January 7, 2010 – Across the nation this cold January, hospitals and other health care providers in the federal 340B program are holding their breath. Not since the 340B law went into effect nearly 18 years ago has Congress been so close to extending the program to hundreds of new providers, and to expanding its use for those who already participate.
On December 24, on the eve of Congress’ annual holiday break, the Senate passed a bill with language that allows drugs dispensed to hospital inpatients to also qualify for the 340B discount. It’s a change that a coalition of organizations representing safety-net providers have fought years for. The original 1992 law that first created the 340B program allowed the drug discount only in the outpatient setting.
Whether the Senate language will prevail is now the big question; the health care reform bill the House passed in November did not include the inpatient language.
It’s becoming increasingly clear that Democrats will try to push through national health reform in the next few weeks without the support from Republicans. By avoiding traditional conference committee deliberations, whose aim is to reconcile the House and Senate version of the legislation, Democrats would avoid Republican hurdles that could delay or hinder passage of a final bill.
By hammering out the last details of health care reform behind closed doors, and with Democrats in tight control, Senate and House leaders hope to have legislation ready for President Barack Obama to sign in early February.
Among the more contentious differences the two chambers must reconcile is whether to require manufacturers to provide rebates on drugs for patients eligible for both Medicaid and Medicare, so called “dual eligibles.” Another hurdle to overcome is whether or not to tax high-cost “cadillac” health plans.
In other ways, the House and Senate bills follow each other closely, for example when it comes to increasing the Medicaid rebate percentage for brand-name drugs from 15.1 percent to 23.1 percent of average manufacturer price. Both bills also extend the Medicaid rebate program to drugs dispensed under Medicaid managed care.
340B Expansion Concerns Industry
The Pharmaceutical Research and Manufacturers of America, representing the country’s leading drug research and biotechnology companies, praised the Senate bill. “We applaud the Senate for taking an important and historic step toward expanding high-quality, affordable health coverage and services to tens of millions of Americans, many of whom are struggling today financially,” the group said in astatement.
As expected, however, the Senate’s inpatient language has not been popular with drug makers, which could stand to lose at least $1 billion in annual revenue as a result, according to a 2008 study by the University of Minnesota’s PRIME Institute.
Industry sought, among other things, to reduce the number of hospitals that would be covered under the inpatient provision by stipulating a higher indigent patient threshold for the inpatient setting than what’s required on the outpatient side. The Senate, however, did not impose a higher threshold for the inpatient setting in the bill it passed last month.
The 340B market, which today includes nearly all major manufacturers and more than 14,000 health care facilities and programs, is already worth more than $5 billion annually. It stands to grow in the years ahead if and when the health care reforms go into effect.
While this will open up new market opportunities for drug makers, some brand-name manufacturers have argued that any revenue drop resulting from cheaper inpatient drugs could hurt them – especially small biotech firms with just one or two drugs in their portfolio.
Safety-Net Hospitals Continue Inpatient Advocacy
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A Side-By-Side Comparison of the House
and Senate Health Reform Bills
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But those on the other side, such as Patricia Cunningham, a senior vice president at St. Barnabas Hospital in the Bronx, N.Y., were delighted to learn that the Senate chose to include all key changes that the 340B hospital community had pushed for.
Cunningham, who oversees the inner-city teaching hospital’s pharmacy and materials management department, estimates that St. Barnabas would save $2 million this year on inpatient drug costs with the 340B discount in place, a saving of nearly 40 percent.
“In an era of reduced hospital reimbursement rates, increased costs associated with state-of-the-art medical care, and an ever-expanding formulary of new drug therapies, 340B savings in drug costs are essential for the survival of many hospitals,” she said. The inpatient extension “would help us continue our mission of serving the poor and underprivileged.”
The Senate bill passed late last month also proposes to expand the 340B discount program to new covered entities: rural hospitals and freestanding children’s and cancer hospitals. And it has new integrity rules for participants and administrators of the 340B program, including a defined dispute resolution process that requires the U.S. Health Resources Services Administration to expeditiously resolve pricing disputes between 340B-covered entities and drug manufacturers.
All these provisions were included in the House health reform bill passed in November.
House Bill Deleted Inpatient Language
While the Senate developments brought some comfort to 340B hospitals, they know that the battle is far from over. That’s why advocacy groups such as Safety Net Hospitals for Pharmaceutical Access, the American Hospital Association, and the National Association of Public Hospitals and Health Systems continue to call on their members to urge lawmakers to support the inpatient expansion. Meanwhile, drug makers are presumably continuing their lobbying efforts against it.
A worrisome cloud in the 340B sky is the fact that House leadership unexpectedly removed the inpatient extension from the health care reform bill it passed in November. Pharmacies are now kept in suspense at a time when many struggle to provide services to growing cadres of uninsured or underinsured patients.
“Our fiscal year is January to January, which means our budgeting cycle begins this month. We had desperately hoped that some resolution to the inpatient allowance for 340B pricing would occur before this month,” said Richard Aldred, senior deputy director of professional and support services at San Joaquin General Hospital in Stockton, Calif. The county-owned hospital and system of clinics provides last-resort care to some 10,000 poor residents annually.”
Pharmaceutical expenses to serve this population are huge and it’s impossible to project appropriate costs without clear direction,” he added. “Like everyone else, we are being forced to make some very difficult decisions about the services we can continue to provide with the limited financial resources available to us.”