The Necessity of Patient-Centered 340B Reform

On the issue of any health policy discussion, many, powerful stakeholders are inserting their priorities and interests, working to be the “most favored” entity group in any final outcome. For the Affordable Care Act (ACA), some fights were seen between providers that asserted some feigned “moral” objection to any given type of care, others included insurance companies fighting to get a bigger piece of the subsidy pie or establishing themselves as “managed care organizations” to take over management of Medicaid programs. To this day, Judge Reed O’Connor has ruled on the ACA more than any other federal judge outside of the Supreme Court. But repeatedly, despite the political stump speeches and the claims of high ethical priorities from other stakeholders, actual patients do not tend to dominate in terms of who benefits most when health policies are enacted or when reforms are needed. The 340B Drug Discount Program is no different. In fact, serving the intent of the program is at the center of the patient-centered reform movement.

Often these fights happen without sufficient focus on how they impact patients. Providers, particularly provider administrators, and payers (public and private) are well-funded enough to out-shout patients and then claim some paternalistic insight as to what will “really” benefit patients. Having someone speak for us is not where we end up being the “winning” stakeholder. It’s part of why patient self-determination is at the core of The Denver Principles. And, again, 340B is no different in this regard.

Bad actors in this space continue to tout prioritizing patients while doing…not that.

For a recent example in a long line of examples, Allina Health System was routinely denying care to patients, despite being designated a “non-profit” health organization. Indeed, in that specific health system, not only were patients denied care for having a balance or struggling with paying medical bills, as evidenced by the system’s less than half of one percent charity care rate indicates patients weren’t being made aware of the system’s own financial assistance policy even when facing collections.

Collections…

Hospital-related collections are the driving factor for health-related GoFundMe and other, similar crowd sourcing, mutual aid sites. A pregnancy complication. A non-life-threatening injury, like a broken arm or a potentially terminal one, like a cancer diagnosis. Regardless of the particular causes, patients needing care and not being able to afford it is the throne in the side of millions of Americans. Medical debt touches more families than even student debt, with one estimate showing at least 11 million owing more than $2,000 in medical debt and at least 3 million owing more than $10,000. And unlike student loans, medical care is an absolute necessity of life.

We need to be clear, some 75% of adults with medical debt owe that debt to hospitals. It isn’t “mom and pop” providers (though hospitals are buying them out at an alarming rate) or your local community clinic. The vast majority of “medical debt” is really just hospital debt. And that medical debt – it’s not evenly distributed. An Urban Institute analysis from 2022 found Black Americans experienced medical debt at a higher rate and higher amount than their white peers. But looking at Bon Secours, an entity that took these vital dollars from Black communities and reinvested them in wealthier, whiter communities, we can’t be terribly surprised to see this data on debt and predatory practices are tinged with racist impact.

We’ll gently remind our readers that equity-minded persons and entities prioritize “impact over intent” is a very real thing.

These things are so sufficiently related that the Los Angeles County Department of Public Health issued a report suggesting the most efficient way to handle the medical debt crisis was for hospitals and mega-providers to pony up and actually meet their charitable service obligations. Meeting those charitable missions thereby reduces medical debt, addresses at least one aspect driving health disparities (financial toxicity), and ensures those program revenues are being geographically oriented to serve the most medically marginalized populations in this country. That includes incentives to address hospital and pharmacy deserts, whereby the experience of patient communities has been pilfering followed by abandonment.

Here’s a simple fact: reforming 340B to better meet the intent of the program does not pose a threat to those entities already meaningfully serving the intent of the program – serving patient needs.

Mr. Becerra, Bring Back the Mega-Guidance. With Love, 340B

Last month, President Biden released details of his proposed budget, including a much needed 23% increase in discretionary spending for the Department of Health and Human Services. Among numerous proposals for these funds, including refilling supplies in the National Strategic Stockpile, expanding mental and behavioral health services, and advancing Ending the HIV Epidemic initiative, is a giant but quiet drug rebate program: 340B. Outside of health policy “wonk” circles, 340B doesn’t often get very much attention. However, inside of those circles an obsessive chant can be heard, “bring back the mega-guidance”.

Let us back up some.

In the early 90’s, another time when drug prices were nearing the height of health care conversations on the national level, Congress and pharmseutical manufacturers struck a balance: in order to ensure a manufacturer’s products were available to a ready purchaser (Medicaid, Ryan White, and other safety net programs), manufacturers would offer their products at exceptional discount based on use – or a rebate. The dollars received as rebates were expected to be used “to the benefit of patients”. The idea being a system-oriented effort to ensure poorer patient populations could get both the medicines and the care they need. Later, the definition of eligible entities for these discounts were expanded to include entities who were not necessarily federal grantees or subrecipients.

