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Reviewing the 340B Program Landscape: July 2022

The 340B Program faces ongoing challenges and opportunities as the year progresses. Read on for a recap of headlines that have emerged affecting the program.
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The 340B Drug Pricing Program (340B Program) continues to face challenges and opportunities as we head into the summer months. Stay up to date with the headlines that have emerged affecting the program.

Federal Fiscal Year 2023 Drug Reimbursement Cuts Reversed

CMS plans to reimburse drugs and biologicals purchased through the 340B Program at a reimbursement rate of average sales price (ASP) plus 6%. Since 2018, these drugs have been reimbursed at ASP minus 22.5%. This is a big win for hospital covered entities that participate as a disproportionate share hospital (DSH), rural referral center, non-rural sole community hospital, and free-standing cancer hospital. This decision by CMS is following a recent U.S Supreme Court decision in American Hospital Association v. Becerra.

AHA v. Becerra

On June 15, 2022, in AHA v. Becerra, the U.S. Supreme Court found the payment reduction of 28.5% that the U.S. Department of Health & Human Services (HHS) applied to drugs purchased through the 340B Program and paid under the Medicare Outpatient Prospective Payment System (OPPS) to be unlawful. The Supreme Court sent the case back to the lower court to determine how to proceed. This ruling applies to 2018 and 2019 payment reductions. This ruling does not result in an immediate resolution of how the reimbursement will be redistributed because the cuts were implemented through budget neutrality.

The ruling is based on the Social Security Act, which would allow HHS to adjust payment rates under OPPS but would require that HHS conduct a survey of hospital drug costs before it can make these types of reductions. HHS did conduct surveys of 340B drug costs in 2020 to maintain cuts in 2021 and 2022. The ruling could apply to cuts made in 2020 but not 2021 or 2022. No decision has been made for 2020.

As hospitals wait for a resolution, they should consider the following action steps:

  • Continue to apply modifier TB to status indicator G and modifier JG to status indicator K drugs paid under Medicare OPPS until CMS provides future instructions
  • Assess reimbursement reduction for 2018-2020 for potential reimbursement impact
  • Exclude reimbursement estimates from future budget forecasts until HHS has communicated how reimbursement will be distributed
  • Continue to advocate for the 340B Program by participating in advocacy programs and contacting members of Congress

Manufacturer Challenges

There are currently 18 manufacturers that are restricting or denying 340B Program savings for contract pharmacy arrangements. There are multiple cases being heard in the U.S. Court of Appeals for the Federal Circuit. Covered entities eagerly wait for the decision in these cases as well as the potential for new 340B Program regulation.

Omnibus Spending Bill Includes 340B DSH Protection

President Biden signed the 2022 Consolidated Appropriations Act into law earlier this year. In addition to funding the federal government for the remainder of fiscal year 2022, the act will protect some hospitals from losing 340B Program eligibility due to COVID-19. This includes hospitals that already lost eligibility during the pandemic by reporting a DSH percentage lower than what is required to participate in the 340B Program.

The provisions will protect:

  • DSHs
  • Freestanding children’s and cancer hospitals (PED & CAN)
  • Rural referral centers (RRC)  
  • Sole community hospitals (SCH)

For hospitals that have not lost eligibility but will upon filing a new Medicare cost report, the protection will begin the date the cost report is filed. Retroactive relief will not be provided for hospitals that previously lost eligibility. Relief was effective as of March 15, 2022. In addition, the hospital is required to have participated in the 340B Program prior to the start of COVID-19 (recognized as January 31, 2020).

Attestation must be provided to HHS regarding how COVID-19 impacted the hospital’s ability to meet the DSH requirements.

  • If your hospital already lost eligibility, you must submit an attestation within 30 days of the law’s date of enactment (March 11).
  • If your hospital will lose eligibility upon filing a new Medicare cost report, an attestation must be submitted within 30 days of filing the new report with an insufficient DSH adjustment percentage.
  • This form will be used to complete the attestation.

If you believe your hospital may be eligible for this exception and have not yet been contacted by the Health Resources and Services Administration, contact the 340B Prime Vendor Program at 1.888.340.2787 (Monday through Friday, 9 a.m. to 6 p.m. Eastern time) or Requests will be evaluated on a case-by-case basis.

This protection is expected to end on calendar year December 31, 2022 based on the regulation, but continue to wait on guidance to see if this protection will be extended based on Medicare Cost Reporting filing dates.

340B ESP™ Panel Discussion

On May 18, the news outlet 340B Report hosted a panel with 340B ESP founder Aaron Vandervelde. 340B ESP’s business model as a software vendor is to assist manufacturers with proactively reviewing duplicate discounts. In this Q&A style panel, Vandervelde responded to a question asking whether there are other manufacturers considering using 340B ESP at this time. His response confirmed that more pharmaceutical companies are considering contracting with 340B ESP to implement some form of 340B Program price restrictions.

Eighteen drug manufacturers have imposed restrictions on covered entities, 12 of which we know are working with 340B ESP to require covered entities to upload contract pharmacy claims to the platform.

Opioid Funding

On May 19, the Biden Administration announced up to $1.5 billion in funds for the State Opioid Response (SOR) program. In addition to providing full-spectrum treatment for overdoses, the grant aims to help states and territories develop Naloxone distribution plans. Overdose deaths reached an all-time high during the COVID-19 pandemic. In 2021, the Office of Inspector General (OIG) found that less than 16% of Medicare patients with an opioid use disorder received treatment. Also included in the funding are provisions for supporting stimulant misuse.

Public Health Emergency Extension

On April 12, 2022, Secretary of HHS Xavier Becerra extended the Public Health Emergency (PHE) through mid-October of this year. In the early stages of the PHE, healthcare witnessed numerous federal regulatory flexibilities. This means that the savings recognized by the regulatory flexibilities may continue to pose benefits to revenue. Covered entities should consider how to make future-oriented decisions between now and October. The 340B Program-related implications include telehealth, provider-based department definition and new site addition flexibilities, and DSH percentage flexibilities. These are expected to remain throughout the PHE.

340B ADR Process Update Delayed

On March 16, 2021, an Indiana District Court granted Ely Lilly efforts to block the implementation of the Administrative Dispute Resolution (ADR) process, which is a requirement of the 340B Program statute that allows HHS to implement a binding process for resolving certain types of 340B-centric disputes. This decision was granted on the grounds that there was not enough of a period for comment.

At present, covered entities do not have the authority to sue 340B manufacturers. The ADR final rule was intended to bring claims of overcharges, duplicate discounts, or diversion between covered entities and manufacturers to a knowledgeable panel to resolve.

As your organization tracks the news, we urge covered entities to also track financial impacts, such as the increase in pharmacy costs of goods over the past two years. Looking back on the recent movement in the 340B Program space, we have yet to see concrete answers from the most pressing of 340B news: manufacturer restrictions.

The professionals at FORVIS can assist in untangling the impact on your organization from the efforts from manufacturers, third-party entities, and HHS. Reach out to a professional or submit the Contact Us form below.

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