March 19, 2012—Critical access hospitals (CAHs) are spending significantly more on orphan drugs than they otherwise would if they could buy the medicines at 340B discounted prices, a new study suggests.
The research, published in the University of Minnesota College of Pharmacy’s Innovations in Pharmacy quarterly, found that a group of 18 CAHs in Minnesota and Wisconsin spent a combined $9.9 million on 111 drugs with orphan designations in 2010, paying wholesale acquisition cost (WAC) or prices negotiated by their group purchasing organization.[ms-protect-content id=”2799″]
If the CAHs had been able to buy the same drugs at 340B discounted prices, they would have spent only $6.8 million, or $3.1 million less, the study concluded. Those savings likely would have had bolstered the hospitals’ ability to increase uninsured and under-insured patients’ access to pharmacy services, the authors said, considering that drugs with orphan designations make up just 5 percent of their drug stocks yet represent 44 percent of their drug spending.
The prohibition on 340B pricing for orphan drugs “has a significant negative financial impact on these hospitals,” the study said. “Expenditures on prescription drugs are a key concern across the entire health care system, particularly in light of rising pharmaceutical costs, the general state of the economy, the increasing age of the population, and the growing use of costly specialty and infusion drugs, which are more likely to have orphan indications. As such, it is important to capitalize on the savings available at the 340B price for these drugs.”
The federal Affordable Care Act (ACA) extended 340B eligibility to CAHs, sole community hospitals, rural referral centers and free-standing cancer centers but forbade them from buying orphan drugs at 340B discounted prices. Last year, the Health Resources and Services Administration (HRSA) published a proposed regulation that would let these hospitals buy orphan-designated drugs at 340B-discounted prices when they use the medicines to treat diseases or conditions other than the ones for which the drugs received their orphan designations. HRSA has set May as its target for issuing the final rule.
Drug manufacturers argue that the exclusion should apply to all 2,571 pharmaceuticals with an orphan designation without regard to how they are used. Only 398 drugs have been granted approvals for orphan indications. HRSA’s proposed rule, some manufacturers say, would gut the exclusion, which was added without debate to a budget bill passed in tandem with the reform law during the last step before ACA’s final passage.
Bipartisan legislation in the U.S. House would repeal the exclusion on 340B orphan drug pricing.
The new study was conducted by Madeline Carpinelli Wallack and Todd Sorensen, both of the University of Minnesota (UM). Wallack is a research fellow at the UM College of Pharmacy’s PRIME Institute and Sorensen is associate head of the college’s Department of Pharmaceutical Care and Health Systems.
The study examined drug purchase invoices for 2010 from 18 CAHs that participate in the Fairview Purchasing Network, a group purchasing cooperative run by Fairview Health Systems in Minnesota. Wallack and Sorensen said they focused on CAHs because they represent the vast majority—77 percent—of hospitals that have enrolled in 340B by means of the program’s expansion under health care reform.
The researchers also explained that they studied the effect of a full exclusion of all drugs with orphan designations regardless of their use to illustrate how the most conservative interpretation of the policy affects CAHs.
The study found that the bulk of the hospitals’ projected 340B savings—$2.5 million out of $3.1 million—would have come from just 10 of the 111 orphan products they purchased, led by Rituxan, Remicade, and Herceptin.
For example, the hospitals spent a combined $1.6 million on Rituxan (NCD 50242005306) at either WAC or their GPO price. The combined 340B price would have been $920,535. Similarly, they spent $2.1 million on Remicade (NDC 57894003001) that would have cost $1.5 million at the 340B price and $1.0 million on Herceptin (NDC 50242005121) that would have cost $698,494.
The benefits of 340B pricing on the drugs would not be limited to the CAHs, the study noted. Because the hospitals’ claims for Medicare are reimbursed on a cost-basis, the orphan drug exclusion also creates “a missed savings opportunity” for the federal government by preventing a decrease in the hospitals’ drug expenditures, it said.
“Given the financial impact demonstrated by this research and the current economic state, it is reasonable to conclude that the policy of excluding high-cost, commonly used drugs from the 340B program should be reconsidered,” the authors wrote.[/ms-protect-content]