May 22, 2012—Regulations implementing health care reform’s Medicaid drug rebate provisions should encourage “shared savings” arrangements between 340B covered entities and Medicaid agencies, provider groups urged in comments filed with the Centers for Medicare and Medicaid Services (CMS).
Drug manufacturers, meanwhile, asked CMS to exempt any prices charged to 340B covered entities from their Medicaid best price computations as well as any 340B sales to covered entities that do not abide by program requirements. [ms-protect-content id=”2799″]They also asked CMS to require Medicaid agencies to develop systems for preventing duplicate discounts on 340B drugs and clearly articulate these systems in their state plans.
Comments on CMS’s proposed rule were due last month. When finalized, the rule will have major implications for prices paid for 340B-discounted drugs. CMS received nearly 300 comments on its proposal, which it issued on Jan. 27. The final rule’s release date isn’t known.
Much of the 202-page proposal dwells on the determination of Medicaid average manufacturer price, one of the main factors in the 340B ceiling price computation. The proposal also contains multiple direct references to the 340B program, touching on such subjects as state Medicaid reimbursement for 340B-purchased drugs, 340B drugs for Medicaid managed care patients, and how manufacturers are to treat prices charged to covered entities for purposes of calculating Medicaid best price.
Shared Savings
On the issue of Medicaid reimbursement for 340B drugs, Safety Net Hospitals for Pharmaceutical Access (SNHPA), the National Association of Community Health Centers (NACHC), and the Hemophilia Alliance asked CMS to promote to states a policy of reimbursing 340B covered entities and contract pharmacies at a rate greater than actual acquisition cost (AAC), such as by paying an enhanced dispensing fee or establishing other kinds of “shared savings” arrangements with 340B providers. Under such arrangements, states require covered entities to pass some of their 340B savings along to the state in the form of lower reimbursement but allow the entities to retain the rest of the savings for themselves.
“It is very difficult for [a federally qualified health center] with a significant Medicaid population to sustain a comprehensive pharmacy program unless it receives adequate reimbursement from Medicaid,” NACHC wrote. “NACHC urges CMS to adopt in the final rule … policies that will encourage states to reimburse FQHCs and other 340B covered entities in a manner that promotes access to care and that mutually benefits the state and 340B covered entities.”
“States should be given the flexibility to negotiate both the [340B] drug ingredient cost component and professional dispensing fee in a different manner than what is done for other drugs,” the Hemophilia Alliance wrote. “This is especially important for a shared savings program for hemophilia. While 340B drug prices can provide significant savings to the state, the [hemophilia treatment centers need] to be assured that [they] can adequately cover the significant costs of dispensing, distribution, and clinical pharmacy services.”
SNHPA, NACHC, Hemophilia Alliance, and other groups representing 340B providers and programs wrote to Health and Human Services Secretary Kathleen Sebelius in January requesting joint guidance from CMS and the Health Resources and Services Administration (HRSA) clarifying that federal policy does not require covered entities to bill Medicaid at AAC for 340B drugs and educating states about the benefits of shared savings policies.
SNHPA and NACHC also said that CMS’s final rule should clarify that states may not require 340B hospitals and health centers to carve their Medicaid managed care organization (MCO) drugs out of 340B in order to prevent duplicate discounts on those medications. In addition, they asked CMS to make clear that drug manufacturers may exclude “any” prices charged to 340B covered entities from their best price calculations, not just those charged under the 340B program or voluntary discounts on inpatient drugs for disproportionate share (DSH) hospitals. They urged CMS to also make clear that manufacturers may, without fear of lowering their best price, (1) offer sub-ceiling prices to 340B covered entities, (2) offer discounts on drugs “carved out” from Medicaid, (3) sell certain orphan drugs at 340B prices to rural and free-standing cancer hospitals, and (4) give voluntary inpatient drug discounts to any 340B hospital, not just 340B DSH hospitals.
Industry Perspectives
Pharmaceutical Research and Manufacturers of America (PhRMA), the trade association for brand-name drug manufacturers, and BIO, the biotechnology trade group, both agreed in their filings that any prices charged to 340B covered entities should be exempt from best price, citing language in the Medicaid statute stating so. PhRMA said CMS’s final rule should mirror this language. BIO added that if CMS has the authority to narrow the exclusion, it needs to precisely define whether sub-ceiling prices, discounts on carved-out drugs, orphan drug sales to rural and cancer hospitals, and inpatient discounts to entities other than DSH hospitals qualify for best-price exemptions.
The industry groups said the final rule should make it clear that 340B sales to covered entities that do not abide by program requirements should not be included in best price calculations. Both noted that HRSA guidelines prohibit manufacturers from conditioning discounted sales upon an entity’s assurance that it complies with all 340B rules and guidelines. In its filing, SNHPA noted those same guidelines in asking CMS to assure manufacturers “that selling orphan drugs at 340B prices to participating covered entities will not implicate a manufacturer’s best price.”
PhRMA and BIO also asked CMS to require state Medicaid agencies to develop systems for preventing duplicate discounts on 340B drugs dispensed to Medicaid fee-for-service and managed-care beneficiaries and clearly articulate these systems in their state plans. Specifically, they said CMS should require states to include pharmacy identifiers and the 340B identification data element developed by the National Council for Prescription Drug Programs (NCPDP) in all Medicaid fee-for-service and MCO utilization data submitted to manufacturers for rebates.
In its filing with CMS, SNHPA observed that the language of the Affordable Care Act (ACA) makes it clear “that it is the states, not covered entities, which have a legal obligation to identify and exclude 340B managed care claims from state rebate requests.”
“While it is true that covered entities have a responsibility to do their part in preventing duplicate discounts with respect to Medicaid [fee-for-service] drugs, nothing in [ACA] indicates that Congress intended for those obligations to extend to Medicaid MCO drugs,” it continued.
SNHPA asked CMS to work with HRSA to establish a regulatory mechanism for states to avoid collecting rebates on 340B MCO drugs. The “exclusion file” that HRSA created to prevent states from collecting rebates on 340B Medicaid fee-for-service drugs can serve as a model, it said. A separate mechanism is needed to prevent the collection of rebates on 340B MCO drugs dispensed by contract pharmacies because “when a contract pharmacy bills a Medicaid MCO for a 340B drug dispensed to a covered entity’s patient, the state will not know whether the drug was purchased by a covered entity listed in the exclusion file,” SNHPA pointed out. The group says this mechanism should be able to accommodate replenishment systems, such that identification of the claim occurs after the drug has been dispensed and billed.[/ms-protect-content]