Critical decisions are pending before courts and legislators in 2023 that promise to shape the future of the 340B Drug Pricing Program (340B Program), which provides discounts on outpatient drugs for certain health care providers, referred to as “covered entities.” The resolution of these issues will have an enormous financial impact on the health care industry, including pharmaceutical manufacturers, 340B hospitals, and federal grantees.
Use of 340B Contract Pharmacies
One critical question relates to the ability of 340B covered entities to dispense medications purchased under the 340B program to their patients through networks of contracted pharmacies. So-called “340B contract pharmacies” have been in place for decades and were greatly expanded in 2010, when the Department of Health and Human Services (HHS) Health Resources & Services Administration (HRSA) issued guidance permitting 340B covered entities to contract with multiple pharmacies if certain conditions were met.
Beginning in 2020, an ever-increasing number of pharmaceutical manufacturers implemented policies that restrict the availability of 340B discounts for drugs distributed through 340B contract pharmacies. HRSA opposed these policies, and issued violation letters to several manufacturers, indicating that the manufacturers’ policies do not comport with the requirements of the 340B statute and that further implementation of such policies may result in penalties. Starting in early 2021, multiple pharmaceutical manufacturers initiated litigation to challenge HRSA’s enforcement authority in this area. In 2022, the trial courts in several of these cases issued dichotomous decisions, some siding with the manufacturers and others siding with HRSA’s reading of the 340B statute. Several appeals are now ongoing in various federal appellate courts around the country.
In January, the first appellate decision in this suite of cases was issued by the U.S. Court of Appeals for the Third Circuit, which sided with the three pharmaceutical manufacturers involved in the consolidated case. The court’s decision affirmed the District Court for the District of Delaware’s decision in one case, in which the manufacturer involved won, and reversed the District Court for the District of New Jersey’s decision in the case involving the other two manufacturers, in which the government won. The court held, among other things, that the government may not enforce its reading of the statute against the manufacturers and that Section 340B does not require delivery of drugs at 340B pricing to an unlimited number of contract pharmacies.
We await appellate decisions in two similar cases involving manufacturers. If the appellate courts in each of these cases (D.C. Circuit and Seventh Circuit, respectively) rule in a manner consistent with the Third Circuit, then the use of 340B contract pharmacies will likely be severely limited. If the appellate decisions produce a circuit split, then we would expect the issue to be appealed to the Supreme Court.
Enforceability of the 340B Definition of Patient
We are also monitoring 340B-related litigation brought by a 340B covered entity, Genesis Healthcare, Inc. (Genesis) v. Becerra et al. (No. 20-1701). This litigation results from HRSA’s attempt to remove Genesis from the 340B Program following an audit. The audit’s findings found, among other things, that Genesis had dispensed discounted 340B drugs to individuals who were not “patients” of Genesis. Genesis filed suit challenging the removal. The lawsuit is significant because – similar to the actions filed by pharmaceutical manufacturers over the contract pharmacy issue – it challenges HRSA’s authority to enforce agency guidance outside of the parameters expressly contained in the 340B statute.
The 340B statute includes a requirement that 340B covered entities may not resell or otherwise transfer drugs purchased under the 340B program to individuals who are not patients of the covered entity. HRSA issued guidance in 1996 interpreting what it means to be a patient of a covered entity for purposes of this statute, which continues to be widely applied. A court ruling that this 1996 guidance is not a comprehensive limit on circumstances when 340B drugs may be dispensed could potentially alter the scope of 340B purchasing and could expand the definition of “patient.”
On July 1, 2022, the United States Court of Appeals for the Fourth Circuit issued its decision to reverse the 2019 decision of the District Court for the District of South Carolina, which had dismissed the case as moot. As a result of the reversal, the case was remanded to the district court for further proceedings, including addressing Genesis’ allegation that the HRSA definition of “patient” is contradictory to the plain language of the 340B statute. The order took effect on August 23, 2022, but the court has not yet addressed the definition of “patient.”
340B Medicare Payment Remediation
Another significant issue for 340B hospital covered entities – and potentially other hospitals – is the forthcoming remediation of Medicare payment cuts for 340B drugs billed by hospitals under the outpatient prospective payment system (OPPS). The Supreme Court recently found the Medicare payment cuts to be unlawful, and a trial court has directed the Centers for Medicare and Medicaid Services (CMS) to remedy affected hospitals.
