Pile of colorful pills in blister packs

Duplicate Discounts Threaten the 340B Program During COVID-19

By Sravya Chary

The 340B program, which provides discount drugs to safety-net hospitals, faces an uncertain future due to revenue leakage faced by pharmaceutical manufacturers and increased demand spurred by the COVID-19 pandemic.

Over the last few months, growing demand for 340B drugs and hard-to-monitor billing issues have placed an immense and unforeseen financial burden on pharmaceutical manufacturers. In response, some pharmaceutical manufacturers have threatened to withhold 340B drugs from contract pharmacies, thus limiting access to steeply discounted drugs for eligible patients.

For example, on July 1, 2020 Eli Lilly stopped shipping Cialis, an erectile dysfunction drug, to contract pharmacies. AstraZeneca announced that on October 1, 2020 it would withhold 340B drugs from covered entities that have their own pharmacy in-house. The announcement stated that hospitals without in-house pharmacies would see a decrease in 340B shipments, as well.

Other manufacturers have requested that covered entities share claims data for their contract pharmacies through an online auditing platform, with some even threatening to refuse access to 340B drugs if the entities fail to comply.

In a letter to the five drug companies requesting the claims data, the American Hospital Association (AHA) expressed its outrage, stating that such action taken during the COVID-19 pandemic attempts “to compel hospitals to divert critical resources away from the pandemic.” Further, the AHA urged manufacturers to make 340B drugs available to vulnerable patients during the public health crisis.

Barriers to access for 340B drugs could be devastating for the uninsured and low-income individuals that rely on them. Further, withholding affordable care during a public health crisis could further exacerbate the disparities faced by marginalized communities.

Drug manufacturers, however, aren’t to blame for this predicament. The financial burden they face with the 340B program has been growing since its inception. It is about time the Health Resources and Services Administration (HRSA) intervenes to simultaneously ensure 340B patients can access affordable drugs and to lessen the financial burden placed on manufacturers participating in the program.

Notable Problem Area of the 340B Program

A key problem contributing to the extensive financial burden for pharmaceutical manufacturers is duplicate discounting.

Duplicate discounting occurs when a 340B-priced drug is dispensed to an insured patient and the patient’s insurer bills the manufacturer for the associated rebate amount. This results in the manufacturer paying both a 340B discount and a rebate, thus doubling the discount footed by the company on the drug.

Duplicate discounting is difficult for both 340B entities and manufacturers to manage. There is no adequate system for entities and contract pharmacies to accurately track whether a particular unit was bought at 340B price and whether the correct unit is being dispensed to an eligible patient. And without adequate tracking, it is nearly impossible for manufacturers to gain lost revenue on duplicate discounts that are paid.

Although HRSA has since provided the Medicaid Exclusion File for manufacturers to identify 340B drugs dispensed to Medicaid patients, the file isn’t sufficient and still permits some revenue leakage. Further, duplicate discounts paid on units dispensed to commercial patients (a patient population that is not eligible for 340B drugs) are even more financially devastating and harder to identify.

The sudden increase in child sites of 340B entities during the COVID-19 pandemic has also contributed to the revenue leakage associated with duplicate discounts.

In a previous post, I discussed the added flexibility HRSA granted on June 6, 2020 that allows covered entities to use 340B drugs at affiliated offsite facilities before they are registered in the online 340B Office of Pharmacy Affairs (OPAIS) database and reported on the entity’s most recently filed Medicare cost report. Although this offers low-income patients an added avenue of access to affordable drugs to their potential benefit, it has since made identifying duplicate discounts even more difficult and, in some cases, impossible for manufacturers.

In other words, the 340B program has snowballed out of control to the point where recovering lost revenue and providing access to affordable healthcare are at odds with one another. Manufacturers are being financially penalized for participating in a program that makes affordable drugs accessible to historically underserved patient populations and provides safety net hospitals with the means to provide charity care for these individuals – both of which are particularly vital during the COVID-19 pandemic. This is a major contributing factor as to why these manufacturers have put their foot down. Now government intervention is necessary to uphold the integrity and original intent of the program.

A Potential Solution

On September 22, 2020 after multiple pleas from congressional leaders in the House and Senate, the Department of Health and Human Services (HHS) released a public response to Eli Lilly stating that HRSA has concerns with the manufacturer’s actions. However, HRSA has not yet made a final decision on whether the drug company’s actions would be subject to sanctions.

At this juncture, HRSA can and should create a win-win situation in which duplicate discounting is eradicated from the program. As a first step, HRSA should provide entities and contract pharmacies with a more robust system for identifying units bought at 340B price and for identifying 340B eligible patients.

The 340B program was established with the goal to provide affordable drugs to vulnerable patient populations. Participating manufacturers are providing drugs at a highly discounted rate to make this a reality. Rather than penalizing manufacturers for doing this by allowing duplicate discounts to slip through the cracks, HRSA should intervene to uphold the original intent of the program and ensure that vulnerable patients do not lose access to the drugs they may desperately need during a pandemic.

 

The above opinions are wholly my own and in no way represent the opinions of my associated institutions.

Sravya Chary

Sravya Chary

Sravya Chary is a data architect in the pharmaceutical industry, a Master of Bioethics (MBE) candidate at Harvard Medical School, and a Petrie-Flom student fellow for the 2020-2021 academic year.

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