MDRP and 340B: updates from last week | Hogan Lovells


On October 13, 2021, the in-person portion of the annual informaconnect Medicaid Drug Rebate Program (MDRP) conference ended in New Brunswick, New Jersey. The day before, on October 12, 2021, a joint hearing was held at Novartis Pharms. Corp. v. Espinosa, et al., 1: 21-cv-01479-DLF (DDC) and United Therapeutics Corp. v. Espinosa et al., 1: 21-cv-01686-DLF (DDC) to examine whether manufacturers can restrict the circumstances in which they offer the 340B ceiling price through contract pharmacy arrangements. We provide highlights from both events below.

David Tawes, Regional Inspector General, HHS OIG, “OIG Updates: Audits and Case Studies from the Manufacturer Perspective”

Mr. Tawes described a number of recent, ongoing, and upcoming reports from the US Department of Health and Human Services and the Office of the Inspector General (“OIG”). Among others, the following were noteworthy:

  • Next report on “Accuracy of the average selling prices declared by the manufacturer. “ As part of the Consolidated Appropriations Act, 2021, Congress recently ordered the OIG, “to assess and submit to Congress,” by January 1, 2023, a report on the accuracy of information on the Average Selling Price (‘ASP’) submitted by manufacturers, “including the extent to which manufacturers provide false information, misclass pharmaceuticals, or misreport information. Congress ordered that the report “include any recommendations on how to improve the accuracy of this information.”
  • Mr Dawes made it clear that the OIG does not approach its assessment from a waiting that there were inaccuracies in the ASP, but that the report would likely be modeled after the 2019 OIG’s work on the manufacturer’s reasonable assumptions under the MDRP. As part of the process, OIG plans to seek information from the manufacturers of the 30 most expensive Medicare drugs (likely Part B), and OIG will also work with the Centers for Medicare & Medicaid Services (“CMS”). Mr. Dawes specifically requested that manufacturers contact him if there are any particular issues or questions they wish to see addressed as part of this report. He noted that the OIG was planning to move forward with this element of the work plan shortly, given the January 2023 deadline, and therefore requested that any manufacturer input be provided as soon as possible.
  • OIG’s recent orphan drug report discussed. Mr Dawes shared concerns about the high price of orphan drugs, which were highlighted in a recent OIG report titled “Medicare High Cost Drugs Often Qualify For Orphan Drug Act Incentives Designed to encourage the development of treatments for rare diseases ”. Mr Dawes explained that 16 of the more expensive Part B drugs and 6 of the more expensive Part D drugs have orphan drug status, and many of these drugs are also approved and primarily used for clinical indications. non-orphan drugs. Mr Dawes added that the 340B program may encourage manufacturers to seek an orphan drug designation, as the orphan drug exclusion is linked to being designated as an orphan drug instead of being approved for an indication. orphan drug.
  • A 2020 report on the inclusion of self-administered drugs not covered in the calculation of the Part B payment rate. Mr. Tawes was the author of a 2020 Report on Inclusion of ASP for Non-Part B Versions of Part B Drugs in Part B Payment Rate Calculations, available here. The report identified what the OIG characterized as a loophole in the Part B reimbursement rules that allowed the inclusion of PHA for certain uncovered and self-administered forms of Part B drugs. found that excluding PHAs from these non-Part B versions of Part B drugs in the Part B payment rate would have saved Medicare and its beneficiaries nearly half a billion dollars in 2017 and 2018. Congress addressed the issue through consolidated appropriations. Law of 2021 by (1) directing the OIG to conduct studies to identify self-administered drugs not covered, PHAs for which the OIG determines should be excluded from the Part B reimbursement rate and (2) ordering it is up to CMS to adjust the amount of the reimbursement as it sees fit. CMS subsequently proposed to implement this change in this year’s proposed physician fee schedule rule. Mr Tawes did not address the process of making these decisions, but noted that he found it easy by referring to the way these products are advertised on manufacturers’ websites.

Additionally, Mr. Tawes noted that part of the reason we may not see more OIG reports on MDRP or 340B is that 80 percent of their funding comes from the anti-disease program. fraud and abuse in healthcare or “HCFAC” and should be used for Medicare and Medicaid. Only the remaining 20 percent can be used for other programs.

Aaron Vandervelde, Managing Director, BRG, “Contrat Pharmacy Arrangements: Implications for Stakeholders”

Following up on his recent report on “Participation of for-profit pharmacies in the 340B program”, Mr. Vandervelde presented his research on the implications of contract pharmacies for today’s 340B program. Highlights of his presentation include:

  • Profit margin (i.e. the difference between the reimbursement rate and the ceiling price) on 340B drugs dispensed by contractual pharmacies is about 72 percent.
    • Mr. Vandervelde further noted that when a vertically integrated pharmacy benefit manager (“PBM”), through a contracted pharmacy, dispenses a drug purchased at the ceiling price of 340 billion, it can realize margins. beneficiaries 3 to 10 times higher on prescription than for drugs not purchased at the ceiling price of 340 billion.
    • When a drug is not purchased at a price of $ 340 billion, the PBM may receive a discount from a manufacturer negotiated on behalf of a health plan or an employer, the discounts estimated by Mr. Vandervelde to be transmitted to that plan or employer 90 percent of the time.
    • When the drug is bought at the ceiling price of 340 billion, Vandervelde suggests that more of the profits are retained by the PBM and that the profits of the vertically integrated PBM increase at the expense of discounts for health plans and employers. ..
  • The catch rate, defined as the percentage of prescriptions filled at a 340B inhome or contract pharmacy, increased from 32% in 2017 to 39% in 2019. Mr Vandervelde attributes this to the increase in the number of in-house and contract pharmacies and the covered entities “referring” patients to these pharmacies.
  • Mr Vandervelde believes his research shows an extension of the definition of patient used by 340B covered entities, including their contract pharmacies, following the result of Genesis Health Care v. Azar. In this case, a covered entity sued the Health Resources and Services Administration (“HRSA”) for attempting to apply the hijack audit findings based on the definition of patient 340B against the entity, in response to which HRSA withdrew its conclusions.

Update on Contract Pharmacy Litigation

On October 12, 2021, United States District Court Judge Dabney Friedrich held a joint hearing on pending motions in pending Novartis and United Therapeutics 340B lawsuits for contract pharmacies, Novartis Pharma. Corp. vs. Espinosa, et al. and United Therapeutics Corp. vs. Espinosa et al. Novartis and United Therapeutics are each challenging HRSA’s May 17, 2021 letter in which the agency informed manufacturers that their contract pharmacy policies violate Law 340B and threatened to impose civil monetary penalties if they did not adhere to contractual pharmacy agreements. Here are some of the highlights from the audience:

  • Justice Friedrich said the text of Law 340B does not specify whether manufacturers are required to honor pharmacy contracts.
  • Among other things, she asked if the government can win its case if it loses the textual argument.
  • Judge Friedrich also asked whether covered entities still retain ownership of drugs shipped to contracted pharmacies.
  • In conclusion, Justice Friedrich indicated that a decision will be rendered shortly.

A plea hearing in the AstraZeneca Contract Pharmacy case has been set for Monday, October 18 at 3 p.m. EST. The public video conference link for the hearing can be found in the “Additional Resources” sidebar on the right. “

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As always, it is important that you carefully review this information in light of considerations that may be relevant to your organization and specific drugs. In particular, if you believe there are any issues to report to the OIG as part of its ongoing work on reviewing ASP issues, we encourage you to work with your legal counsel to assess if and how best to communicate this information.

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