MEMORANDUM. If you have any questions or comments regarding this report, please do not hesitate to contact me.

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1 MEMORANDUM DATE: November 1, 2008 TO: FROM: Honorable John H. Lynch, Governor Honorable Terie Norelli, Speaker of the House Honorable Sylvia B. Larsen, President of the Senate Honorable Karen O. Wadsworth, House Clerk Tammy L. Wright, Senate Clerk Michael York, State Librarian Representative Cindy Rosenwald, Chairman SUBJECT: Final Report on HB 148, Chapter 245:1, Laws of 2007 establishing a commission to study pharmaceutical costs and the 340B Drug Pricing Program. Pursuant to HB 148, Chapter 245:1, Laws of 2007, enclosed please find the Final Report of the commission to study pharmaceutical costs and the 340B Drug Pricing Program. If you have any questions or comments regarding this report, please do not hesitate to contact me. I would like to thank those members of the commission who are instrumental in this study. I would also like to acknowledge all those who have testified before the commission and assisted the commission in our study. Enclosures cc: Members of the Commission

Wright, Senate Clerk Michael York, State Librarian Representative Cindy Rosenwald, Chairman SUBJECT: Final Report on HB 148, Chapter 245:1, Laws of 2007 establishing a commission to study

2 FINAL REPORT Establishing a commission to study pharmaceutical costs and the 340B Drug Pricing Program. HB148, Chapter 245:1, Laws of 2007 November 1, 2008 HB 148 (Chapter 245:1 of 2007), Established a commission to study pharmaceutical costs and the 340B Drug Pricing Program: The creation of the commission was to study obtaining greater efficiencies and cost savings in public pharmaceutical costs through increased participation in the federal 340B Drug Pricing Program with particular emphasis on Medicaid and inmate populations. PURPOSE OF THE STUDY: Specifically, the charge of the commission was to Undertake a study of strategies available to reduce the cost of pharmaceuticals paid for with public funds by expanding participation in the 340B program. Analyze whether county corrections facilities could realize savings through 340B participation. Propose changes to New Hampshire law, as needed, to support the maximization and participation in the 340B program to reduce the cost of pharmaceutical procurement. Review legislative efforts in other states to maximize 340B participation and shall also take advantage of any other analysis by outside organizations or foundations. PROCESS AND PROCEDURES: HISTORY: The following is a review of each meeting. August 30, 2007 The commission met six times, and at the organizational meeting elected Representative Cindy Rosenwald chair. Gail Brown summarized the recent national 340B conference. Issues included: definition of patient, whether providers can be under contract to the 340B entity, expansion of contract pharmacies, drug diversion, double dipping with Medicaid, billing procedures for drugs administered by a physician, and state and local government partnerships. Ms. Brown advised that New Hampshire has 10 Federally Qualified Health Centers (FQHCs) which are 340B - eligible, a number of Title XX family planning programs, a hemophiliac program at Dartmouth Hitchcock Medical Center, and the state is also a grantee for Ryan White AIDS funds. The pharmaceutical industry representatives noted a concern about making sure that 340B supplies

commission was to study obtaining greater efficiencies and cost savings in public pharmaceutical costs through increased participation in the federal 340B Drug Pricing Program with particular

3 are not diverted to ineligible patients. Edward Shanshala noted that entities are able to provide assurance on this point though audit procedures. E-prescribing should also help. September 14, 2007 Dr. Robert MacLeod presented information on pharmaceutical utilization and costs for the Department of Corrections. Two representatives of the University of Massachusetts Medical School presented information on pharmaceutical utilization in the Medicaid program. They cautioned that success depends on relationship-building, and mandates are not necessarily successful. Rep. Rosenwald briefed the commission on the Texas program to cover all state prison inmates through the University of Texas medical clinic system. Finally, Gail Brown briefed the commission on FQHC issues: patient definition, capacity, liability. The facility must maintain a medical record for the patient, providers may be either employees or contractors, and the service needs to be within the facility s scope of practice. Providers are covered by the Federal Tort Claims Act instead of malpractice insurance. There are some limitations on providers and services in this coverage. September 26, 2007 Further discussion was held on the FQHC issues: patient definition, capacity, liability, potential expansion through SCHIP re-authorization. Henry Lipman presented information on hospital disproportional share payments, which is a component of 340B entity qualification. Four hospitals in the state receive these payments. Al Wright presented an overview of health care in the Rockingham County jail, which has the only privatized system and gets good prices on drugs. October 10, 2007 Medco s Curtis Bary introduced Ken Trader from Accredo, a therapy management company. They work on specialty pharmacy. They question whether 340B is really a money saving choice for expensive products like hemophilia medication. Henry Lipman again addressed the issue of disproportional share hospital payments. The 11.75% DSH rate adjustment is correct. Sometimes a jail can be a provider-based department of a hospital. He gave out the hospital agreement form that a hospital would sign to take on 340B patients. He thinks we might have four hospitals that are getting DSH payments: Mary Hitchcock, Frisbee, Elliot, and Southern NH Medical Center. We are waiting for Medicare latest numbers. These hospitals could treat patients as outpatients. It is possible to have virtual inventory so that pharmacy doesn t need two stocks. October 31, 2007 Frank Cassidy reported on his conversation with Maxor, the PBM that has a contract with the Texas prison health system and also consults on a 340B project with the state of Vermont. Any pharmaceutical company that has a Medicaid contract is also eligible for the 340B program. Also, a pharmacy does not need to maintain separate inventories; the inventory can be virtual. Henry Lipman presented information such that the DSH rate adjustment must be 11.75%, which sets the bar higher for our hospitals. Al Wright gave information about drug utilization in the county jails. Psychotropic use varies from 25%-75% of expenditures.

