Avalere Consultant Outlines Problems with 340B Program in Drug Benefit News Interview

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For the April 4 issue of Atlantic Information Services’s Drug Benefit News, an Avalere consultant explained why PBMs and commercial payers are indirectly losing money on the 340B Drug Pricing Program, even though drug companies are the primary stakeholders.

A new report from a coalition of stakeholders suggests that a considerable portion of hospitals enrolled in the 340B Drug Pricing Program provides a negligible amount of free or reduced-price care to indigent, uninsured patients. This study, conducted by Avalere Health LLC and partly funded by PBMs, adds to the growing body of analysis questioning whether hospitals that qualify for special drug pricing under the federal program are actually using the savings for their intended purpose. While pharmaceutical manufacturers are the primary stakeholders on the drug side of the program, experts contend that PBMs and commercial payers are indirectly losing out as well. For the April 4 issue of Atlantic Information Services’s Drug Benefit News, DBN interviewed an Avalere consultant who explained these indirect losses.

The 340B Drug Pricing Program, established in 1992, allows qualifying nonprofit entities to purchase covered outpatient drugs at deeply discounted rates. The program is administered by the Department of Health and Human Services’s Health Resources and Services Administration (HRSA), which indicated that it intends to issue a proposed regulation by June to clarify certain program elements, such as its patient definition and contract pharmacy arrangements. Congress’s original intent was that covered entities use the savings from 340B-purchased drugs to “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Manufacturers must offer the discounts in order to get their drugs covered by Medicaid.

While PBMs negotiate rebates with manufacturers for preferred placement on plan sponsors’ formularies, there’s the potential for 340B covered entities to “ignore” patients’ insurance coverage, Amanda Bartelme, a director in Avalere’s reimbursement and product commercialization group, told DBN. “Theoretically, the potential for the covered entity to make a margin on the drug can drive behaviors versus relying on the payer’s formulary,” she suggests. “So it undermines the PBMs’ ability to be effective in those places because hypothetically a covered entity could be getting a nonpreferred drug for such a deep discount that it could dispense [the drug] to a patient and charge the same copay that it would have for the preferred product or waive the copay and still be made whole or make a profit off the insurer’s payment alone.”

“The onus is on the covered entity to contract with the external pharmacy and to put all of the program integrity pieces in place to make sure that…they’re not dispensing 340B covered drugs to Medicaid beneficiaries and then the state’s also collecting the rebate on it,” Bartelme, who did not contribute to the report, continues. At the same time, covered entities are responsible for ensuring that their pharmacies are dispensing only to patients who meet all applicable components of HRSA’s patient definition.

There’s no such thing as a “340B-eligible patient,” Bartelme explains, only a 340B covered entity. “There’s never been a prohibition against dispensing drugs purchased at the 340B price to someone with commercial insurance and receiving the full payment from the commercial insurance for that drug,” she explains. “That’s the underpinning of how the system works. But I think manufacturers and commercial insurers are realizing more and more that the funding of this entire program is on their backs, for the most part. So I think that’s where the concern is growing, particularly on the manufacturer side, as more and more of their products are exposed to these discounts.”

Visit http://aishealth.com/archive/ndbn040414-02 to read the article in its entirety, which also speculates that HRSA’s forthcoming “mega-reg” and other proposed rules may not solve all of the 340B program’s issues.

About Drug Benefit News
Published biweekly, Drug Benefit News delivers timely news and proven cost management strategies for health plans, PBMs, pharmaceutical companies and employers. Coverage includes up-to-the minute news of industry consolidation, strategies for participation in exchanges, generic promotion tactics, formulary decisions, innovative benefit designs, drug pricing methodologies, PBM contracting, changes in Part D and other federal initiatives, and much more. Visit http://aishealth.com/marketplace/drug-benefit-news for more information.

About Atlantic Information Services
Atlantic Information Services, Inc. (AIS) is a publishing and information company that has been serving the health care industry for more than 25 years. It develops highly targeted news, data and strategic information for managers in hospitals, health plans, medical group practices, pharmaceutical companies and other health care organizations. AIS products include print and electronic newsletters, websites, looseleafs, books, strategic reports, databases, webinars and conferences. Learn more at http://AISHealth.com.

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