June 29, 2010 – Congressional Democrats have abandoned a tax and jobs bill that would have enabled children’s hospitals to continue to buy outpatient orphan drugs at their 340B discounted prices and created a discount program for drugs administered or dispensed to hospital inpatients lacking health insurance.
The fourth version of the bill, H.R. 4213, also included a last-minute amendment by Senate Finance Committee Chairman Max Baucus (D-Mont.) to revise the definition of average manufacturer price (AMP) included in the Affordable Care Act (ACA), the nation’s new health care reform law. AMP is used to calculate 340B discounts, manufacturer Medicaid rebates and federal upper limits on Medicaid pharmacy reimbursement for generic drugs.
The ACA eliminated various fees, payments and discounts from the computation of AMP in order to increase Medicaid pharmacy reimbursement for generic drugs. The Baucus amendment would have required the inclusion of fees, discounts and rebates provided in sales of inhalation, infusion and injectable drugs that are not dispensed through a retail community pharmacy. Pharmacy reimbursement for those drugs probably would have been reduced while 340B discounts probably would have risen.
Orphan-Drug Exemption in Doubt
Senate leaders gave up hope of passing H.R. 4213 late last week after failing to secure the 60 votes needed to break a filibuster. Opposition to the bill focused on provisions unrelated to prescription drug pricing.
The bill’s collapse leaves the future of the children’s hospital orphan-drug exemption, the proposed 340B-1 inpatient drug discount program, and the AMP changes in doubt.
The ACA prohibited free-standing children’s and cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals from buying approximately 350 high-priced orphan drugs with the 340B outpatient discount. Current 340B providers were not affected by the ban.
Hospital groups lobbied Congress to overturn the prohibition entirely. Drug manufacturers have argued that they would have trouble recouping their orphan drugs’ R&D costs if they had to sell them at 340B discounts to more hospitals. The House voted in late May to lift the ban for children’s hospitals only.
“We’re distraught about the failure to get moving with this correction,” says Jim Kaufman, the National Association of Children’s Hospitals’ vice president for public policy. “We have been in this program and have had a benefit taken away from us by mistake. Everyone we have spoken to in Congress has been extremely supportive and recognizes this is a technical correction that needs to be made as soon as possible.”
Kaufman also says that NACH has been working with the Obama administration to delay the orphan-drug ban’s implementation pending further action by Congress.
340B-1 Also in Limbo
The failure of H.R. 4213 also places the future of the proposed 340B-1 inpatient drug discount program in jeopardy.
340B-1, despite its name, would have been a new drug discount program separate from the current 340B outpatient drug discount program. Drugs eligible for 340B-1 discounts would have been limited to those administered or dispensed to inpatients without insurance coverage or other means to pay for the drug in hospitals with a Medicare disproportionate share (DSH) percentage greater than 20.2 percent. In contrast, the current 340B program provides discounts on virtually all outpatient drugs in hospitals with a DSH percentage greater than 11.75 percent.
Despite the proposed program’s promise of some inpatient discounts, 340B-1 was met with skepticism from several hospital groups. Most hospitals that participate in 340B would not have been able to participate in 340B-1, the groups observed. Those that could have would have been burdened with the need to keep a separate 340B-1 drug inventory and required to abide by program integrity provisions much stricter than 340B’s. Hospitals also would have had a hard time knowing whether the discount should apply without first knowing whether a patient had sufficient insurance coverage.
Prior to the final vote on H.R. 4213, Senate leaders incorporated changes into the bill that were requested by Safety Net Hospitals for Pharmaceutical Access (SNHPA), the National Alliance of State and Territorial AIDS Directors, the National Association of Children’s Hospitals, the National Association of Public Hospitals and Health Systems, and the Planned Parenthood Federation of America. The new language replaced terms such as “patient,” “drug” and “covered entity” that were drawn from the 340B statute with “inpatient,” “inpatient drug,” and “340B-1 covered entity,” respectively, to clarify that the new program would not affect the operations of or eligibility for the existing 340B program. The additional language also made clear that enrollment in 340B-1 would not have been mandatory and that the new program’s compliance requirements would have applied only to its enrollees.