Testimonies focus on benefits of 340B Drug Program

Various testimonies were provided in a hearing before the House Committee on Energy and Commerce examining how covered entities are using the 340B Drug Pricing Program. The hearing discussed various issues, including how covered entities (1) track and use savings from the 340B Program; (2) use contract pharmacy arrangements; (3) use child sites; and (4) interact with the Health Resources and Services Administration (HRSA). In addition, the hearing focused on the requirements different types of covered entities must meet in order to receive reduced prices through the 340B Program.

Neither the 340B statute nor HRSA guidance, however, explain how 340B entities must use savings from the program. There is no requirement that the discounted 340B price be passed on to uninsured patients who seek treatment at 340B entities. As a result, the 340B entity will acquire the drug at a discounted price, but the uninsured patient may pay the full list price for the drug. While some 340B entities pass savings on to uninsured patients, it has been reported that some use savings from the 340B Program to pay for the operations of the covered entity, such as marketing. The House Committee convened the hearing to examine current practices and usage of savings generated by the 340B Program.

Background

Established by Congress, the 340B Drug Pricing Program mandates that drug manufacturers provide outpatient drugs to eligible health care organizations, also known as covered entities, at reduced prices to remain eligible for reimbursements through entitlement programs such as Medicaid and Medicare. Covered entities are eligible to receive discounts on outpatient prescription drugs from participating manufacturers and report saving between25 and 50 percent of the average wholesale price for covered outpatient drugs.

Covered entities do not receive discounts on inpatient drugs under the 340B Program. Covered entities can realize substantial savings on outpatient drugs through 340B price discounts and generate 340B revenue by selling 340B drugs at a higher price than the discounted price at which the covered entity obtained the drug.

Testimonies

Shannon A. Banna, Director of Finance and System Controller, at Northside Hospital, Inc., noted that the 340B Program savings allow the hospital to provide drugs to some of its most vulnerable patients and expand its charity care and community programs. In addition, the hospital met 340B Program requirements, with only a single instance of inadvertent diversion of less than $7 in an HRSA audit. Northside is an independent Georgia non-profit corporation that owns or operates an extensive network of health care facilities in Georgia, including three acute care hospitals located across the northern metropolitan Atlanta area with a total of 926 operational beds and more than 150 ancillary and physician service sites located across the 28 county Atlanta Metropolitan Statistical Area.

Michael Gifford, President and Chief Executive Officer, of AIDS Resource Center of Wisconsin, a non-profit providing health care services and support for HIV patients, stated that the savings generated by the 340B Program allowed entities to purchase certain medications at a price lower than what these medications are normally purchased for. In turn, these savings that are generated off the reimbursement for the medication purchased using 340B pricing are then reinvested into programs and services that directly benefit the individuals the covered entity serves.

Ronald A. Paulus, MD, President and CEO, of Mission Health Systems, Inc., testified that six Mission Health hospitals qualify to participate in the 340B Program based on either disproportionate share hospital (DSH) or critical access hospital status. The hospitals use of 340B Program savings directly reflects the intent and design of the 340B Program, going to support high quality, safety net services and programs many of which are otherwise unavailable in the region and would be unavailable absent the 340B program. He noted that funds provided by 340B program savings were integral to the hospital’s work.

Charles B. Reuland, Executive Vice President and COO, of The Johns Hopkins Hospital stated that participation in the 340B Program allowed the hospital to provide care and service to vulnerable individuals and families. As a safety net hospital, Johns Hopkins uses its 340B savings to respond to emerging crises and to continue serving the most vulnerable patients in Baltimore. Reuland noted that since 2009, Johns Hopkins has offered a charity program designed to improve access to effective, compassionate, evidence-based primary and specialty care to uninsured and underinsured patients from the neighborhoods immediately surrounding the hospital.

Sue Veer, President and CEO of Carolina Health Centers, Inc., a federally qualified health center that serves as the primary care medical home for 26,952 patients in the west central area of South Carolina, noted that using 2016 as a sample, 142,045 or 43.1 percent of the 329,679 prescriptions dispensed at the system’s two pharmacies were filled with 340B purchased inventory for eligible patients. The system’s total 340B savings for 2016—calculated as the net margin after the sale of the drug—was $561,620. She further noted that the savings enabled the health center to provide deeply discounted pharmacy services to those patients eligible for the income-based sliding fee program, offer medication therapy management to promote clinical and cost effective care, and assist patients with qualifying for manufacturer Patient Assistance Programs.

