340B: Overview of the Program and Legislative Update

1. 340B: Overview of the Program and Legislative Update Lelan Stice, PD, MBA

2. Disclosures • Administrative Director of Jefferson Regional Medical Center, a 340B covered entity. • Owner of Doctor’s Orders Pharmacy, a contract pharmacy in the 340B program.

3. What is the 340B Program • 340B is federally-administered drug pricing program for “covered entities” (CE) • 340B allows for purchase of drugs at or below the “ceiling price” set by regulation • 340B is not a rebate program • 340B is not Taxpayer funded

4. History of 340B –Alphabet Soup • 340B was enacted in 1992 as part of Public Law 102-585, the Veterans Health Care Act (VHCA) • The program is named for Section 340B of the VHCA • 340B is managed by the Office of Pharmacy Affairs (OPA), which is part of the Health Resources and Services Administration (HRSA) • Manufacturers participating in the Medicaid program must also offer 340B pricing – Pharmaceutical Pricing Agreement (PPA)

5. History and A little more SOup • 340B’s original scope was to limit the cost of covered outpatient drugs to certain federal grantees and designees. Indian Health Service, Ryan White Clinics, FQHC’s, PPH,… • Disproportionate share hospitals (DSH) meeting certain criteria were added prior to passing • 2010 ACA added Rural Hospitals, Children’s Hospitals, and Free Standing Cancer Clinics • Today, the majority of 340B purchases are made by DSH hospital entities • 340B limits the cost of covered outpatient drugs sold to 340B covered entities by defining a ‘ceiling price’ for covered drugs (Allows for sub-ceiling price negotiation)

6. And Some more History • HRSA Established Contract Pharmacy (CP) model • Most grantees had little or no pharmacy services • Initially a one to one ratio • Many to one CP model was proposed • Tested under Alternative Methods Demonstration Projects (AMDP) • Most hospitals use this model today

7. Last of the history lesson • Prime Vendor Program (PVP) • Established in the original Act • Original PVP was Amerisource Bergen • 2007 Apexus was formed and awarded PVP • Negotiate Sub-ceiling and WAC pricing • Provide Education and Help Desk • Manage Overpricing by Manufacturers

8. What was 340b intended to do • The purpose of the 340B program is to stretch the power of scarce federal dollars flowing to entities that form a health care ‘safety net’ for some of the most vulnerable patient groups • There is no required use of program savings, but uses can include: • Reduce price of medications for patients (pass-through) • Expand drug formularies • Increase number of indigent patients served • Expand other patient services offered by the entity

9. How to Participate in 340B • Must be Not for Profit • Meet criteria based on your type of Covered Entity • DSH facilities with DSH percentage of 11.75% • CAH • SCH with DSH percent of 8%Contract with Government • Enrollment period every quarter • If approved…access 1st day of the following quarter

10. 340B Discounts • Studies have demonstrated an approximate 20% discount from GPO • 50% discount from AWP • Pricing is not public • Ceiling Price • Brand products must be discounted the greater of 23.1% from AMP or the difference between AMP and Best Price (BP) • Certain branded clotting factors must be discounted the greater of 17.1% from AMP or the difference between AMP and BP • Generic products must be discounted the greater of 13% from AMP or the difference between AMP and BP

11. 340B Discounts • Drugs increasing in price faster that rate of inflation • Additional discount calculation added • Can cause negative calculation • Penny Price • Manufacturers may extend Sub-ceiling pricing or discounts to non-covered patient categories (inpatients)

12. Medicaid • Prohibition against duplicate discounts • If Medicaid seeks a rebate, 340B discounted drugs cannot be used • Medicaid is a growing and complex program • Consult Medicaid for billing and reporting requirements

13. Purchasing Rules • DSH, Children’s Hospitals, and Free Standing Cancer Clinics • GPO exclusion on covered outpatient drugs • WAC • SCH, RRR, CAH • Cherry picking GPO or 340B • Orphan drug exclusion • Manufacturer can extend 340B pricing on Orphan drugs (few do)

14. Contract Pharmacy • Retail Pharmacies generally cannot purchase at 340B prices • No dispensing to non-eligible patients • Avoid Medicaid • Retail Pharmacies must have a contract with 340B CE • Retail Pharmacies must be registered on OPA website • Quarterly registration window

15. Patient Definition • 340B drugs can only be dispensed to those who meet the definition of a patient, under 340B guidelines: • The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual's health care; and • The individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g. referral for consultation) such that responsibility for the care provided remains with the covered entity; and • The individual receives a health care service or range of services from the covered entity which is consistent with the service or range of services for which grant funding or Federally-qualified health center look-alike status has been provided to the entity. Disproportionate share hospitals are exempt from this requirement.

16. Key points for patient eligibility • The definition of a patient does not include payer status or income level • The definition of a patient is critical in determining eligibility for 340B-priced replenishment, especially in a CP setting • The definition of a patient was highly debated in comments on “Mega-Guidance”

17. Managing Contract Pharmacy • Manually can be extremely tedious • Validating Patient Eligibility • Validating Prescriber Relationship • Multiple Inventories • Third Party Software Partners • Requires Administrator at CE • Maintain Prescriber and CE database • Many Companies to choose from

18. Third party Administrator Example Patient Savings Program Benefit • Adjudicate to 3rd Party PBM • Adjudicate to TPA Third PartyClaims • Capture Claims • Confirm Eligibility • Confirm 340B Profit TPA Covered Entity Contract Pharmacy CashClaims

19. Patient fills script at pharmacy TPA When 100% of bottle is dispensedP.O. is generated based on NDC-11 match Contract Pharmacy Eligible Entity P.O. is approved Stock is replenished Wholesaler

20. TPA

21. Congress and 340B • House Energy and Commerce Committee • Multiple hearings on 340B Program • Issued report recommending twelve changes to program • Senate Health, Education, Labor, and Pensions (HELP) Committee • Three hearings on 340B Program • No announcements of intentions to submit any changes…yet

22. House of Representatives Activity • 340B Supportive Bills • HR 6071 • Introduced by Rep. Matsui (D. Cali) • Would codify many aspects of the 340B program as they currently are • Require greater transparency for Manufacturers • Eliminate Orphan Drug Exclusion • Reverse DSH payment cuts for 340B DSH facilities • HR 4392 • Reverses the $1.6 billion DSH payment cuts

23. House Activity • HR 4710 – Would freeze ability to add any hospitals to the program • S 2312 – Would freeze addition of DSH, Children’s, and Free Standing Cancer clinics • Increase the DSH percentage to reduce number of current participants • Discussion on raising DSH percentage by Joe Barton (R. TX) that would raise participation requirements • Would eliminate 51% of current participants

24. Trump Administration • Implemented cuts in reimbursement to DSH for outpatient • 30% reduction • New formula is ASP – 22.5% • Blueprint for Drug Prices • Many references to 340B program reductions • Penalties for Manufacture's Overcharging • HHS delayed implementation again this year

25. Questions