Several drug manufacturers recently announced new 340B contract pharmacy policies limiting covered entities from accessing 340B pricing for drugs dispensed through contract pharmacies. These policies threaten an established and relied-upon source of funding for many health systems as they deliver essential services to their communities.
On September 22, Trellis Rx hosted an educational panel discussion focused on this rapidly evolving topic. Ted Slafsky, Publisher and CEO of 340B Report, provided an update on the latest policy developments and discussed what might happen next. Trellis Rx CEO Andy Maurer and Chief Pharmacy Officer Jerry Buller explained the potential impact on patients and providers and outlined how health systems might respond to these challenges.
If you missed the event, you can watch the on-demand version of the educational panel discussion on our website. Looking for more information? Download Trellis Rx’s new resource that summarizes recent events and recommends actions for health systems.
Drug Manufacturers’ 340B Contract Pharmacy Policies Pose Challenges for Providers and Patients – Covered Entities Looking to Mitigate Impact & Risk
(Quotes have been edited for clarity. Information is not intended to be taken as legal advice.)
Key Take-Away 1
Drug manufacturers’ policies appear to be aimed at curtailing the expansion of the 340B contract pharmacy program, which they believe has grown beyond its intended scope. While advocacy efforts are ongoing and lawsuits are pending, it remains unclear when or even if these policies will be reversed.
“I expect there to be lawsuits that will be filed in the federal court system to try to force HHS to enforce the rules. We’ll see – that takes time. Even if there’s an effort to get an immediate injunction…as you all know from the Medicare Part B reduction debate that’s going on right now, that takes time and sometimes things don’t move as quickly as all of us would hope.”
– Ted Slafsky
“It’s unclear if there’s going to be a way to curtail these changes…and obviously if there isn’t some sort of regulatory remedy or legal remedy, there’s really no likelihood that the drug companies will back off of this – there’s no reason for them to. This is a major turning point for the program overall.”
– Andy Maurer
Key Take-Away 2
340B contract pharmacy restrictions are already having and will continue to have a detrimental impact on covered entities and the communities and patients they serve.
“We think that some entities could see a third of their contract pharmacy revenue disappear pretty quickly…every health system is going to be impacted differently, but we should expect that they are going to have to make hard decisions around their budgets…as a result of this financial hole that they’ve been put in. I think that’s going to directly impact patients as those decisions get made.”
– Andy Maurer
Key Take-Away 3
Health systems are evaluating how to expand in-house pharmacy capabilities, including specialty pharmacy services, to mitigate the impact of current and future 340B contract pharmacy policies. Leaders believe this can drive significant clinical, operational, and financial benefits for their organizations.
“If you’re thinking about a different strategy, a retail or specialty strategy, first of all do a thorough opportunity assessment. Complete a financial model, but also understand your clinic and provider needs. We talked about gaps that may exist with your current contract pharmacy set-up – what gaps can a comprehensive in-house program fill, and what are the potential clinical and operational impacts?…It has to be a comprehensive approach that is patient-focused.”
– Jerry Buller
If you missed the event, you can watch the on-demand version of the educational panel discussion on our website. For more information on this topic, how to navigate this issue, or on building or growing an in-house specialty pharmacy service within your health system, contact Trellis Rx.
Answers to Attendee Questions about Drug Manufacturers’ 340B Contract Pharmacy Policies
(Responses have been edited for clarity. Information is not intended to be taken as legal advice.)
Since Ted, Andy, and Jerry were unable to answer all questions submitted by attendees during the event, they have responded to each question below. You are welcome to submit additional questions.
