September 18, 2013—Health care providers in the 340B drug discount program should be subject to far more government scrutiny and drug companies should have more power to look at 340B covered entities’ books, attorneys who represent drug companies in 340B matters said during a major drug industry conference in Chicago last week.[ms-protect-content id=”2799″]
Speaking at the annual Medicaid Drug Rebate Program Summit, Alice Valder Curran of the Hogan Lovells law firm and William Sarraille of the Sidley Austin firm both suggested that drug companies should begin thinking now about how they want to reshape 340B via the comprehensive regulation for the program due to be published for notice and comment in June 2014.
Health care providers’ 340B discounts “should be viewed as taxpayer dollars,” Valder Curran said, and covered entities should be regulated more heavily. The worst covered entity violators of 340B rules, she said, should be expelled from all federal health care programs.
Today when covered entities enroll in 340B, they obtain unlimited access to “the spigot of money that is the 340B program,” she said. “Open access to revenue requires more than a promise to comply.”
For example, the government could require 340B covered entities to be accredited by an independent body, just as it does suppliers of durable medical equipment, Valder Curran said. It could also require covered entities to pass an independent audit of their internal controls, post a surety bond, and prove that they use 340B savings to meet program objectives, and at the same time allow manufacturers hold 340B discounts in escrow while audits are in progress, she added.
Speaking earlier during the conference, Sarraille said “there is room for improvement” in the rules governing manufacturer audits of 340B covered entities. For example, he said, manufacturers should be allowed to audit hospitals for compliance with the prohibition against using group purchasing organizations. Likewise, he said manufacturers should be allowed to audit for errors in the 340B covered entity database. Sarraille also advocated a pilot program under which manufacturers would be able to audit entities without first having to establish reasonable cause and said companies should not be barred from auditing entities that are already being audited by HRSA.
In addition, Sarraille said that the Health Resources and Services Administration’s (HRSA) new regulation implementing the 340B orphan drug exclusion is “a train wreck” and “ultimately unworkable.”
“This is really a defining moment” for Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Industry Organization (BIO), the two major trade groups for makers of branded drugs, he said. If they do not sue to have the rule invalidated, “the credibility they will have going forward with respect to agency discretion” to interpret and implement legislation “will be undermined forever.”
“It’s an existential event for the trade associations,” he said.[/ms-protect-content]