7/16/ th Annual 340B Coalition Conference July 19, 2010 Washington, DC. Safety Net Hospitals for Pharmaceutical Access

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1 Safety Net Hospitals for Pharmaceutical Access The Story From Washington, D.C. Ted Slafsky Executive Director, SNHPA Editor in Chief, Drug Discount Monitor (202) th Annual 340B Coalition Conference July 19, 2010 Washington, DC Overview The Dynamics of Washington in B in Health Care Reform HtBtt Hot Button Issues 340B-1 Inpatient Discount Program Safety Net Hospitals for Pharmaceutical Access Ted Slafsky (202) The Setting In Washington Historic Year Health Care Reform Passes Major Changes to the 340B Program Implementation Questions Remain Election year politics hampering further legislation from advancing House: 255 Democrats 178 Republicans 2 Vacancies Republicans within striking distance of taking House 2010 election will likely result in a historically narrow majority for winning party Senate: 57 Democrats 41 Republicans 2 Independents (Both caucus with Democrats) Republicans need to pick up 10 seats for majority Unlikely, but not impossible 1

2 Inpatient Discounts March 23, 2010 President Obama signs Patient Protection and Affordable Care Act, extending 340B to the inpatient setting Inpatient Discounts But one week later. Inpatient Discounts March 30, 2010 President Obama signs Budget Reconciliation Bill, limiting 340B to the outpatient setting 2

3 What Happened? Health reform effort was very different than previous attempts. Obama made deals with key sectors of health care industry, including Rx industry. Drug industry commits to $100 billion in budget offsets and spends millions on advertising in support of the bill. In return, the bill includes no government interference in Medicare Part D pricing, no drug reimportation, and no 340B inpatient extension. Big Deal Anyway Nevertheless, the bill includes the most dramatic changes to 340B since Will impact every 340B stakeholder. Be Prepared! New Covered Entities Now eligible for 340B: Free-standing children s hospitals with DSH adjustment > 11.75% Free-standing cancer hospitals with DSH adjustment > 11.75% Critical access hospitals Sole community hospitals and rural referral centers with DSH adjustment 8% All new hospitals must either be publicly owned or be a private nonprofit contracting with a state or local government to provide indigent care Enrollment process for newly eligible has not yet begun 3

4 Changes to Discount Percentage Increased Medicaid rebate percentage likely to yield steeper 340B discounts: Brand name drugs: 15.1% to 23.1% Clotting factor and pediatric drugs: 15.1% to 17.1% Generic drugs: 11% to 13% Medicare Changes Medicare Part D coverage gap or donut hole fixed Seniors in donut hole will receive $250 towards Part D drugs in 2010 Seniors will get 75% discount for donut hole drugs by 2020 Manufacturers to start covering 50% cost of brands in 2011 Government subsidy will eventually cover 25% Medicaid Changes Medicaid rebate program expanded to managed care plans 340B providers protected New HHS guidelines on Medicaid billing required. 4

5 Integrity Provisions A host of new integrity provisions Aimed at improving pricing transparency Ensuring providers are not overcharged Also intended to improve accuracy of covered entity data on OPA website Integrity Provisions and the Drug Industry Drug manufacturers must: -Allocate drugs in short supply proportionally between 340B and non-340b providers -Offer each 340B hospital drugs for purchase at or below the 340B price if that drug is made available to any other purchaser at any price -Ensure that IVIG and other drugs in short supply would be available at 340B prices Hot Button Issues Inpatient Battle Drug Allocation Debate Amendments in Senate HELP Committee Amendments in Senate HELP Committee Exceptions to GPO Prohibition Orphan Drugs (last minute surprise) 5