The Medicare payment cuts go back to 2018. The cuts reduced Medicare reimbursement to hospitals by almost 30% for drugs acquired through the 340B Program, from a reimbursement rate tied to the average sales price (ASP) plus 6% to a reimbursement rate tied to ASP minus 22.5%. CMS’s intention was to reduce reimbursement by an amount that approximates the discounts that the 340B covered entities were receiving on their 340B drug purchases from manufacturers. The 2018 reimbursement changes immediately generated industry push-back and litigation on behalf of 340B hospital covered entities, but CMS continued reimbursing covered 340B drugs at the lower rates in 2020, 2021 and 2022, while the case worked its way up to the Supreme Court.
In June 2022, SCOTUS ruled in favor of the hospitals (American Hospital Association (AHA) v. Becerra (No. 20-1114)), finding the reduced reimbursement rates unlawful. The implications of this decision for 340B covered entities are enormous. CMS estimates that the payment differential could mean an additional $1.96 billion for 340B hospital covered entities.
Remedying the Supreme Court’s decision is complicated by the fact that, when CMS implemented the 340B rate cuts, it was required to do so in a “budget neutral” manner. As a result of the reductions in payment under the OPPS for 340B drugs, payments to other hospitals and for other services were slightly increased as a budget offset. Therefore, remedying the reimbursement rate, or “unscrambling the egg” (as coined by the U.S. District Court for the District of Columbia), could potentially impact all hospitals reimbursed under the OPPS.
Courts have thus far shown a willingness to allow CMS to propose its method for remedying the violation, including a decision on whether it will recoup payments from non-340B hospitals. CMS has not yet issued its proposal, but has indicated that it will do so through notice and comment rulemaking, which we currently expect to be issued around April 2023. Public comment would be taken on the rule, and the rule would need to be finalized before implementation.
Conflict around the 340B program has not escaped the notice of Congress. Through legislation, Congress could address the conflicts around contract pharmacies, clarify or limit HRSA’s enforcement authority, or establish new rules or parameters around the dispensing of 340B drugs. Members of Congress have also expressed an interest in establishing new transparency or reporting obligations for 340B covered entities.
In January, Rep. Matthew Rosendale Sr. from Montana introduced the Drug Pricing Transparency and Accountability Act, which has been referred to the Committee on Energy and Commerce (which referred it to the Subcommittee on Health) and the Committee on Ways and Means. If passed, the bill would:
- Impose a 2-year moratorium on Disproportionate Share Hospitals registering main locations or child sites in the 340B Program;
- Require 340B covered entities that participate in Medicare to include aggregate 340B acquisition costs and aggregate 340B revenues in their Medicare cost reports;
- Require all claims for covered outpatient drugs to utilize the 340B modifier established under the hospital OPPS; and
- Require 340B hospital covered entities to report to HHS their annual 340B drug revenue minus their drug acquisition costs.
This bill was only recently introduced, and we cannot predict whether it will pass or whether it will be amended. We expect multiple 340B proposals to be considered by the new Congress, which may have different priorities. Of particular interest are principles issued jointly by trade associations representing pharmaceutical companies and health centers, which have been circulated to Congress.
The number of high-value disputes related to the 340B program indicate that the program, while expected to continue for the foreseeable future, is at a crossroads. Stakeholders interested in the 340B program have been awaiting resolution of these fundamental issues for years. Decisions that will be made in 2023 promise to determine the future direction and scope of the program. Foley attorneys are closely monitoring these changes and actions implicating the 340B Program and can help you understand their impact as they occur.
Foley is here to help you address the short- and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues.Please reach out to the authors, your Foley relationship partner, or to ourHealth Care Practice Groupwith any questions.
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Impact on Overall Hospital Payments
Specifically, CMS is implementing a budget neutrality adjustment of -3.09% for 2023 to offset the 3.19% increase in payment for non-drug services implemented in 2018. CMS estimates that removing the 340B payment reduction will increase payments to all hospitals by 0.9%.
