October 26, 2010—Bristol-Myers Squibb (BMS) says it is “required” to extend 340B discounts retroactive to Jan. 1 of this year to rural and children’s hospitals that have enrolled in the drug discount program under health care reform.
The drug manufacturer made the announcement in its third quarter earnings report filed with the U.S. Securities and Exchange Commission (SEC). BMS’s decision comes just days after Eli Lilly and Co. executives said in a conference call with reporters that a Sept. 20 federal policy reversal regarding the availability of retroactive discounts allowed it to restore $40 million in revenues to its balance sheet for the year.
BMS’s Awareness Uncertain
It is unclear whether BMS was aware of the Health Resources and Services Administration’s (HRSA) Sept. 20 determination, published as an entry in its Web site’s frequently asked questions page, when it submitted its SEC filing, which covered company earnings through Sept. 30. BMS announced its quarterly earnings on Oct. 26. In any case, it seems that the company has been operating under the assumption that it needs to set aside money to pay newly eligible hospitals’ claims for 340B discounts on drugs bought since Jan. 1.
The Monitor is continuing to track other drug companies’ statements in their Q3 earnings reports on whether they will provide the back discounts.
In its Web posting, HRSA says that “as a general rule, the Office of Pharmacy Affairs (OPA) does not consider any entity eligible for 340B pricing until the entity is fully enrolled, assigned a 340B identification number and listed in the 340B database.”
“A newly enrolled covered entity’s benefit,” it continues, “starts the day the covered entity is listed on the database as eligible.”
Congress, however, gave Section 7101 of ACA, which extended 340B eligibility to the rural, children’s and cancer hospitals, an effective date of Jan. 1 and said that the program’s expansion “shall apply to drugs purchased on or after” that date. HRSA did not explain the apparent discrepancy.
HRSA’s position on the availability of retroactive discounts also appears to run counter to those it took in guidelines shortly after 340B was created in 1992 and again when children’s hospitals were added to the program in 2009. In both instances, HRSA permitted health care providers new to the program to seek discounts from drug manufacturers retroactive to the date of their eligibility.
In its SEC filing, BMS said “we have experienced and will continue to experience additional financial costs and certain other changes to our business” due to the passage of health care reform in March. Among the “most significant” changes, it says, “we will extend discounts retroactive to January 1, 2010 to certain critical access hospitals, cancer hospitals and other covered entities as required by the expansion of the 340B Drug Pricing Program under the Public Health Services Act.”
Santa Clara and Price Fixing Suits
BMS also said in its filing that “it is not possible at this time to reasonably assess the outcome of” a pivotal 340B lawsuit now before the U.S. Supreme Court on whether 340B providers have the right to sue it and eight other drug manufacturers for alleged overcharges “or its potential impact on the company.”
BMS likewise said is unable to assess the outcome or potential impact of a second lawsuit now before a California State Superior Court charging it and other drug manufacturers of price fixing.