Advocacy and Legal Update

A Flurry of Activity Related to HTCs and 340B Pre-Election
by the Artemis Policy Group

As Fall progresses, common wisdom in DC is to not anticipate much legislative activity prior to the election. However, this year, Congress must pass legislation to continue to fund the federal government by September 30th before heading out to campaign. Also, Congress will need to return before the end of the calendar year to act on several key “must-do” health care priorities. These include extending the telehealth flexibilities, mitigating payment cuts to doctors under the Medicare Physician Fee Schedule and to DSH hospitals under Medicaid, and extension of the Community Health Center grant program. Given this long to-do list, Congress is moving some bills now to be ready for action during an anticipated “lame duck” session.

While comprehensive legislation to reform the 340B Program seems to have stalled for now, Congress has included proposals related to 340B in other bills that could move before the end of the year. Most recently, the House passed the “Accelerating Kids’ Access to Care Act” (H.R.4758) which streamlines interstate-state Medicaid enrollment for pediatric providers. This bill was amended to require providers to publicly report their 340B revenue earned from Medicaid managed care plans, which the government would then make available online in a searchable format. H.R. 4758 also prohibits “spread pricing” practices by PBMs in Medicaid managed care, whereby the PBM charges Medicaid more than they actually pay pharmacies. Similar spread-pricing proposals were included in other PBM reform bills, such as the “Lower Costs, More Transparency Act” (H.R.5378) which passed out of the House with 320-71 vote but has seen no action by the Senate.

The Hemophilia Alliance has engaged extensively with Congress as they consider reforming the 340B Program and will continue to do so. We will carefully track end-if-year legislation and keep members apprised of important developments.

New 340B Legislation Introduced to Stop Contract Pharmacy Restrictions

In mid-September, Senator Welch of Vermont introduced federal legislation to ensure 340B covered entities have access to contract pharmacies. Although not identical, the 340B Pharmaceutical Access To Invest in Essential, Needed Treatments & Support Act of 2024 or the 340B PATIENTS Act of 2024 (S. 5021) largely resembles Representative Matsui’s (D-CA) 340B PATIENTS Act bill (H.R. 7635) which she introduced in March.

More specifically, the bill would require manufacturers to offer 340B discount prices to covered entities, regardless of the manner or location in which a drug is dispensed. It would prohibit drugmakers from placing conditions on a covered entity’s ability to purchase and use 340B drugs, including requiring claims data submissions; and impose civil monetary penalties on manufacturers that violate those provisions. Put simply, the bill affirms covered entities use of contract pharmacies in 340B.

Today, more than 35 drug manufacturers have established restrictions on covered entities’ use of contract pharmacies. These efforts started in 2020 and proliferated further in 2023 after a federal appeals court held that drugmakers do not need to provide 340B prices to an “unlimited number of contract pharmacies.” In response to those restrictions, eight states have passed contract pharmacy access laws, all of which have garnered legal challenges from the drug industry.
Bleeding disorder drug manufacturers have exempted Hemophilia Treatment Centers from these contract pharmacy restrictions, allowing people with bleeding and clotting disorders to continue to utilize 340B discounted products at contract pharmacies. However, we have, and will continue to, closely monitor developments.

J&J Rebate Model Latest Manufacturer Action Making Waves in Washington

At the end of August, Johnson and Johnson (J&J) announced that as of October 15, 2024, it plans to stop providing 340B discounts and shift to providing rebates for two drugs for disproportionate share hospital (DSH) covered entities. Hospitals would buy Stelara and Xarelto at regular commercial prices, and if they submit data that demonstrates that the drug was given to an eligible patient, the hospital would receive a rebate. J&J has said they are responding to “rampant abuse and misuse” in the 340B program and that “to help the 340B Program better serve vulnerable patients, J&J is implementing reasonable, standard business practices used across other government programs and contracts.”

Further complicating matters, these two drugs have also been chosen for the Medicare Drug Price Negotiation Program, for which new, negotiated reimbursement levels will take effect in 2026. The law says that manufacturers won’t have to provide the 340B discount for Medicare drugs being reimbursed the new rate (similar to how they don’t have to provide both the 340B discount and the Medicaid rebate).

Last week, HRSA sent a letter to the J&J CEO warning the company that “this unapproved rebate proposal violates J&J’s obligations under the 340B statute, and HRSA expects J&J to cease implementation of it.” If J&J moves forward with the model, HRSA says that they will be violating federal law and could face consequences such as termination of J&J’s Pharmaceutical Pricing Agreement (that allows them to sell products to Medicaid) or fines for “knowingly and intentionally charging a covered entity a price for purchase of a drug that exceeds the maximum applicable price.” HRSA wrote it expects J&J to cease implementation immediately and to inform the agency no later than September 30th in order to provide adequate notice to covered entities.

This is just the latest salvo in the ongoing battle between manufacturers and HRSA that has started with contract pharmacy restrictions and is now moving to rebates. There will likely be additional lawsuits on this policy, if it takes effect next month. We also suspect that J&J started with the two Medicare negotiated drugs as a means of underscoring the complexity of there being multiple discount programs.

Why are we telling HTCs about this? All of this adds to the noise and stakeholders pushing for Congress to enact 340B reform. One of the proposals in some of the comprehensive bills, for example, is to create a new clearinghouse where all 340B claims would be sent to clarify Medicaid vs. Medicare vs. rebate-eligible private insurance claims, etc. None of the proposals would allow a manufacturer to stop providing the 340B discount, however! A cynical person might think that even if J&J is prepared to lose the battle over whether they can move to this new rebate model, they may be trying to win the war of getting Congress to act.