliac clinics. Tim Horn, director of the Health Care Access team at the National Alliance of State and Territorial AIDS Directors, described why it was necessary for this expansion, in particular to Ryan White clinics, serving communities affected by and vulnerable to HIV as opposed to limiting program qualification to those pharmacies run and owned by clinics themselves, “340B contract pharmacies are vital to Ryan White and other safety net providers for a couple of important reasons: they help ensure equitable access to affordable medications by uninsured clients, including patients who might live too far from a program's in-house pharmacy, and they help programs maximize their ability to generate essential revenue on prescription fills for insured clients.”

Regardless of entity type, most patients access care through a “payer” (health care insurance provider, be they public – like Medicaid managed care organizations – or private), who play a central role in the 340B payment system design. In turn, this means “pharmacy benefit managers” (PBMs - who sometimes also own the contract pharmacies in question) also play a central role, by designating schemes for how providers are reimbursed for care they’ve provided or medications that have already been dispensed. Jeffrey Lewis, a board member of Community Access National Network and President & CEO of Legacy Health Endowment, described how some PBMs engage in discriminatory practices by paying for 340B drugs at lower rates than non-340B drugs, reducing the benefit Congress intended to give 340B hospitals and clinics:

“340B providers receive less revenue than if 340B drugs are reimbursed at normal non-340B rates. That loss of revenue results in 340B providers having less money to underwrite the cost of providing uncompensated care, including serving uninsured or underinsured patients or providing services that insurers do not reimburse. PBMs, on the other hand, retain the difference between the 340B and non-340B payment rates for themselves. This program "benefit", which was intended to go to non-profit safety net providers, ends up going to for-profit PBMs instead. In this manner, PBMs' payment policies prioritize PBMs’ for-profit interests over 340B providers' non-profit missions to support public health.”

The center of one of the most pressing actions to date is “who’s job is it to make sure the rules are being followed?” with manufacturers being the first to move – by way of seeking the ability to require entities wishing to participate in 340B to provide additional claims data. Lewis points out that in a unanimous Supreme Court decision in 2011, courts had previously interpreted covered entities as lacking authority to seek enforcement against manufacturers, so the same must be true in reverse, requiring all parties to use a dispute resolution process dictated by HRSA. Indeed, the ruling even goes so far to cite the ACA’s directive for HRSA to issue a formal “alternative dispute resolution” process. However, HRSA failed to formalize this process in a final rule until December 2020. That rule is now part of a patch work of suits from manufacturers looking to the courts for clarity, with manufacturers arguing that statutory enforcement can’t be one-sided – if manufacturers must provide these discounts, someone should be ensuring the entities receiving these discounts are actually using them for patients and HRSA, by their own admission, doesn’t have the capacity to do so. Of note, Justice Ginsburg, who pinned the 2011 ruling in Astra USA, Inc., noted HRSA’s failure to bilaterally enforce the rules did not necessarily provide for a right of action by 340B actors.

Nonetheless, 340B remains a critical source of revenue for Ryan White clinics and other federal grantees already meeting the legislative intent of the program, at least generally better than other payer and provider actors in this scheme. As a result of sustainable federal funding and legislators prioritizing public health funding, federal grantees are scrambling – and manufacturers should consider how best to not harm the “good guys” in what ever actions taken next. Indeed, NASTAD’s Tim Horn stated:

“340B program revenue will always be an important – and dynamic – supplemental funding source for our HIV care programs, particularly where Medicaid has not been expanded and where federal and state funding is both limited and inflexible. A number of factors that have real or potential impacts on 340B…are now requiring serious discussions regarding the sustainability of program revenue generation. Simply put, we're not going to end HIV as an epidemic without significant and nimble funding required to support the myriad medical and support services associated with the best possible health outcomes. 340B revenue is a substantial part of this and, absent alternative funding streams to ensure that these programs remain whole, will remain the lifeblood of HIV service delivery in the United States.” 

Legacy Health Endowment’s Jeffrey Lewis agreed:

“The value and importance of the 340B program are well known. However, where there is ambiguity, it impacts both covered entities and patients. With the positive growth of covered entities to serve more people in need, Congress must take a thorough look at why 340B was created, its absolute value and tackle the tough questions where ambiguity may exist. Clarity is needed now more than ever to stop pharmaceutical companies from indiscriminately deciding whether and how to participate and prevent jeopardizing patients' lives. Similarly, Congress has an obligation to evaluate the role of PBMs and Third-Party Administrators (TPAs) operating in the 340B space and set a specific rule regarding revenue sharing. The 340B program was created to aid covered entities in serving more people in need. Unfortunately, every dollar taken by PBMs or TPAs reduces the ability of covered entities to care for more and more patients.

Clear legislative intent and rules are critical to ensuring program stability and, ultimately, safety net provider stability. Ryan White Centers, Hemophilia Centers, FQHCs, and rural hospitals as particularly vulnerable to Congressional, HRSA, and OPA ambiguity. The current and future failure to clarify the uncertainty of the 340B program jeopardizes patients and the financial stability of covered entities.”

While the finger-pointing on “who’s at fault” for an unsustainable program growth rages on and works its way through both the courts and the minds of lawmakers or who is responsible for drawing the lines in which manufacturers, providers, and payers can color inside of, the only thing clear is the population this program is meant to serve is not receiving as much benefit from the program as it should. We could say “patients” here, but that word apparently needs to be defined with regard to 340B. In the end, all stakeholders, outside of lawyered language, know exactly who has been harmed by bad actors in the 340B landscape. Everyone with power in this minefield would do well to remember that.

We invite you to download the 340B Final Report, issued by the Community Access National Network’s 340B Commission.