Dem leaders push for quick Graham-Cassidy CBO assessment; hearing scheduled

Democrats in both the House and Senate reacted quickly to the Graham-Cassidy legislation in requesting a full assessment from the Congressional Budget Office (CBO). The office stated that it is working on a preliminary assessment for the week of September 25, 2017, as early as possible. However, the CBO warned that point estimates on several matters will be unavailable for at least a number of weeks.

Graham-Cassidy legislation

Offered as an amendment to the American Health Care Act (AHCA) (H.R. 1628), the proposal would give more control to states over meeting their residents’ health care needs. The legislation would repeal the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and fund a block grant program through the Children’s Health Insurance Program (CHIP) instead (see Sanders’ Medicare-for-all, Graham-Cassidy’s block grant legislation introduced in Senate, September 14, 2017).

Finance hearing

The Senate Finance Committee will conduct a hearing on the Graham-Cassidy amendment on September 25, 2017. Committee Chair Orrin Hatch (R-Utah) announced the hearing, stating that it would allow members on both sides of the issue to better understand policy. In light of the Finance Committee’s hearing announcement, Sen. Ron Johnson (R-Wis), chair of the Senate Homeland Security and Governmental Affairs Committee, has chosen to cancel his committee hearing.

CBO request and response

According to Rep. Nancy Pelosi (D-Calif), “Republicans are reportedly hoping to rush to a vote with only a scant budget assessment.” The letter to the CBO requested information on loss of coverage, premium and out-of-pocket cost increases, effect on those with pre-existing conditions, Medicaid cuts, marketplace stability, and state reform timelines. The CBO will be unable to provide estimates on the effects on the deficit, coverage, or costs in its preliminary assessment.

AMA chimes in 

Ahead of a CBO report, the American Medical Association (AMA) believes that the bill would destabilize markets and cause millions to lose coverage. The association reached out to Senate Majority Leader Mitch McConnell (R-Ky) and Minority Leader Chuck Schumer (D-NY) to oppose the amendment and all legislation that would jeopardize coverage. The AMA holds the position that any health reform proposals should ensure that those currently insured are able to maintain their coverage, and expressed its concerned that the conversion of the Medicaid program would limit federal support for needy patients.

House Committee urged to extend funding for federal safety net programs

Extend funding for the Children’s Health Insurance Program (CHIP) to ensure continuity of coverage for children, particularly in light of the current uncertainty surrounding other sources of health coverage in the U.S., witnesses urged at a House Committee on Energy and Commerce hearing titled “Examining the Extension of Safety Net Health Programs.” The purpose of the hearing was to examine the extension of funding for two federal safety net health programs that provide health care and coverage for low-income adults and children, CHIP and the Community Health Center Fund (CHCF).

CHIP

CHIP is a program that provides health coverage to targeted low-income children and pregnant women in families that have annual income above Medicaid eligibility levels but have no health insurance. It is jointly financed by the federal government and states, and the states are responsible for administering the program. A memo from the committee majority staff states that in fiscal year (FY) 2015, 8.4 million children received CHIP-funded coverage.

Section 2101 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) increased the CHIP enhanced federal medical assistance percentage (E-FMAP), which varies by state, by 23 percent from October 1, 2013 through September 30, 2019. Since the ACA did not include additional or extended funding for CHIP, MACRA extended funding through September 30, 2017. The Medicaid and CHIP Express Lane Option, Child Enrollment Contingency Fund, CHIP Qualifying State Option, and CHIP Outreach and Enrollment Grants also expire September 30, 2017.

At the hearing, Cindy Mann, partner at Manatt, Phelps & Phillips, touted the success of CHIP, which covers 8.9 million children nationwide. She stated that Congress must consider the overall level of funding for CHIP, in addition to the E-FMAP funds, which “are now fully integrated into states’ budgets and a key source of funding for sustaining CHIP.” She said that Congressional action is needed as soon as possible to ensure program continuity, budget certainty for states, and stable coverage for children, particularly those with special health care needs. She urged a five-year extension instead of two to provide needed stability (see Extend CHIP, protect DSH payments, MACPAC tells Congress, March 16, 2017).