Medicare Part B Payments: On June 15, 2022, after many years of ongoing litigation, the U.S. Supreme Court unanimously overturned a substantial Medicare Part B payment reduction to many 340B Program participating hospitals related to certain outpatient prescription drugs provided to Medicare patients.What is a key point about the 340B Drug Pricing Program? ›
The 340B Program enables covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. Manufacturers participating in Medicaid agree to provide outpatient drugs to covered entities at significantly reduced prices.How do you explain the 340B program? ›
Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to health care organizations that care for many uninsured and low-income patients.What is the 2023 CMS rule? ›
On April 5, 2023, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that revises the Medicare Advantage (MA or Part C), Medicare Prescription Drug Benefit (Part D), Medicare Cost Plan, and Programs of All-Inclusive Care for the Elderly (PACE) regulations to implement changes related to Star Ratings ...What is the 2023 CMS proposed rule? ›
As proposed, CMS will base the payment amount for the drug component of HCPCS codes G2067 and G2078 for CY 2023 and subsequent years on the payment amount for methadone in CY 2021 and update this amount annually to account for inflation using the PPI for Pharmaceuticals for Human Use (Prescription).What is the 340B Drug Pricing Program 2023? ›
The 340B Drug Pricing Program (340B Program) requires drug manufacturers to sell outpatient drugs at discounted prices to covered entities (including certain types of hospitals) for the manufacturers' drugs to be covered by Medicaid. More than 2,600 hospitals were participating in the 340B Program as of January 2023.What is a criticism of the 340B Program? ›
There are concerns that 340B discounts, which can range on the low end from 22.5–100 percent of a drug's cost, have become so numerous and large that they are driving up the costs of 340B drugs in private markets as well as non-340B drugs to account for decrease in profits.Why is 340B controversial? ›
Pharmaceutical companies argue that the law establishing the 340B program does not expressly permit these contracting arrangements, which they say are responsible for increasing drugmakers' costs or loss of revenue. Drugmakers further assert that the program's operations lack transparency and oversight.How do hospitals make money from 340B? ›
340B hospitals can generate profits by prescribing drugs to patients who have private insurance or Medicare.
A federal program that is not funded by taxpayers. Drug manufacturers are required to participate in the 340B program to be included on Medicaid and Medicare's covered drug list. Discounts range from 20-50% off drug prices. 340B discount drug purchases account for 2.8% of all pharmaceutical sales.What drugs are excluded from 340B? ›
General exceptions to 340B drug eligibility
There are a few exceptions, which include vaccines and Orphan Drugs (which are, by definition, medications specifically developed to treat rare diseases or conditions — and drugs that have only recently been granted New Drug Status by the FDA).
Congress created the 340B Drug Pricing Program in 1992 to protect safety-net hospitals from escalating drug prices by allowing them to purchase outpatient drugs at a discount from manufacturers.What is a 340B covered drug? ›
(340B Program) The 340B Drug Pricing Program is a federal program that requires drug manufacturers participating in the Medicaid drug rebate program to provide covered outpatient drugs to enrolled “covered entities” at or below the statutorily defined ceiling price.What is the formula for 340B? ›
(a) Calculation of 340B ceiling price. The 340B ceiling price for a covered outpatient drug is equal to the Average Manufacturer Price (AMP) from the preceding calendar quarter for the smallest unit of measure minus the Unit Rebate Amount (URA) and will be calculated using six decimal places.What changes are coming to Medicare in 2023? ›
- Part B costs have gone down. ...
- Part A costs have gone up. ...
- Insulin costs are capped. ...
- Medicare start dates have shifted. ...
- Medicare Advantage plan ratings are lower. ...
- People with end-stage renal disease can get more drug coverage.
*Office visits are not billable as split/shared services. Beginning January 1, 2023, the physician or practitioner who spends more than half the total time (the substantive portion) will bill for the primary E/M visit and the prolonged service codes when the service is furnished as a split/shared visit.What are the changes to Part D in 2023? ›
What Other Changes Are Being Made to Part D? As of 2023, the out-of-pocket cost of insulin products is limited to no more than $35 per month in all Part D plans. In addition, adult vaccines covered under Part D, such as the shingles vaccine, are covered with no cost sharing.What is the Medicare 2023 threshold? ›
These per-beneficiary amounts under section 1833(g) of the Act (as amended by 1997 BBA) are updated each year by the Medicare Economic Index (MEI). For Calendar Year (CY) 2023, the KX modifier threshold amounts are: (a) $2,230 for PT and SLP services combined, and (b) $2,230 for OT services.What is CMS 2023 final rate announcement? ›
The final policies in the Rate Announcement improve payment accuracy and ensure taxpayer dollars are well spent. CMS will phase-in certain updates, and on average, CMS anticipates a payment increase for MA plans of 3.32% from 2023 to 2024, which is approximately a $13.8 billion increase in MA payments for next year.