- What would you recommend to a covered entity that is looking to register specialty pharmacy contract pharmacies this quarter? Before proceeding with expanding your contract pharmacy network, we recommend completing an in-depth evaluation of your health system’s prescribing volume and distribution. This analysis will provide information about the impact of the current and potential drug manufacturer 340B contract pharmacy restrictions. We also recommend completing an in-depth analysis to evaluate the potential clinical, financial, and operational benefits of developing or expanding your health system’s in-house pharmacy capabilities, including specialty pharmacy services. (Jerry Buller)
- How are you seeing these changes specifically effect Part B drugs? Part B drugs billed under the pharmacy benefit and processed through a PBM via a contract pharmacy are affected in the same way as part D drugs. (Jerry Buller)
- Why is this happening now? Have 340B entities done anything to spark this move by drug companies? We have heard clearly from manufacturers that they believe the contract pharmacy program has grown beyond its original intent and want collaborative measures to be taken to curb what they see as the excesses of the 340B program. In the absence of such collaborative measures, drug manufacturers have now moved to find another, more direct way to address this perceived problem. The timing could be down to many factors, but the current legislative climate and the focus on drug pricing likely have sparked these sudden, and many would say, aggressive moves. (Andy Maurer)
- Are you aware of any manufacturer joining the 340B Pay program offered by Kalderos? We are not aware of any specific manufacturers joining to date. (Andy Maurer)
- Doesn’t it just make sense to have more than one pharmacy as not all pharmacies have all commercial health plans to be able to assist the covered entity? Manufacturers need to realize this. It appears that manufacturers have not factored considerations such as health plan network restrictions into their policies. That said, this would be one of the stronger arguments for a relaxation of these policies and for a much more collaborative dialogue between all stakeholders to ensure better, more affordable medication access for patients. (Jerry Buller)
- What resources are available for small clinics to try to analyze what the impact to their 340B programs will be due to Eli Lilly & AstraZeneca’s contract pharmacy policies? We recommend leveraging your health system’s 340B program management technology to analyze where contract pharmacy prescriptions are currently being filled. With this data, you can identify which prescriptions are affected and quantify the impact of current and potential policies. (Jerry Buller)
- Do you know what Lilly or AstraZeneca’s endgame is? What do they expect to see happen by pulling out of the program? We can only speculate, but clearly drug manufacturers have been vocal in their opposition to what they see as the expansion of the contract pharmacy program beyond its intended scope. None of the manufacturers have publicly expressed opposition to the 340B program in general, so it would appear their target is to force the curbing or the contraction of the contract pharmacy model. (Andy Maurer)
- Curious if health systems are also seeing this an “opportunity” for the organization to expand services to provide medications and coordinated ambulatory and specialty care services to patients? As opposed to seeing this a detriment, how can we look at looking at this as an opportunity? Though drug manufacturers’ policies threaten vital 340B savings and pose significant challenges to the provider community, we agree health systems can approach the current situation as an opportunity to reevaluate their ambulatory and specialty strategy to mitigate the impact of current and future changes to contract pharmacy policies.
Many health systems we have spoken with are exploring how to use 340B savings to offer embedded, high touch pharmacy services to their patients. These health systems see expanding in-house pharmacy capabilities and services as a way to address common gaps that exist in the contract pharmacy model, which create challenges for their patients and providers. (Jerry Buller)
- Is there any indication that drug manufacturers will open up LDDs to in-house specialty pharmacies if they can no longer use contract pharmacies for medications they cannot access? We have not specifically seen manufacturers speak to this yet; however, we feel it is an approach that may provide health systems leverage when seeking to access to LDDs. If drug manufacturers’ contract pharmacy policies impact patient access and adherence – or add further challenges and hassles to the patient and provider experience – we hope drug manufacturers will be motivated to adjust their distribution strategies. (Jerry Buller)
- I understand the need to assist patients; however, the 340B program was created to help covered entities. It was never meant to be a drug-assistance program. HRSA desires covered entities to assist patients, and our hospital does. This is impacting covered entities – not just patients. We are a critical access hospital with 18 beds. We depend heavily on 340B and only have a small contract pharmacy network (four total). Last year at the 340B Conference, it was stated if anything happened to 340B, a lot of rural hospitals would have to close. Is anyone speaking up for covered entities? There are many voices advocating for covered entities, especially organizations like your hospital that depend so heavily on the 340B savings, as well as the patients they serve. Organizations like America’s Essential Hospitals and 340B Health and individuals like Ted Slafsky are actively advocating drug manufacturers, government representatives, and HRSA, on behalf of covered entities. Many members of Congress are speaking up for covered entities too. We expect these voices to remain loud and sustained until a collaborative and positive resolution for covered entities can be found. As Ted mentioned during our panel discussion, legal action on behalf of covered entities is also anticipated in the near future. (Jerry Buller)
- Have you heard anything from the wholesalers? How will this effect wholesale agreements with systems that have a large volume of 340B purchases? While we haven’t spoken with any wholesalers directly, 340B sales to participating entities and their contract pharmacies is an important part of their business. The shift in sales from 340B to other price points that is expected to result from drug manufacturers’ actions will likely have a negative impact on the economics of drug distribution. (Andy Maurer)