Jami Snyder, Director of the Medicaid and CHIP programs for the state of Texas, noted that a decision to not reauthorize the CHIP program would result in a loss of over $1 billion in annual funding to the state of Texas and a loss of coverage for more than 380,000 Texas children.

Health Center Program

The Health Resources and Services Administration’s (HRSA) Health Center Program, authorized under Section 330 of the Public Health Service Act, awards grants to federally qualified health centers (FQHCs). The program is supported by discretionary appropriations and the CHCF, a mandatory multibillion-dollar fund established by Section 10503 of the ACA. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10) extended funding through fiscal year 2017. According to the staff memo, the CHCF represents over 70 percent of the Health Center Program’s FY 2016 funding.

Michael Holmes, the chief executive officer of Cook Area Health Services, an FQHC in Minnesota, testified that as a result of CHCF investments new FQHC were added in more than 1,100 communities. With the extension nearing its expiration date, he “strongly urged” Congress to renew funding for at least five years to allow FQHCs to provide a stable and reliable source of access to patients and recruit and retain a comprehensive health care workforce.

User fee program reauthorizations necessary for product development

The House Energy and Commerce Subcommittee on Health focused its attention on the FDA’s generic drug and biosimilar user fee programs by inviting the FDA and industry leaders to a hearing to discuss how the programs have been implemented to date and recommendations on reauthorization. Both the Generic Drug User Fee Amendments of 2012 (GDUFA) and the Biosimilar User Fee Act of 2012 (BsUFA) expire in September 2017 and must be reauthorized for the Fiscal Years 2018 to 2022. The hearing also discussed H.R. 749, the Lower Drug Costs Through Competition Act, which seeks to increase generic competition through a shortened review cycle of six months.

Background

Since 1992 and based on the Prescription Drug User Fee Act (PDUFA), Congress has authorized the FDA to collect fees from regulated industry to supplement congressional appropriations. Revenues generated from these fees have been used on specific activities related to the review and regulation of medical products. In exchange for industry agreeing to pay fees, the FDA agrees to meet certain performance goals, such as completing product reviews within specified timeframes. Industry concerns about the length of time it was taking the FDA to review generic drug applications, known as abbreviated new drug applications (ANDA), and the backlog of such applications pending at the agency led Congress to pass GDUFA as part of the Food and Drug Administration Safety and Innovation Act (FDASIA).

Likewise, the Biologics Price Competition and Innovation Act (BCPIA) of 2009, as passed with the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), established a new regulatory authority for the FDA to create an abbreviated approval pathway for biological products demonstrated to be “highly similar” to, or “interchangeable” with, a previously licensed biological product. As part of FDASIA, Congress passed BsUFA to authorize FDA to collect user fees from biosimilar product manufacturers.

Pew Charitable Trusts

Allan Coukell, Senior Director of Health Programs, The Pew Charitable Trusts presented testimony on rising pharmaceutical costs, within and beyond the user fee context. He noted the rising cost of new medicines—especially high-cost specialty drugs, which are only used by 1 to 2 percent of the population, but account for more than one-third of drug spending. Although the FDA’s approval processes outlined in the generic and other user-free agreements offer some potential to address drug spending, he stressed that competition via generic drugs.

As such, the Lower Drug Costs through Competition Act (H.R. 749) would award a generic priority review voucher to any manufacturer that brings a generic drug to market in cases of limited competition or a drug shortage. It would also establish a six-month timeline for FDA review of priority applications, faster than the GDUFA review. In addition to accelerated review, the Pew Charitable Trusts called for Congress to consider requiring greater transparency of contract terms and definitions between payers and pharmacy benefit managers (PBM), as well as mandating the ability to audit these deals, and ensuring that entities that advise purchasers on PBM contracts do not also have financial relationships with the PBMs themselves.

Association for Accessible Medicines

David Gaugh, Senior Vice President for Sciences and Regulatory Affairs at the Association for Accessible Medicines (AAM), which was previously known as GPhA—the trade association representing the manufacturers and distributors of generic prescription drugs, manufacturers and distributors of bulk pharmaceutical chemicals—testified that the best way of achieving the goal of providing patients access to generic alternatives is through the development of policies that promoted competitive markets. The AAM stressed that the best way to control drug costs generally was through policies that incentivize competition, such as GDUFA.