The cuts reduced Medicare reimbursement to hospitals by almost 30% for drugs acquired through the 340B Program, from a reimbursement rate tied to the average sales price (ASP) plus 6% to a reimbursement rate tied to ASP minus 22.5%.How does Medicare reimburse 340B drugs? ›
Beginning in CY 2023, Medicare pays for separately payable drugs and biologicals (hereinafter referred to as “drug” or “drugs”) acquired through the 340B program at the same rate as drugs not acquired through the 340B program, which is generally the statutory default rate of the average sales price (ASP) plus 6 percent ...How big is the 340B program? ›
The 340B Program Climbed to $44 Billion in 2021—With Hospitals Grabbing Most of the Money. Here's a summer surprise for fans of the 340B Drug Pricing Program: Drug Channels has just obtained the 2021 figures from the Health Resources and Services Administration (HRSA)!Are 340B pharmacies profitable? ›
Total 340B sales at the 340B price approached $30 billion in 2019 and continue to grow rapidly. We estimate that in 2019, 340B created over $40 billion in profits which were shared between covered entities, contract pharmacies, and possibly patients (in the form of reduced-price medicines).Who are the largest 340B contract pharmacies? ›
The three largest PBMs—CVS Health, Express Scripts, and OptumRx—collectively have about 500 mail, specialty, and infusion pharmacy locations acting as 340B contract pharmacies. Combined, these locations have nearly 35,000 relationships with covered entities.What is true about a 340B contract pharmacy? ›
A 340B Contract Pharmacy is a retail entity that provides prescription drugs to patients of eligible entities under the 340B Drug Discount Program. Covered entities often choose contract pharmacies to dispense 340B drugs to patients for a number of reasons.What did the judge rule on 340B? ›
Drugmakers are allowed to restrict providers' use of community and specialty pharmacies to dispense drugs in the 340B drug discount program, a federal appeals court ruled Monday. The decision is a win for drug manufacturers Sanofi, Novo Nordisk and AstraZeneca.What makes a patient 340B eligible? ›
A hospital that is private, non-profit with a contract with a state or local government to provide health care services to low income individuals who are not entitled to benefits under Medicare or eligible for State Medicaid, is eligible for the 340B Program.How many 340B hospitals are there in the US? ›
From 2005 to 2011, the number of hospitals participating nearly tripled, from 591 to 1,673, and the number of hospital sites (separate locations of a given hospital that all participate in 340B) almost quadrupled, from 1,233 to 4,426. As of October 2017, there are 12,722 covered entities participating in the program.What is the most profitable hospital in the US? ›
New York-Presbyterian/Weill Cornell Medical Center. The New York City-based healthcare provider has 862 staffed beds and $5.73 billion in net patient revenue. Tish Hospital. The New York City-based healthcare provider has 725 total staffed beds and $5.67 billion in net patient revenue.
If you answered yes to any of these questions, you are NOT alone. On average health systems in the US capture only 20-30% of their 340B potential revenue. Hospitals that have put previous solutions in place are typically operating at a capture rate of 60-70%.Is 340B a non profit? ›
Is 340B Health a nonprofit organization? Yes, 340B Health is a section 501(c)(6) nonprofit trade association.Is insulin covered under 340B? ›
For people with diabetes, the most important participant in the 340B program is community health centers, which provide discounted insulin. To acquire insulin through the 340B program, you need a 340B prescription from a community health center.Who audits 340B? ›
HRSA has the authority to audit covered entities for compliance with 340B Drug Pricing Program (340B Program) requirements (42 USC 256b(a)(5)(C)): Covered entities are subject to audit by the manufacturer or the federal government.How many 340B covered entities are there? ›
Participation in the 340B Program has grown from nearly 9,700 covered entities in 2010 to 12,700 in 2020.Are diabetic supplies 340B eligible? ›
The HRSA 340B Prime Vendor Program enables 340B covered entities to obtain pharmaceutical prices lower than 340B statutory prices and access cost-saving contracts for value add pharmacy items such as diabetic supplies, vaccines, diagnostic test kits, pharmacy hardware, software solutions and more.Does 340B apply to Medicare Advantage plans? ›
For 340B facilities, CMS reimburses 340B status indicator K drugs and biologics at a discounted rate of ASP minus 22.5%. CMS requires Medicare Advantage plans to reimburse non-contracted providers using these Original Medicare rates.What is 340B split billing? ›
The term “split-billing” is used to describe this software, which “splits” a purchase order into two or three different accounts (i.e. 340B, GPO, non-GPO/WAC). This software can help the entity place orders in appropriate accounts while maintaining auditable records of the accumulations and purchases.How do I become a 340B analyst? ›
- To enter into the Apexus Advanced 340B Operations Certificate Program, you can: ...
- Take the Operations Certificate Entrance Exam. ...
- Register and pay for the program. ...
- Operations Certificate Baseline Exam. ...
- Watch 340B Operations Certificate curriculum modules. ...
