January 19, 2010 – Democrats are working night and day to complete health care reform legislation. And with the lobbying frenzy in Washington reaching crescendo, a previously little-known federal program, 340B, suddenly appears to be on everybody’s radar screen.
Language that would extend the 340B drug discount program to also cover hospital inpatient medications was included in the Senate version of the health reform bill passed last month, pleasing safety-net providers that had fought years to gain the benefits of additional savings. But the powerful pharmaceutical and biotech industry, which must provide the steep discounts when participating in the program, quickly fired back.
Salvos against 340B program mount
In the past week, the Biotechnology and Industry Organization (BIO), a trade group representing more than 1,200 of the world’s leading drug research and development companies, has suggested that not only should the inpatient language be scrapped – but the whole program be scaled back.
James Greenwood, BIO’s president was quoted by Reuters as saying that his lobbyists will be pressing lawmakers to “fine-tune” the health care reform bill to limit the 340B drug discount to uninsured patients.
Today, anybody who’s a patient at a 340B hospital can access discounted drugs. This is because the statute as written sought to stretch resources for health care providers that serve large indigent populations, rather than targeting specific patients.
A few days later, after news broke that Democrats were seeking an additional $10 billion in concessions from drug makers to help patch the Medicare Part D coverage gap, analysts speculated that this could bolster the industry’s ammunition. Industry could offer up the extra money, they said, under condition that lawmakers drop the 340B inpatient measure.
The National Community Pharmacists Association (NCPA), representing 22,000-plus independent pharmacies nationwide, also chimed in. The group wrote a letter to congressional leaders last week, raising concerns about the proposed expansion of the 340B program.
The group complained that the Health Resources and Services Administration is operating the 340B program “without any specific rules as to patients that qualify for these discounted drugs.” As a result, NCPA alleged, the discounted drugs are often going to ineligible patients, such as hospital employees or patients with private insurance.
Friends of 340B fight back, set record straight
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Manufacturers Brace and Plan
For 340B Program Growth If passed, health care reform would impose change on many players in the nation’s health care system, not the least the pharmaceutical industry. While the drug lobby is fighting hard to soothe the impact of reform and to help drug makers draw whatever benefits they can from the change, manufacturers are now scrambling to try to prepare for what could soon be a very different world. The federal 340B program, at $5 billion annually still a drop in the bucket for the nation’s $300-billion prescription drug market, is a case in point. The Senate bill would open up the door to hundreds of new entrants – rural hospitals and free-standing cancer hospitals – and also extend the 340B drug discount to the hospital inpatient setting. That will require a new mindset by manufacturers participating in the program, said Alice Valder Curran, a partner in Hogan & Hartson’s health law practice in Washington, D.C. “In my experience, manufacturers do manage the Public Health Service program, but it’s often a backwater of sorts – not in terms of compliance, but it’s just not a program that some manufacturers need to spend a lot of time on today particularly if they don’t have a lot of sales into the PHS market,” she said. “If this program grows the way it’s likely to grow, they’ll have to spend a lot more resources on it.” Curran has urged manufacturers to immediately start to calculate how a broader 340B program would affect their bottom-line as well as to consider the likely expansion in supportive administrative and systems resources that likely also will be needed. “You really need to look at those new entities that would qualify under the expansion and know what this will do in terms of what would clearly be a decrease in revenue on those sales – if you’re selling at higher than the ceiling price to them now,” she told industry representatives at a recent conference. New Business for Drug Makers A 2008 study by the University of Minnesota’s PRIME Institute estimated that manufacturers would lose at least $1 billion in annual revenue if the 340B discount was extended to the inpatient side. While this would be a very modest decline in terms of overall industry sales, any drop in revenue is a red flag for business. But the reforms would also open up a bigger and still-profitable market for drug makers as more than 30 million Americans get health insurance. That should off-set losses from legislative changes, including an expansion of the 340B program, said Ramsey Baghdadi of Prevision Policy, a health policy research company. “I think the new business, combined with the follow-on biologics provisions (for generics) are very advantageous to the industry over the long-run,” he said. “That’s why they came to the table early.” If the 340B legislation goes into effect there could be an influx of especially smaller hospitals with limited outpatient pharmacy operations that can now use the discount on the inpatient side, said Chris Hatwig, vice president of the 340B Prime Vendor Program. “If the 340B program expands, we can also expect more manufacturers to pay closer attention to their 340B contracting strategy and pricing,” he said, adding, “and this is where the Prime Vendor Program plays a key role.” |
Safety Net Hospitals for Pharmaceutical Access, the organization representing 340B-covered hospitals, immediately contacted members of Congress and NCPA to point out that the 340B law that went into effect in 1992 doesn’t discriminate against patients as long they’re patients of the covered hospital system.
Other defenders of the proposal to strengthen and expand the 340B program have also come forward to try to sway any lawmakers who, at the 11th hour of health reform negotiations, may be wavering in their support of the prescription drug discount program.
“With the high annual cost growth in pharmaceutical prices and the critical role of pharmaceuticals in inpatient care, expanding 340B to cover inpatient drugs is a strong tool in helping hospitals manage costs for their patients,” the 5,000-member American Hospital Association wrote in a Jan. 7 letter to House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.).
The Service Employees International Union, one of the nation’s largest labor groups with more than 2.2 million members, also sent a letter to Pelosi and Reid, urging them to “strengthen the safety net…and adopt the Senate expansion of the 340B program to increase the availability of affordable prescription drugs.”
Many members of Congress agree. Forty-two House members sent their own letter to Pelosi this month, noting that the inpatient provision would save the federal government an estimated $1.7 billion over the next decade, and safety-net hospitals millions.
Pharma’s estimated gain: $115 billion in new business
But the pharmaceutical lobby is strong, and has made its agenda heard on Capitol Hill. That has safety-net providers worried that the proposed 340B expansion may fall victim to the industry’s aggressive efforts to convince lawmakers that they can’t afford more discounts to 340B providers.
Such concerns notwithstanding, many industry analysts believe that pharmaceutical companies will come out ahead after health reform. In fact, Prevision Policy, a healthy policy analysis and forecasting company, estimates that drug manufacturers stand to gain about $115 billion in new business over 10 years when an additional 30 million-plus Americans get insurance.
That should exceed whatever losses they’ll incur when rebates and costs for 340B and other programs go up, said Ramsey Baghdadi, a Prevision founder.