The user fee program supports small business by exempting them from a facility fee until the first ANDA in that facility is approved. The proposal also provides for a tiered structure of annual ANDA program fees based on small, medium, and large companies. Designing GDUFA to spread fees across industry to keep individual amounts as low as possible, the AAM believed the program would help assure that patients continue to receive the significant cost savings from generics alternatives.

Biotechnology Innovation Organization

Kay Holcombe, Senior Vice president, Science Policy, Biotechnology Innovation Organization (BIO), offered testimony to the Subcommittee on reauthorization of BsUFA and H.R. 749. BIO supported the reauthorization of BsUFA, as well as expressed its support for competition in the prescription drug marketplace not only between innovator biologics and biosimilars, but also between innovator drugs and generic drugs, which is the subject of H.R. 749. BIO urged the FDA to lay out its thinking on interchangeability and believed it was crucial for the FDA to clarify its expectations for the data needed to determine that a biosimilar product is interchangeable with its reference biological product. Such a determination could serve to encourage greater prescribing and use of biosimilars as the availability of biosimilar products increases, provided the determination is sufficiently rigorous.

As for H.R. 749, BIO did not adopt a position on the question of timelines for generic drug review or awarding certain generic drug applicants with priority review vouchers under the proposed legislation. BIO did note that it supported policy intended to lower drug prices through the promotion of competition in the drug marketplace, including the timely entry of generics and biosimilars once patents and exclusivities for innovator drugs have expired.

Biosimilars Council

Bruce Leicher, Senior Vice President and General Counsel at Momenta Pharmaceuticals, and Chair of the Biosimilars Council Board of Directors, a division of AAM, noted that the BsUFA reauthorization user fees were now tied to the level of resources needed and adjust with resource demand. As such, it was vital that Congress understood that the funding provided by user fees is in addition to, not a substitute for, congressional appropriations.

Biosimilars Forum

Juliana Reed, Vice President of Government Affairs for Coherus BioSciences, stated that the Biosimilars Forum entered into the BsUFA reauthorization negotiation process with four primary goals: (1) ensuring solid financial support for the program; (2) improving communication between the FDA and biosimilars product sponsors during the approval process to improve efficiency; (3) increasing transparency during the approval process and regarding the spending of user fees; and (4) preventing the expenditure of BsUFA funds on extraneous policy issues or activities that are not exclusive to biosimilars. The Biosimilars Forum was pleased to see that the BsUFA draft met these goals.

In addition, the Biosimilars Forum urged Congress require CMS to review its current reimbursement policy for biosimilars and make it consistent with FDA biosimilar policies. Specifically, it noted that the FDA policy on biosimilars acknowledges the unique nature of each biosimilar, and CMS should align its policy by assigning unique, individualized billing codes to each biosimilar.

FDA

Janet Woodcock, Director of the Center for Drug Evaluation and Research (CDER) at the FDA, discussed both GDUFA and BsUFA during her testimony before the Subcommittee. GDUFA achieved a number of notable goals during the course of its five-year authorization. The FDA approved or tentatively approved 835 ANDAs—the most approvals in the history of the agency—in fiscal year (FY) 2016 alone. The previous high was 619. In addition, approximately 25 percent of all currently approved generic drugs were approved over the past four years. Prior to GDUFA, ANDAs were approved in one review cycle less than one percent of the time. Now, approximately nine percent of ANDAs are approved in the first review cycle.

The FDA did note some challenges to GDUFA, namely submission completeness and volume of applications. Historically, it has taken on average about four review cycles to approve an ANDA as a result of deficiencies by generic drug sponsors in submitting complete applications. More work by both the FDA and industry will be necessary to have the filings be accurate the first time. Moreover, in FYs 2012, 2013, and 2014, the FDA received over 1,000, nearly 1,000, and nearly 1,500 applications, respectively, which taxed the agency’s ability to timely process the ANDAs.

The FDA was also supportive of and fully engaged with the development and approval of biosimilar and interchangeable products. One of the first steps in the development and review process for a biosimilar is for an applicant to join the FDA’s Biosimilar Product Development (BPD) Program. As of February 2017, 64 programs were enrolled in the BPD Program and CDER has received meeting requests to discuss the development of biosimilars for 23 different reference products. Moreover, the FDA finalized six guidances and issued four draft guidances during the timeframe in question. The FDA’s challenge, however, was a result of staffing shortages. Without additional staffing to handle the increased workload for biosimilar review, the FDA warned that review performance would be impacted.