- If your organization uses a ship-to arrangement for a pharmacy in another town but the same system for prescriptions written in their system, would this really help? Because would those patients’ providers not make the prescriptions ineligible due to location? In many cases, a 340B participating entity may have multiple eligible locations and may own and operate a ship-to outpatient pharmacy at a different address (or even a different city) than the clinic location where the patient was treated and the medication was prescribed. If both the patient’s care location and the ship-to pharmacy are part of the same 340B entity, the fact that the two are at different physical locations should not impact 340B eligibility. If, on the other hand, there are multiple distinct 340B entities that are part of a health system and the clinical services provided to the patient are provided at a location of entity A, while the ship-to pharmacy is part of entity B, then it is likely that the pharmacy would also need to be made a contract pharmacy of entity A and would potentially be exposed to the impact of the recent drug manufacturer actions. (Andy Maurer)
- For covered entities that rely only on contract pharmacies, would you recommend moving into in-house pharmacy model? We believe there to be enough uncertainty with contract pharmacies for health systems to seriously consider expanding their in-house pharmacy capabilities and services. Ultimately, a comprehensive in-house pharmacy that includes clinically-integrated ambulatory and specialty services can drive clinical, financial, and operational benefits for health systems, especially for those in risk-based agreements. (Jerry Buller)
- Some health systems with in-house specialty pharmacies still use contract pharmacies to gain commercial payor network access to medications. What do you suggest to overcome the payor barrier? A number of health systems have had success contracting with commercial payors to secure preferred specialty pharmacy contracts. However, gaining access requires a deliberate, strategic approach – as well as time. Key success factors include investing in the capabilities and infrastructure required to deliver differentiated value to commercial payors (e.g. clinically-integrated care model, integrated specialty pharmacy technology, etc.) while collaborating with key internal stakeholders to develop and execute a plan focused on gaining access. (Jerry Buller)
- Have PBM-owned pharmacies taken a stance on this formally? If they lose this revenue, what are the downstream effects to pharmacies? We have not seen a formal position or statement from any of the PBM-owned specialty pharmacies yet. It is hard to determine the downstream impact, but we would expect any contraction in their revenues and margin will ultimately have to be made up elsewhere. In the worst case, this may precipitate further tightening of their networks (to the detriment of patient experience) to protect their interests. (Jerry Buller)
- Could this be spread to the other 340B programs such as clinics, ER, etc.? Yes. For example, there is no indication that drug manufacturers have created any exemptions for Ryan White Clinics. We certainly believe those organizations and other covered entities that leverage contract pharmacies will be impacted. (Andy Maurer)
- Have you heard if additional drug manufacturers will join Lilly and AstraZeneca? We have not heard definitively if other drug manufacturers have plans to enact similar policies, but pending HRSA or legal action, we would expect others to follow suit. (Jerry Buller)
- How can health systems with owned contract pharmacies respond to this? We recommend continuing to petition manufacturers. You should focus on showing how these “contract pharmacies” are functioning as in-house pharmacies and as an extension of the clinics themselves. These “contract pharmacies” still own the patient relationship and are responsible for the continuum of care. This is very different from other contract pharmacies where a free-standing retail or specialty chain is simply dispensing a prescription and collecting a fee. (Andy Maurer)
- With only a few manufacturers currently changing their policies, do you anticipate switching to manufacturer products that are fully participating in 340B? That will obviously depend on the institution. Health systems have a good bit of experience creating and managing formularies using pharmacoeconomic criteria. If products are considered to be therapeutically equivalent, then it comes to down to economics. We could see these discussions happening at multiple sites; however, PBM formularies may influence implementing. (Jerry Buller)
- Do you feel pharmacies should get involved with Social Determinants of Health to enhance patient impact? Yes, we believe pharmacies can play a role in addressing Social Determinants of Health (SDOH). For example, Trellis Rx’s embedded specialty pharmacy team members frequently connect patients to social services to address SDOH including food insecurity and housing insecurity. In short, any strong population health program should include an embedded pharmacy component to supports patients’ overall care plans. (Jerry Buller)
- Do you think the change in Supreme Court members will affect this, both in terms of being a distraction for Congress representatives supporting of 340B and having potential to impact rulings of 340B lawsuits in the future? I think the biggest threat will be additional Justices that are not supportive of the Affordable Care Act. The loss of Justice Ginsberg means one less vote to preserve the ACA which includes important 340B provisions. The 2011 Supreme Court case, which put the onus on HRSA to enforce drug manufacturer compliance, remains intact. It was a 9-0 decision authored by Ginsburg. (Ted Slafsky)
- I know this is about manufacturer actions, but can you also address Pres. Trump’s executive order re: insulin and the impact on community health centers? Community health centers are very upset about the executive order. They believe it is unnecessary and could actually result in health centers having to charge higher prices to low income patients. If they have to charge the 340B price, that could be higher than the price offered under a sliding fee scale. (Ted Slafsky)