The problem, nearly 28 years later is regardless of Congressional intent, no one has definitions for what any of this means. Manufacturers argue non-federal grantee entities (including for-profit hospitals, contract pharmacies, and pharmacy benefit managers) are abusing the program and not just to the detriment of their own interests but to the detriment of patients by way of narrowed provider networks, skewing formularies, and buying up competing practices as examples. Indeed, these are the very examples Senators cited in 2018, the last time 340B was meaningfully discussed on the Hill. Senators then listened as representatives from the Government Accountability Office (GAO) and Health Resources Services Administration (HRSA) see-sawed between saying they either lacked the statutory authority or merely lacked the proper funding support to shore up to program, eliminate abuse, and more adequately perform audits.

The issue at hand was the result of the then-new Trump administration torpedoing the Obama administration’s “mega-guidance”, which would have defined “patient”, provided for a federal portal of products captured under 340B to extend transparency, and more. For context the Obama administration had given notice in 2010 of proposed rulemaking. Which ultimately didn’t manifest an actual proposed rule until August 2016, by which time it was too late to finalize as is the tradition for incoming administrations to pause or cancel late-made rules of the previous administration.

In that 2018 Senate committee hearing, Senators argued HRSA already had the authority necessary – pointing toward the abandoned mega-guidance – and ultimately came to no conclusions other than “things need to change”. That’s an understandable sentiment given the growth of the program. Even if the general public is to question the data of the Pharmaceutical Research Manufacturers of America (PhRMA) stating provider and pharmacy profit margins from 340B grew more than 900% from 2013 to 2018, instead of sharing those savings with patients. However, even HRSA’s own data now puts 340B at nearly the size of Medicaid’s outpatient drug program, up by 23% from 2018-2019 alone. If consumers considered the idea their medications might have been 23% lower in cost if those savings were shared with them instead of pocketed by other entities in the health care pipeline in one year alone, the rising anger shifts the blame quite readily.

There’s plenty to go around, though. The 340B can has gotten kicked down the road for far too long. In the absence of rulemaking, various players in industry have tried to fill the gaps. Last year, several manufacturers began implementing their own practices, primarily by imposing new, internal requirements on contract pharmacies to prove a patient actually qualified or merely refused to allow contract pharmacies to play middle men at all. HRSA responded by sending letters to 6 of the largest manufacturers implementing these programs and demanding they resume offering the discount program to the contract pharmacies – including a threat to penalize manufacturers who refused to cease these limiting activities. A particular manufacturer, Eli Lilly, sued to stop HRSA from enforcing this threat.

Ultimately, though, HRSA hasn’t been able to meaningfully explore its regulatory powers with regard to 340B. President Biden’s effort to fund oversight of 340B is necessary as market-based solutions are at best messy and slow and apparently needing judicial intervention. With sufficient funding for oversight and enforcement under the President’s proposed budget, all that’s left is the same, repeated call of patient advocates and “wonks” alike from the last 4 years: bring back the mega-guidance.

For a more detailed review of the variety of issues 340B faces, please review Community Access National Network’s 2019 report here.

CMS Sides with the Devil: Insurers’ Co-Pay Accumulators Remain…for Now

The Affordable Care Act (ACA) was revolutionary in how prescriptive statutory language was in ensuring health insurers (payers) covered costs associated with pre-existing conditions, if they accepted even a penny of federal funding. The trade off was a simple theory: “cover more people and their entire health and we’ll make sure you’re still profitable”. There were hundreds of pages of caveats, definitions, incentives for public programs, pharmaceutical research, and regulatory authority passed to state and federal agencies. Everyone got a piece of the pie to the end benefit of Americans for whom health care had been out of reach for the majority of their lives. We would be healthier together by simply providing people the care we need and reducing overall costs. However, as these things go, payers are creative and pay their lawyers handsomely to find ways around that basic agreement. As payers fight to “contain costs”, co-pay accumulator programs are one of the most disingenuous methods to limit consumer access to quality care and pad payers profit margins.

From issues of discriminatory plan design, or making consumers pay the highest cost-sharing for medications which are only used to treat certain conditions like HIV, to limiting provider networks in such a way that a patient requiring a surgery or emergency care results in surprise bills to toxic practices known as “utilization management” (including, but not limited to, abusive prior authorizations and step therapy, also known as “fail first”), payers have paid their lawyers quite well to find loopholes or design new problems in order to maintain their profits. The ACA’s medical loss ratio (MLR) rule, also known as 80-20/85-15 rule (in general requiring 80% or 85% of a plans premiums to actually be used on costs of care or pay back to balance to consumers) has resulted in a startling 2 billion dollars to be paid back to consumers in 2019 alone. But the rule doesn’t necessarily count other income payers can produce by way of cost-sharing or deductible payments, co-pays (a fixed price typically paid after deductibles are met for care and medications), and – now, more commonly – “co-insurance” (a percentage price typically paid after deductibles are met for care and medications) as part of that rule. The result is consumers and those who would like to see us get the quality, individualized care we need are being put on the hook for payers’ greed.

