The Next 340B Battle: Discount Duplication With Medicare Negotiated Prices

Manufacturers should not be subject to regulatory enforcement action if they do not promptly provide hospitals with 340B discounts for Medicare negotiated drugs when they are unable to obtain the needed claims data, the Pharmaceutical Research and Manufacturers of America warned the Centers for Medicare and Medicaid Services.

PhRMA aired its concerns with reconciling 340B discounts and Medicare-negotiated “maximum fair prices” in recent comments on the agency’s draft guidance on the second round of the Medicare price negotiation program.  (Also see "Medicare Negotiation Second Cycle Draft Guidance Offers Options For ‘Effectuating’ Prices" - Pink Sheet, 3 May, 2024.)

The Inflation Reduction Act states that manufacturers will not be required to provide both 340B discounts and a maximum fair price (MFP). They must provide one or the other, whichever is lower.

In the guidance, CMS proposed that manufacturers “promptly” make up the difference to 340B providers if the discount is discovered retrospectively to be lower than the MFP.

However, the agency also will not ensure there is no duplication and expect manufacturers and 340B covered entities to deal with the issue. Manufacturers have until 1 June 2025 to provide CMS with plans for ensuring availability of the negotiated prices going into effect 1 January 2026.

PhRMA urged CMS to establish a neutral clearinghouse for drug claims that would facilitate better 340B discount tracking and require hospitals and other providers to include modifiers on claims indicating when 340B discounts are received.

“Fourteen years after the passage of the Affordable Care Act, we still do not have a solution to deduplicate Medicaid rebates and 340B discounts on the same prescription. And now we’re about to introduce it for Part D drugs, for some of the most utilized Part D drugs.” – Drug Channels’ Adam Fein.

If the recommendations are not adopted, which appears likely, “primary manufacturers will develop their own processes for deduplicating discounts between the MFP and 340B ceiling price,” the trade group said.

But “if 340B [covered entities] … do not work in good faith … to identify which selected drug claims are for 340B-eligible units, then a primary manufacturer should not be subject to an HHS enforcement action if the manufacturer, despite its reasonable, good faith efforts, is unable to ‘promptly provide to the 340B [entity] dispensing the 340B drug the difference between the MFP… and the 340B ceiling price,’” PhRMA maintained.

The comments also indicate the “prevailing” inventory replenishment model used by 340B contract pharmacies “presents significant challenges in appropriately identifying individual prescription claims that are the basis for [covered entity] replenishment requests at the applicable 340B price.”

Hospitals ‘Historically’ Uncooperative

Covered entities also “have historically not always been cooperative partners with manufacturers in identifying 340B-eligible units and resolving duplicate discounts,” PhRMA said.

Drug Channels Institute president Adam Fein shared the group’s skepticism about the likelihood that providers would cooperate.

“Is deduplication something that covered entities will help with? Well, if past is prologue, probably not,” he said during a recent Drug Channels webinar on the 340B program.

Fein said the Affordable Care Act prohibits duplicating Medicaid rebates and 340B discounts but that watchdog agencies, including the Government Accountability Office, have flagged a lack of regulatory oversight in that area as a consistent problem.

“Fourteen years after the passage of the Affordable Care Act, we still do not have a solution to deduplicate Medicaid rebates and 340B discounts on the same prescription,” he commented. “And now we’re about to introduce it for Part D drugs, for some of the most utilized Part D drugs. And eventually, for some of the most utilized Part B drugs.”

To underscore the potential impact of the issue, Fein cited a 2023 JAMA Health Forum study that found a significant proportion of Part D claims for five of the drugs now in the negotiation process were filled at 340B pharmacies in 2020.

The drugs and share of claims filled in 340B pharmacies identified include: Bristol Myers Squibb Company’s Eliquis (47%), Merck & Co., Inc.’s Januvia (48%), Johnson & Johnson’s Xarelto (48%), Novo Nordisk A/S’s Novolog (48%) and AbbVie Inc.’s Imbruvica (74%).

“This is not a theoretical concern. This is a big issue,” Fein said. “Which means it’s going to affect 340B discounts and the oversight of the program.”

If manufacturers can require providers to turn over claims due to the MFP requirements in the Inflation Reduction Act, some state laws prohibiting the practice and litigation challenging it “may vanish and we may have a much more complicated situation,” he suggested.  (Also see "Pharma's 340B Legal Disputes Over Contract Pharmacies May Get A Boost With Chevron Ruling" - Pink Sheet, 15 Jul, 2024.)

The IRA And 340B Program Transparency

Fein predicted the IRA’s requirements for 340B discounts are “potentially going to force manufacturers, covered entities and contract pharmacies to become much more transparent as to what’s happening … Just the nature of what is required under the IRA is going to force, and in some cases require, manufacturers to drive” more transparency.

The outcome “could actually … be very bad for covered entities, who may have some very strong feelings about whether they should be following this [CMS] guidance or not,” he said.

The IRA provision establishing price inflation rebates in Medicare Part D could similarly drive greater 340B transparency. CMS is supposed to exclude drug units with 340B discounts from their rebate calculations, which requires the agency to develop a process to identify drugs with 340B discounts.

A discussion of CMS thinking on the issue was part of the recently released Medicare Physician Fee Schedule proposed rule, which also included a plan to codify existing CMS guidance on the inflation rebate program in Part D and Part B.

Hospitals Weigh In

In separate comments on the CMS guidance, the American Hospital Association took issue with the idea of manufacturers retrospectively reconciling 340B discounts on Medicare negotiated drugs.

“We are deeply concerned that such an elaborate process would put providers in the position of chasing rebates and 340B discounts from drug manufacturers instead of requiring manufacturers to make the lower negotiated prices available upfront, just as the 340B program currently works,” AHA said.

“Further, this would require the 340B covered entity or its [third party administrator] to transmit sensitive claims data to each drug manufacturer, of which there are many, creating unnecessary burden and cost to the covered entity, and which can be used by the drug manufacturer for their own financial advantage,” the organization added.

AHA also predicted a retrospective process “would create an administrative nightmare” for covered entities and for HRSA.

Covered entities that have not received refunds from manufacturers could seek relief through the 340B administrative dispute resolution (ADR) process. As a result, “the 340B ADR process could be inundated with such requests for administrative review, creating uncertainty for covered entities, manufacturers and the government,” the group said.