1. Ryan Witz VP, Healthcare Financing Initiatives
340B Overview and Update
Ryan Witz
VP, Healthcare Financing Initiatives

2. Agenda Overview of the 340b program CA Governor’s Executive Order
Proposed Federal Changes

3. 340B Drug Discount Program

4. 340B Drug Discount Program
Program created by Congress in 1992 to help eligible safety-net “providers to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services” H.R. Rep. No (II), at 12 (1992).

5. 340B Drug Discount Program
Overview
Provides financial relief from high prescription costs to certain safety net hospitals
Requires drug manufacturers participating in Medicaid to sell outpatient drugs at discounted rates to healthcare organizations that care for a significant number of uninsured and low-income patients
Allows hospitals to provide free or discounted drugs to low-income patients and expand health services
There are B hospitals across over 1,800 sites in CA
Program has undergone significant changes and remains threatened

6. 340B Drug Discount Program
Administered by the Office of Pharmacy Affairs (OPA) within the Health Resources and Services Administration (HRSA)
The 340B program requires manufacturers that participate in Medicaid and Medicare Part B to provide discounts to 340B providers on outpatient drugs
California Medicaid (Medi-Cal) is a mandatory carve-in state

7. 340B Drug Discount Program
340B-Eligible Providers Types

8. 340B Drug Discount Program
Hospital Eligibility:
Hospital Type
DSH %
Subject to GPO Prohibition
DSH Hospital
Greater than 11.75%
YES
Critical Access Hospital
Not Applicable NO
Rural Referral Center
Greater than or equal to 8%
Sole Community Hospital
FS Children's Hospital
FS Cancer Hospital
*All Hospitals must have a contract with Government or Non-Profit

9. 340B Drug Discount Program
Disproportionate share hospitals, free standing children’s hospitals, and free standing cancer hospitals may not use a group purchasing organization (GPO) or other group purchasing arrangement when purchasing covered outpatient drugs
Complying with the GPO prohibition is a statutory requirement
Hospitals can still use a GPO for inpatient drugs

10. 340B Drug Discount Program
State’s can choose whether to “Carve-in” or “Carve-out” the requirements for Covered Entity’s participation in Medicaid
California requires 340B Covered Entities to carve-in for Medi-Cal
340B Hospital must list on OPA Medicaid Exclusion File Database all Medicaid billing numbers or National Provider Identifiers used
Hospitals must indicate on the OPA website they will not bill Medicaid FFS in the carve-out states.
Medi-Cal FFS reimbursement is limited to AAC + a dispensing fee

11. 340B Drug Discount Program
Medi-Cal managed care has become California’s delivery system of choice for Medicaid, with over 10.6 million enrolled in a plan
ACA expanded Medicaid Agencies’ ability to claim rebates on Medicaid managed care
Significant challenges exist for the state with duplicate discounts
Medi-Cal MCP reimbursement is not limited to AAC + a dispensing fee

12. 340B Drug Discount Program
In-House vs. Contract Pharmacies
Growth of contract pharmacy arrangements
2010 – 1,300 arrangements
2017 – 20,000 arrangements
In 2017, 30% of CE’s utilize contract pharmacies
Duplicate discount issues

13. 340B Program Under Attack
State and Federal proposals to reduce the size of the program and increase transparency
Moratorium on new 340B DSH hospitals (340B PAUSE Act)
Onerous reporting requirements
Elimination of contract pharmacy arrangements in 340B
California proposal to prohibit 340B drugs from being dispensed to Medi-Cal managed care and fee-for-service beneficiaries

14. CA Governor’s Executive Order

15. Governor Newsom’s Executive Order on Drug Pricing
Governor Newsom signed an executive order on drug pricing as his first act as governor
Instructs DHCS to transition all pharmacy benefits for Medi-Cal managed care beneficiaries to fee-for-service by January 2021
This transition would impact reimbursement for 340B-covered pharmacy drugs

16. Governor Newsom’s Executive Order on Drug Pricing
Transition of pharmacy benefit from Medi-Cal managed care to FFS does not require additional approval from the legislature or federal government
“Medi-Cal Rx” carve-out includes the following when billed by a pharmacy on a pharmacy claim:
Covered Outpatient Drugs, including Physician Administered Drugs,
Medical Supplies,
Enteral Nutritional Products

17. Governor Newsom’s Executive Order on Drug Pricing
Medi-Cal Rx will not impact prescriptions billed on a medical or institutional claim by a pharmacy, or any other provider type.
What will not change?
The scope of the existing Medi-Cal pharmacy benefit
Provision of pharmacy services in an inpatient or long-term care setting, regardless of delivery system
Existing Medi-Cal managed care pharmacy carve-outs (e.g., blood factor, HIV/AIDS drugs, antipsychotics, or drugs used to treat substance use disorder)
The State Fair Hearing process

18. Governor Newsom’s Executive Order on Drug Pricing
DHCS has released a Request for Proposal to contract with a vendor to oversee the Medi-Cal FFS pharmacy benefit.
The PBM will be responsible for:
Claims and Utilization Management
Pharmacy Drug Rebate Administration
Provider and Beneficiary Support
Proposals are due back to DHCS by October 1, 2019
Contract will be awarded November 5, 2019

19. Governor Newsom’s Executive Order on Drug Pricing

20. Governor Newsom’s Executive Order on Drug Pricing
2019/20 state budget directs the Department of Health Care Services to establish pharmacy advisory group
Inform and receive feedback from stakeholders on changes for managed care plans and beneficiaries
Update the advisory group on expected savings and changes to beneficiary access to medication
Next stakeholder meeting is September 26th at 2pm in Sacramento
WEBINAR INFORMATION: To join the webinar, participants can click on the following link, and follow the instructions.

21. Proposed Federal Changes

22. AHA Lawsuit Challenging CY2018 and CY2019 OPPS Payment Cuts to 340B Hospitals
U.S. District Court ruled in favor of AHA and found the payment cuts to 340B hospitals to be unlawful
Department of Health and Human Services appealed the ruling and it is with the D.C. Circuit Court
Hospitals are encouraged to issue appeals for high-cost 340B drugs to ensure your time limit for appeals is preserved
Once the appeal is denied, hospitals are encouraged to file a second level appeal

23. AHA Lawsuit Challenging CY2018 and CY2019 OPPS Payment Cuts to 340B Hospitals
Following the Government's appeal to the appellate court in DC, the AHA requested an expedited briefing schedule
Court’s timeline is short—briefing schedule is by mid-Oct
The Government did meet their required date for filing their first brief on 9/3/2019

24. CMS Issues CY 2020 OPPS Proposed Rule
340b Drug Pricing Program: For CY 2020, CMS proposes to continue its current 340B drug payment adjustment of average sales price minus 22.5 percent.
CMS also acknowledges the ongoing litigation pertaining to the 340B payment adjustment and seeks comment on alternative payment options for CY 2020 and potential remedies for CY 2018 and CY 2019 payments in the event of an adverse ruling on the 340B payment policy by the United States Court of Appeals.

25. AHA Commitment to Good Stewardship Principles for the 340B Program
By committing to Good Stewardship Principles, 340B hospitals would:
Communicate the Value of the 340B Program
Disclose Hospital’s 340B Estimated Savings
Continue Rigorous Internal Oversight
Hospitals are encouraged to sign the pledge
85% of 340B Hospitals in CA signed on
List of signees will be made public in October
FAQs

26. Questions?
Ryan Witz VP, Health Care Financing Initiatives California Hospital Association