- Take the Exams.
Step 1: Calculate 340B savings by reviewing the purchase history report from the 340B account and identify the unit price for each NDC when purchasing those NDCs at 340B price and GPO price. 340B savings will be equal to the GPO total minus the 340B total.
Pricing Agreement (PPA)
A manufacturer must hold legal title to or possession of the NDC number for the covered outpatient drug. Such term does not include a wholesale distributor of drugs or a retail pharmacy licensed under State law.
Beginning January 1, 2023, Medicare will pay 340B hospitals under Medicare Part B for certain outpatient drugs (high-cost, separately paid drugs) at the drug's average sales price (ASP) plus 6%, the same rate used for non-340B hospitals.What is a 340B clean site? ›
A 340B clean site will see only those medications that they should have rights to purchase. A non-340B clinic may see a broader sub-formulary but still doesn't have access to everything an inpatient pharmacy would have access to, and so on.How is best price calculated? ›
Best Price is essentially the lowest price offered during the quarter for that specific product. If the difference between AMP and Best Price is greater than the value of AMP multiplied by 23.1%, then AMP minus Best Price will serve as the Base URA calculation.What is 340B certification? ›
Product Description. The Apexus Advanced 340B Operations Certificate Program is the most advanced 340B training program available, designed to provide learners with all the education and insight they need to understand the issues, maintain compliance, and manage their entity's 340B program effectively.What is the 340B contract pharmacy dispensing fee? ›
Under the terms of the contract, the Contract Pharmacy bills 340B claims to the PBM, receives payment, and keeps a $25.00 dispensing fee in exchange for filling the prescription and retuning the remaining reimbursement amount to the covered entity (net of the $25.00 dispensing fee, which is retained by Contract ...What is 340B NDC? ›
The 340B Program requires drug manufacturers participating in Medicaid to provide outpatient drugs to covered entities at significantly reduced prices.What are the Medicare rate changes for 2023? ›
29 increased the 2023 conversion factor to $33.8872 — a reduction of only 2% compared to last year. The budget bill also allows physicians to continue offering telehealth to Medicare beneficiaries — including by phone — through the end of 2024, and invests in mental health through primary care.What are the changes to Medicare reimbursement for 2023? ›
The AMA's push to avert an 8.5% Medicare cut in the 2023 omnibus spending bill slowed down the wheels of a runaway train—but didn't stop it completely. Physicians will still see a 2% cut in Medicare pay this year, with at least a 1.25% cut in store for 2024.What are the proposed Medicare cuts for 2023? ›
Physicians are facing a 2% cut in Medicare payment in 2023, and 2024 will bring at least a 1.25% cut.
People who want to keep their current Medicare coverage do not need to re-enroll. CMS released the 2023 premium and coverage information for 2023 Medicare Advantage and Part D plans on September 29, 2022.What are the income limits for Medicare Part B for 2023? ›
In 2023, your costs for Medicare Parts B and D are based on income reported on your 2021 tax return. You won't pay any extra for Part B or Part D if you earned $97,000 or less as an individual or $194,000 or less if you are a joint filer.Are Medicare Supplement plans going up in 2023? ›
How much is Medicare going up in 2023? The cost of Medicare Part B is not going up this year — it's going down by $5.20 per month. The 2023 monthly premium of $164.90 is lower than last year because coverage was resolved for an expensive Alzheimer's drug.How much will Medicare Part D cost in 2023? ›
The estimated average monthly premium for Medicare Part D stand-alone drug plans is projected to be $43 in 2023, based on current enrollment, a 10% increase from $39 in 2022 – a rate of increase that outpaces both the current annual inflation rate and the Social Security cost-of-living adjustment for 2023.What is the deductible for Medicare Part D in 2023? ›
This is the amount you must pay each year for your prescriptions before your Medicare drug plan pays its share. Deductibles vary between Medicare drug plans. No Medicare drug plan may have a deductible more than $505 in 2023.How much will Medicare increase in 2024? ›
Also starting in 2024, the calculation of the base beneficiary premium will be adjusted, as needed, to limit increases in the base premium to no more than 6% from the prior year.What is the final rule for MSSP 2023? ›
The final rule removes the limitation on the number of agreement periods in which an ACO can participate in Level E of the BASIC track while making the ENHANCED track purely optional (for new agreement periods beginning on or after January 1, 2024).What is the Medicare Max for 2023? ›
We call this annual limit the contribution and benefit base. This amount is also commonly referred to as the taxable maximum. For earnings in 2023, this base is $160,200.