Patient advocacy often has interesting bedfellows. And at the intersection of our care interests and that of industry, pharmaceutical manufacturers have found what can arguably described as a somewhat socialist model by way of patient assistance programs, often enacted as co-pay card or discount programs aimed at directly benefiting patients by taking care of the patients’ share of a medication’s cost. These programs are quite frequently limited by income or if a person is insured. The idea being to make sure the most costly medications make their way into the hands of the people who need them most and can least afford them. In this, our interests as patients absolutely converge with that of manufacturers. We want quality therapies made available to us. However, when a medication “goes generic”, often these programs are no longer available as a less costly, generic medication is preferred by the payer unless a patient fails that particular medication (see: step therapy, “fail-first”). The problem is generic medications are not held to extraordinarily strict requirements for Food and Drug Administration (FDA) approval that brand name medications are held to. Indeed, earlier this year, Vice offered a fantastic explanation of the problem with preferencing generic medications by payers (both public and private) is harmful to patients and why our generics “approval” process is a threat to the health and safety of patients. It’s no wonder, with the lax oversight of generic medications and the offer of payment assistance from manufacturers that patients would want access brand name and newer medications on the market.

One of the most amazing benefits of patient assistance programs is, in theory, because they’re meant to cover the patient’s cost-sharing obligations, these out-of-pocket (OOP) costs should apply to the patient’s deductible and OOP maximums and reduce the cost burden to patients for future care throughout the plan year. Right?

Wrong.

Payers have near uniformly adopted a practice known as “accumulator adjustment programs”, or co-pay accumulators, in which a payer basically says to a patient and a manufacturer “all for me, none for thee”, taking the entirety of the benefit offered by a patient assistance program and not crediting the patient with those funds received against the patient’s deductible, co-pay or co-insurance, or out-of-pocket maximums. To boot, manufacturers have zero control over this practice and often don’t know when it’s happening until a patient complains about the experience. Payers justify this move as “cost-containment” and disincentivizing patients from seeking more costly medications – which translates to newer, more effective, safer medications (go back to the problem with generic approvals above).

So far, the Centers for Medicare and Medicaid Services (CMS), the primary authority in which payment rules are issued from the federal government to payers, have generally made extraordinary effort to ensure protect the interests of patients and those who align with our interest. In the instance of CMS’s newest rebate rule, CMS chose to side with payers for some inexplicable reason. The rule states pharmaceutical manufacturers, not payers, would have to count these direct-to-consumer assistance programs among “best price” calculations, which govern Medicaid rebate price setting or what the government pays for a medication, if a patient didn’t receive 100% of the benefit of the assistance program. Previous rules on what to consider in calculating “best price” were generally limited to prices negotiated within industry movers inside the supply chain, not that of end users. The theory goes like this: “if ultimately this assistance program is paying an insurer’s bottom line and not helping patients, then it should be considered a price you (manufacturers’) negotiated. You were planning for that in setting your prices anyways, right?” Pop quiz answer: wonky negotiations with payers is not what manufacturers were planning on in designing income limited, only-accessible-by-consumers-asking for-it assistance programs. The solution CMS offered was for manufacturers to ensure patients received the intended benefit by requiring patients to pay for a medication up front and then ask for reimbursement – a process that only makes medication access and affordability infinitely more complicated and burdensome for patients.

In the end, CMS decided that in response to an excessively abusive payer practice that disadvantages patients, the answer was to create further barriers to accessing care for patients rather than to reduce them.

Let’s make this real and “back of the envelope” this practice in terms of realized patient experiences:

Monthly Income: $2,583 (based on average US income in 2019 provided by the Census Bureau)
Monthly premium: $304 (lowest cost local silver deductible is $3,400, OOP maximum is $8550, co-insurance is 20-40%)

Absent a public payer intervention, co-pay accumulators might allow a patient assistance program to cover the estimated $600 per month co-insurance would demand for a certain medication, however, I’m not likely to meet my deductible or maximum OOP for the year at all. With local rent costing about $1000 per month, a car payment and car insurance in order to work (there’s no meaningful public transit in the vast majority of the country), food costs, utilities, etc. Even with federal subsidies provided via the health care market place, every month, I’m in the negative. Which means I can’t afford to see my doctor or get my quarterly labs, which means I can’t get my medication in the first place.

However, without the application of a co-pay accumulator, accessing just 3 month’s worth of a patient assistance program would meet my deductible and maximum OOP costs for the year. I don’t have to worry about at least $200 per month in medical costs. And one less financial strain is off my shoulders.

For the vast majority of us, our medications are not a luxury item. They’re not something we can afford to pay for up front and mail-in a rebate request and wait months for. In doing so, CMS not only suggests an increase to the paperwork burden on patients and manufacturers alike, CMS also seeks to increase barriers to accessing life saving medications to begin with.

All to the benefit (read: profit) of payers. So it’s no wonder the trade organizations, Pharmaceutical Research & Manufacturers of America (PhRMA) chose to initiate a lawsuit to halt the implementation of CMS’s backwards and punitive rule.

While patient advocates may spar readily about the role of industry among advocates, we should also recognize actions that align with our own interests on their face. Yes, PhRMA may be leading up this suit - and CMS should listen to the needs of patients, reverse course, and voluntarily pull this rule.