Adria Warren, health care transactional partner at Foley & Lardner LLP, spoke with the Journal of Clinical Pathways about new developments in the 340B drug pricing program and provided updates on recent court rulings and cases in process that may affect the program.

Transcript:

Hi, I'm Adria Warren. I'm a health care transactional partner with Foley & Lardner in our Boston office. I'm going to be speaking on some of the new developments in 340B.

I think that it probably feels a little bit like Groundhog Day because we talk about 340B all the time. There's been some recent decisions and activity and we're expecting more attention this year and some more changes to come. So there's some things to really profile this year.

In particular, since 2018, we've been talking about CMS's cutting back on reimbursement rates and the reduction by almost 30% to ASP minus 22%. And the court decisions winded their way through up to the Supreme Court during the pendency of these reduced rates to covered entities. And just last November, the Supreme Court ruled that CMS had to really refix this and go back to its original price.

And it was a pretty technical rationale for the decision. It is final. And for hospitals and covered entities that are out there, you probably know that you're being reimbursed now going forward at ASP plus 6, but there's still, CMS has to go back and refix the wheel, if you will, for 2018 until 2022 and figure out how to reimburse what they're estimating is like 1.96 billion—with a B—in payments. So expecting some rule making around that in April, stay tuned on the reimbursement piece. So that was a big win for hospitals and for covered entities in the 340B area.

The other big change we're seeing is going to be in the area of contract pharmacies. And we're already seeing this because there are a couple of court decisions, some pending, and one just came down in January in the area of contract pharmacies, so 340B hospitals, if you have an in-house pharmacy, that's fine. A lot of hospitals will also rely on contract pharmacies and sometimes a variation, a variety of both.

And starting in 2020, the pharmaceutical companies start to restrict being able to rely on the contract pharmacies for distributing 340B drugs. Department of Health and Human Services and CMS pushed back and it ended up in court around whether HHS could make distribution through contract pharmacies be something that had to happen. And the court of appeals for the third circuit just ruled in favor of pharmaceutical companies.

So as a result, we have over 20 now pharmaceutical companies that are restricting reimbursement for drugs that are, 340B drugs, that are distributed through contract pharmacies. Basically, going back to kind of original like 1996 vision. And there are a couple more cases that were argued in October and decisions are pending, could probably hear from them any day.

I think, if you’re a pharmaceutical company, it's a big win. If you are a hospital covered entity, it can really cut into your bottom line. And probably the best we can hope for now is a split circuit, a split decision and making the case being taken up by the Supreme Court and revisited. So one for the hospitals, one for the pharmaceutical industry.

This is being taken up on the Hill as well, we’re seeing some legislation being introduced that would have a moratorium on adding child sites under the 340B program and potentially more reporting on 340B margins and the like. But we just have one bill in a new Congress and it's got a ways to go. So we can't say what's going to be coming out or what form it'll come in and other priorities may be picked up.

So the main thing, so right now there's changes. It's changes in what's going to be reimbursed. Oh, there's one other thing I can say, sorry. There's one other case that we're monitoring as well, which is the Genesis health care litigation. And that is challenging what would be considered an eligible patient, because 340B drugs have to be distributed, not just to the qualified covered entity, but also for their patients. So a patient that's getting care from the hospital, the covered entity for 340B purposes, but not just getting drugs.

And so Genesis Healthcare was audited and removed from the 340B program on the grounds that they were distributing to non-patients, and they were eventually reinstated. But it's also being challenged in court. And depending on how this goes, it could have big implications for the individual patients. And so that's also going to be an interesting thing to watch.

I'm a health care transaction attorney, and I think at the bottom line, the cases that have been resolved and that we're waiting to hear from, potentially expanding the patients that could be eligible, really restricting the ability to rely on contract pharmacies, not to mention the reinstatement of the 30% to ASP plus 6%, really will have an effect on the bottom line in the calculation of 340B revenues to a covered entity.

That is a big piece of a lot of oncology transactions today. And just kind of evaluating and deciding whether or not to implement a transaction. The savings are still there, and I think it is still something that's really important to be reviewed, but really kind of understanding where the direction is headed and how it can affect the margin is something to bear in mind if you're evaluating going into a health care deal in oncology.