February 14, 2011—The Obama administration today proposed the first-ever user fee for providers enrolled in the 340B drug discount program, a 0.1 percent levy on each purchase to pay for the program’s operating expenses and improve its administration and oversight. The White House included the user fee plan in its formal budget request to Congress for the fiscal year that begins on Oct. 1.
If adopted by Congress, the proposal would effectively shift the entire responsibility of paying for the Office of Pharmacy Affairs’ (OPA) line item in the federal budget from the federal treasury to 340B covered entities. OPA is the unit within the Health Resources and Services Administration (HRSA) that oversees the 340B program.
Total 340B drug sales are currently pegged at $6 billion annually. A one-tenth of 1 percent fee on that sum would yield $6 million. Manufacturers would collect the new fees “at the time of sale” and they would be credited to the OPA budget account, where they would remain available until spent.
Technical Assistance Curtailed
OPA Director Krista Pedley, meanwhile, announced at the 340B Coalition winter conference in San Diego last week that, due to funding constraints, beginning March 1 her office’s contractor, the Pharmacy Services Support Center (PSSC), will provide less technical assistance to some types of covered entities than before, including disproportionate share hospitals and Title X grantees. (Check back with the Monitor soon for more details on this development.)
President Obama requested $5 million for OPA in his budget request for the current fiscal year, 2011, and he is seeking the same sum for 2012.
Congress, however, did not pass a single 2011 appropriations bill. Funding for the whole federal government has been provided for instead under a series of temporary spending measures called continuing resolutions. The latest of these, passed in December, maintained OPA’s budget at its 2010 level of just over $2 million for a full year.
House Action This Week
The most recent continuing resolution expires on March 4. Later this week, the Republican-controlled U.S. House will debate and probably vote on a new continuing resolution that would run through Sept. 30. That bill would lop off about $60 billion government-wide from the amount provided for under the current continuing resolution. The effect of the cuts would be magnified because they would occur with half of the fiscal year essentially complete.
The House spending bill is also expected to include language barring the government from using any money to implement health care reform, including funds to carry out 340B’s expansion and to strengthen the program’s integrity.
The Democrats who control the Senate have already signaled that they will reject the House’s plan. If the two sides cannot find common ground, a government shutdown is possible.
Although President Obama is seeking the same amount for OPA in 2012 as he did for 2011, he proposes to cut its parent agency HRSA’s budget from its present $7.6 billion to $6.8 billion. HRSA got about $8.6 billion in fiscal 2010. The Department of Health and Human Services (HHS) would get a total of $79.9 billion under the president’s plan, a slight increase from this year.
At a drug pricing conference last September, OPA Director Pedley said her office was spending about $15 million per year, or about seven times as much as it gets from its current line item in the budget. HHS has filled the gap by shifting money to OPA from HRSA and other department agencies.
Idea Was Raised Under Bush
The idea of a 340B covered entity user fee was floated during George W. Bush’s presidency, but his administration shot it down because it perceived such a move as a “tax.”
Advocates of such fees argue that they would give the 340B program much needed financial stability and certainty. Other, however, point out that safety-net health care providers can ill afford any additional expenses.
Safety Net Hospitals for Pharmaceutical Access (SNHPA), which represents nearly 700 hospitals and health systems enrolled in 340B, said it is still evaluating the proposal. The organization said it recognizes OPA’s need for funding to carry out its new obligations under health care reform, but has concerns about proposals that would increase the cost of medicines for its members. SNHPA said it would study the proposal carefully and respond in greater depth soon.
Officials at the National Association of Community Health Centers (NACHC), many members of which participate in 340B, were unavailable for comment on the administration’s proposal.
Other Budget Highlights
In addition to the 340B user fee proposal, Obama’s budget called for cutting back from 12 to seven the number of years that drug manufacturers could exclusively market brand-name biological drugs. It would also give the Federal Trade Commission authority to block so-called pay-to-delay deals in which brand-name drug manufacturers pay manufacturers of generics to keep their copies of certain drugs from reaching the market.
The White House said both moves are designed to increase the availability of generic drugs, leading to “cost savings for consumers and health programs across the federal government.”
The president’s proposal also calls for an additional $2.1 billion to expand community health center services. The increase would come on top of the $500 million provided under the recent economic stimulus bill and $11 billion over five years provided under health care reform.
Missing from the budget plan was a call to extend Medicaid rebates to the Part D dual eligible population. The news service Inside Health Policy reported last week that House Democrats were urging the administration to adopt the policy, which they had included in their version of health care reform in 2010.