Two representatives of the University of Massachusetts Medical School presented information on pharmaceutical utilization in the Medicaid program.

4 October 20, 2008 The commission met a final time to review activity during the past year and discuss next steps. The commission also reviewed information from other states and reports on 340B expansion in Washington and Colorado provided by the Heinz Foundation. A similar report from this organization on opportunities for 340B expansion in New Hampshire is due later this fall. FINDINGS: Congress has been considering expanding eligibility to more types of hospitals. This could make 16 more hospitals in New Hampshire eligible for the 340B program. Movement is not expected before the end of the current administration. This could have a positive impact on New Hampshire s ability to expand program participation through hospital outpatient clinics. The FQHCs have capacity problems, with many unfilled provider positions. In addition, not all providers can reasonably treat inmates, who are determined to present unique health care treatment needs. It is possible to have inmates be patients of a 340B entity for certain disease states (e.g. Hepatitis C, HIV/AIDS, mental health) which do not require frequent doctor visits but do involve very expensive medications. The state may be able to help increase provider capacity at FQHCs in order that more Medicaid patients can be accommodated and still realize an overall net savings. County inmates present a constitutional challenge. Some counties may be able to take advantage of geographical proximity to an FQHC. The department of health and human services was directed to ask HRSA what specific criteria would have to be met by DHHS to formaly grant governmental powers for the purpose of qualifying a DSH facility as a 340B entity. The department determined that the state s Medicaid provider agreements would not stand in for formal contracts; a contract with HRSA OPA would be necessary. The department of health and human services was directed to pursue with HRSA any demonstration projects available to New Hampshire and provide examples from other states. The department responded that there were no appropriate projects at this time. In the meantime, the department of Corrections has lowered pharmaceutical expenses through a tiered formulary for psychotropic drugs and through better negotiations with manufacturers. The commissioners of Health and Human Services and Corrections have also been working together on several strategies to reduce health care costs for inmates. The county jails have been in discussions about money-saving opportunities such as alternative pharmaceutical providers. The Heinz Foundation report on 340B program expansion opportunities for New Hampshire is still outstanding. It is still not clear whether legislation is needed or partnerships can be created by interested stakeholders without state statutory mandate.

A similar report from this organization on opportunities for 340B expansion in New Hampshire is due later this fall.

5 RECOMMENDATIONS: The commission recommends that the commissioners of Health and Human Services and Corrections work together to develop a plan to expand the 340B program to high pharmaceutical cost inmates. However, due to budget constraints the commissioner does not plan to file legislation for COMMISSION MEMBERS COMMISSION MEMBERS: Representative Cindy Rosenwald, Chair Representative Gene Charron, Clerk Representative Martha McLeod Senator Robert Clegg Senator Kathy Sgambati Tess Kuenning Francis Cassidy Michael Connor Dick Fortier Henry Lipman Doris Lotz Robert MacLeod Susan Presby Marc Sadowsky Edward Shanshala Richard Silverberg Al Wright APPENDICES LISTING Appendix A: Appendix B: Appendix C: Appendix D: Appendix E: Appendix F: 340B Eligibility FAQs NCSL Overview of State Legislative Action New Hampshire 340B Entity List Medicare Disproportionate Share Hospital Information Slides from National 340B Conference Federal Register Proposed Definition of Patient

COMMISSION MEMBERS COMMISSION MEMBERS: Representative Cindy Rosenwald, Chair Representative Gene Charron, Clerk Representative Martha McLeod Senator Robert Clegg Senator Kathy Sgambati Tess Kuenning

6 Appendix: G: UMASS Medical School Presentation Appendix H: Virtual Drug Inventory FAQ from HRSA Appendix I: LRG Healthcare DSH Letter Appendix J: House Bill Appendix K: Senate Bill Appendix L: DHHS Response Letter

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