6 Amendments in Senate HELP Senators Enzi and Hatch introduced amendments hostile to 340B in HELP Committee s consideration of health reform. Enzi withdrew amendment that would sunset 340B program. Sen. Hatch introduced amendment to stall 340B expansion until GAO completed study on program s future. Compromise reached in HELP Committee to go ahead with expansion, but mandate the study as well. Government Accountability Office (GAO) to prepare report for Congress by September 2011 on 340B program Reasonable Exceptions to GPO Prohibition Provision included in health reform law -- but removed in reconciliation bill. SNHPA believes hospitals should be allowed to purchase drugs through their GPOs when: Sold by manufacturers that don t participate in 340B Unavailable due to a drug shortage or manufacturer non-compliance Dispensed to individuals who are not patients within 340B Purchased outside 340B for Medicaid population to avoid duplicate discount problem Provision included in health reform law -- but removed in reconciliation bill. PVP, HRSA, drug industry opposed. SNHPA will encourage PVP and HRSA to come up with solutions. Orphan Drug Prohibition for New Covered Entities At eleventh hour, orphan drugs extension added to bill. Excluded use of orphan drugs under 340B by newly-eligible entities and children s hospitals. Does not apply to current covered entities Does not apply to current covered entities. Highly problematic for effective use of 340B program 6

7 Orphan Drug Prohibition for New Covered Entities Orphan drugs (1) are designed to treat rare diseases and conditions that affect fewer than 200,000 patients in the U.S. or, (2) if the disease or condition affects more than 200, patients in the U.S., will produce sales that fail to cover R&D costs Orphan Drug Prohibition for New Covered Entities Implementation of prohibition raises questions: Does exclusion apply for all indications for orphan drug, even those for which the orphan drug has not been granted orphan status? Does exclusion apply indefinitely, i or only during 7-year period of exclusivity? Should exclusion apply to children s hospitals eligible prior to passage of health care reform? Orphan Drug Prohibition for New Covered Entities House passed provision exempting children s hospital from exemption as part of tax extenders bill in May Extenders bill has been unable to pass the Senate Some drug manufacturers have stopped offering 340B prices on orphan drugs to children s hospitals already in 340B House passes exemption in technical corrections bill July 15 Senate situation unclear 7

8 The Aftermath of Health Care Reform: 340B-1 340B-1 is a new limited inpatient discount program for about 1/3 of 340B eligible hospitals Extends inpatient discounts for drugs: Administered or dispensed to uninsured patients and For which hospitals collect no reimbursement HRSA must implement program by January 1, 2011 DSH Hospitals must have DSH adjustment greater than 20.2% Sole Community Hospitals and Rural Referral Centers must have DSH adjustment greater than 8% 340B-1 represents compromise between congressional leadership and drug industry No federal savings, program would cost Feds $35 million The Aftermath of Health Care Reform: 340B-1 Sets new integrity provisions for inpatient program: HRSA must implement program by regulation, including definition of covered inpatient drug Mandatory OIG inspection of all enrolled hospitals Stiff penalties fines, automatic recoupment, easier termination Easier to be audited by manufacturers The Aftermath of Health Care Reform: 340B-1 SNHPA s position: Positive first step towards further inpatient discounts Some hospitals will gain needed savings But 340B-1 1is too limited i din scope Anticipate implementation difficulties Onerous compliance provisions may discourage enrollment, as cost of compliance may outweigh benefits of discount 8

9 The Aftermath of Health Care Reform: 340B-1 340B-1 passed House as part of tax extenders bill in May. Extenders bill failed to gain 60 votes needed to be considered in Senate SNHPA successfully secured technical changes in Senate bill that will help ensure 340B-1 is implemented and administered as a different program than 340B Future of 340B-1 uncertain Read the Drug Discount Monitor to stay informed! CE Credit Question What DSH adjustment must a hospital have in order to participate in 340B-1? Answer: DSH Hospitals must have a Medicare DSH adjustment greater than 20.2% SNHPA and Drug Discount Monitor Contacts Ted Slafsky Executive Director Tel: (202) ted.slafsky@snhpa.org Bill von Oehsen President and General Counsel Tel: (202) william.vonoehsen@snhpa.org Rob Recklaus Jaimie Vickery Government Relations Director Policy and Advocacy Manager Tel: (202) Tel: (202) rob.recklaus@snhpa.org jaimie.vickery@snhpa.org Tom Mirga Executive Editor Drug Discount Monitor Tel: (202) tom.mirga@drugdiscountmonitor.com 9