November 16, 2012—Expectations are growing that a bill may be introduced in Congress soon that would exempt certain generic injectable drugs from 340B drug discounts for possibly up to seven years.
Rep. Bill Cassidy (R-La.), a member of the House Energy and Commerce Subcommittee on Health, has drafted drug shortage legislation that includes the 340B discount exemption and has circulated a letter among his House colleagues seeking co-sponsors.[ms-protect-content id=”2799″] In mid-November, he co-authored an op-ed in The Wall Street Journal that partially attributed recent cancer drug shortages “to government requirements to provide discounts and rebates on drugs for high-need populations.”
The main lever in Rep. Cassidy’s draft Patient Access to Drugs in Shortage Act is a provision to change the Medicare Part B reimbursement rate for generic sterile injectable drugs with four or fewer manufacturers from the current 106 percent of average sales price (ASP) to wholesale acquisition cost (WAC) for single-source drugs and a weighted WAC for multiple-source drugs. Supporters of such a change in reimbursement say it will help incentivize continued production.
Rep. Cassidy’s bill also would exempt this same category of drugs from Medicaid rebates and 340B discounts, with a sunset date of Dec. 31, 2019. Senate Finance Committee Ranking Republican Orrin Hatch of Utah has circulated similar draft drug shortage legislation that also would curtail 340B discounts.
Some health policy experts argue that 340B is a price-control scheme that distorts markets and leads to shortages. However, leading pharmacist organizations, hospital groups, and the generic drug industry have not found a link between 340B pricing and shortages.
Rep. Cassidy is among the members of Congress who have been probing the 340B program for the past year following the Government Accountability Office’s finding of inadequacies in program oversight. He asked the Health Resources and Services Administration (HRSA) in July to revise the 340B definition of patient to ensure “the program’s eligibility is for those truly in need and curbs any misuse.” In a news release announcing the request, he expressed concern that the 340B program “is not working well and may indeed be contributing to drug shortages.”
Experts say that an executive order issued by President Obama late last year and legislation passed by Congress this summer have reduced drug shortages almost in half, from about 180 in September 2011 to 100 one year later, according to the Food and Drug Administration (FDA). The presidential directive and the new law focus on requiring drug companies to give the FDA advance notice of supply disruptions and/or manufacturing problems.
Many of the past and ongoing shortages have involved difficult-to-manufacture sterile injectable drugs that have lost their patent protection. Most leading authorities on drug shortages agree that the current spate of shortages has been caused by manufacturing challenges such as quality and capacity problems. Rep. Cassidy and others, however, argue that manufacturing breakdowns are a direct result of federal pharmaceutical reimbursement and pricing policies that have made the production of generic injectable drugs a losing proposition.[/ms-protect-content]