By Karin Rives
A little-known provision in the federal omnibus spending bill passed by Congress last month could have huge implications for family planning clinics and student health centers – as well as their patients.
The bill allows new groups of health service providers to procure drugs at “nominal prices” under the Medicaid drug rebate statute. The nominal price of a drug is less than 10 percent of the average manufacturer price, and is not included in the government’s “best price” calculations used to determine the price available to Medicaid and the 340B program. The nominal sales exemption was designed to encourage drug makers to sell their products at steep discounts to public and non-profit clinics.
“We applaud Congress for righting a wrong that has restricted access to basic, but critical, preventive healthcare services and left millions of women at risk of unintended pregnancy,” said Cecile Richards, president of Planned Parenthood Federation of America. The legislation is “a victory for women’s health and especially for women who have struggled to afford the rising costs of basic contraception in these tough economic times.”
Deficit Reduction Act pushed up prices
Before 2007, family planning and student health clinics had access to nominally priced drugs and were able to pass the savings on to low-income women and college students. The 2005 Deficit Reduction Act (DRA), however, tightened eligibility for such discounts to curb what Congress and federal prosecutors perceived to be manufacturer abuse of the privilege
The 2005 law limited nominal price eligibility to entities covered under the 340B drug discount program, government-owned or operated nursing homes, intermediate care facilities for the mentally retarded, or other entities qualified by the U.S. Department of Health and Human Services (HHS) – in effect shutting many family planning and college clinics out of the deal.
This meant that clinics that had paid less than $1 for one month’s worth of birth control pills suddenly were charged as much as $30, and that patients paid up to 10 times more for contraception.
In 2007, then-Senator Barack Obama was a lead sponsor of legislation to adjust what was described as a “bureaucratic mistake.” (See Monitor Dec. 2007.) But it took until the 2009 appropriations bill to adjust the DRA language. The spending bill made the expanded eligibility of nominal sales retroactive to Jan. 1, 2007, when the DRA went into effect. This will require manufacturers to review all their best-price calculation since that date so they can exclude all sales to now-covered clinics “and restate Best Price as necessary,” according to a recent client news alert issued by King & Spalding’s Healthcare Practice Group, which represents large drug companies.
Manufacturers wary
The new law makes it reasonably clear that family planning and college clinics that offer family planning services are covered. But there is a second group of eligible providers that is not nearly as well-defined, said John Shakow, a Washington, D.C.-based partner in King & Spalding’s FDA/Healthcare team. “The law opens the exemption to entities that provide the same ‘type of service’ to the same ‘type of populations’ as 340B-covered providers. We need clarifying guidance from CMS before drug manufacturers can know with confidence who these entities actually are,” Shakow said.
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New entities eligible for nominally priced drugs “An entity that – (aa) is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Act or is State-owned or operated; and (bb) would be a covered entity described in section 340(B)(a)(4) of the Public Health Service Act insofar as the entity provides the same type of services to the same type of populations as a covered entity described in such section provides, but does not receive funding under a provision of law referred to in such section” “A public or nonprofit entity, or an entity based at an institution of higher learning whose primary purpose is to provide health care services to students of that institution, that provides a service or services described under section 1001(a) of the Public Health Service Act, 42 U.S.C. §300.” |
Safety Net Hospitals for Pharmaceutical Access (SNHPA) was among organizations that tried to convince HHS to exercise its authority under the DRA to expand the list of institutions eligible for nominally prices drugs. “We’re hopeful that in the wake of the new nominal pricing law, and with the new leadership at HHS, the government will be willing to add new categories of safety-net entities – especially clinics and other providers affiliated with 340B hospitals,” said Bill von Oehsen, SNHPA’s president and general counsel.
For now, however, manufacturer attorney Shakow is advising clients to wait until they get further guidance from Centers for Medicare and Medicaid Services.
“It’s extraordinarily risky to extend nominal pricing when manufacturers don’t know for sure which providers are subject to the exclusion,” Shakow said. “They’d run the risk of unintentionally setting new best prices, and having their Medicaid liability shoot through the roof. It’s a mistake that could cost manufacturers tens of millions of dollars.”