115th Congress: Pharmaceutical Industry, Medicare, ACA, 340B – Legislation to Watch

Legislative measures aim to solve problems as defined by members of Congress. Once a bill passes both Chambers, the President will either sign the bill into law or veto it. If passed, the new law —  or act —  is codified in the United States Code (U.S.C).

REGULATIONS 

Once codified, federal agencies create rules and regulations — published in the Federal Register (FR) — to carry out the laws passed by Congress. Regulatory agencies act with broad discretionary authority and within limits set by Congress and the Constitution.

LEGISLATION TO WATCH

    1. S.2460 – Every Prescription Conveyed Securely Act – If passed in its current form, this bill will amend title XVIII of the Social Security Act to require e-prescribing for coverage under part D of the Medicare program of prescription drugs that are controlled substances.
    1. S.2453 – Ensuring the Value of the 340B Program Act of 2018 – If passed in its current form, this bill will amend title XVIII of the Social Security Act to require hospitals to provide the Secretary with information on the hospital’s acquisition costs for 340B drugs and the total revenues received by the hospital for such drugs.
    1. S.2476 – Expanding Access to Low Cost Generic Drugs Act – If passed in its current form, this bill will amend the Federal Food, Drug, and Cosmetic Act to ensure that valid generic drugs may enter the market.
    1. S.2478 – End Taxpayer Subsidies for Drug Ads Act – If passed in its current form, this bill will amend the Internal Revenue Code of 1986 to deny the deduction for advertising and promotional expenses for prescription drugs.
  1. S.2554 – Patient Right to Know Drug Prices Act – If passed in its current form, this bill will amend Section 1311(e) of the Patient Protection and Affordable Care Act by adding at the end the following:

(4)  INFORMATION ON PRESCRIPTION DRUGS. —The Exchange shall require health plans seeking certification as qualified health plans to ensure that—  “(A) the health insurance issuer does not restrict any pharmacy that dispenses a prescription drug to an enrollee in the plan from informing (or penalize such pharmacy for informing) an enrollee of any differential between the price of the drug to the enrollee under the plan and the price the individual would pay for the drug if the enrollee obtained the drug without using any health insurance coverage; and

“(B) any entity that provides pharmacy benefits management services under a contract with any such health plan does not, with respect to such plan or any health benefits plan that the entity contracts with to provide pharmacy benefits management services and that is offered by an entity other than such sponsor or organization, restrict a pharmacy that dispenses a prescription drug from informing (or penalize such pharmacy for informing) an enrollee of any differential between the price of the drug to the enrollee under the plan and the price the individual would pay for the drug if the enrollee obtained the drug without using any health insurance coverage.”

(b) Other Health Plans. —The provisions of section 1311(e)(4) of the Patient Protection and Affordable Care Act (as added by subsection (a)) shall apply to all health insurance issuers with respect to health insurance coverage and to all group health plans (as such terms are defined in section 2791 of the Public Health Service Act).

Notably, (a) not all measures [necessarily] pass through the Chamber in which they are introduced — similarly,  not all measures that pass through one or both Chambers will [necessarily] pass in their current form and (b) it is important to consider the (Party) composition of Congress in relation to the political (Party) affiliation(s) of the President and a bill’s sponsor — and co-sponsor(s) when gauging the likelihood of a legislative measure becoming law [this should not be taken to mean that ALL legislative measures lack bipartisan support].

LEGISLATION BEGETS REGULATION

The pharmaceutical industry, the 340B program, health plans, hospitals, and Medicare Part D are highly regulated. Government action profoundly impacts industry’s operations, products and business development goals. Strategically, the value of proactively tracking legislation cannot — and should not — be underscored.

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Update: Federal Court Allows The Centers for Medicare & Medicaid Services to Cut $1.6 billion from Federal 340B Drug Pricing Program

Health care policies are implemented through expenditure decisions made by government officials. Today, a federal court  deemed a lawsuit brought by three hospital associations — among other entities — invalid, allowing the CMS to implement the provisions of a final rule the agency published in November. 

BACKGROUND

In November, the CMS published a controversial final rule  which, among other things, cut Medicare hospital reimbursement payments for hospitals that participate in the Health Resources and Services Administration’s (HRSA’s) 340B Drug Pricing Program by $1.6 billon, effective January 1, 2018. Rural, children’s and cancer hospitals are not subject to reimbursement decreases.

THE JUSTIFICATION FOR CUTTING HOSPITAL REIMBURSEMENT PAYMENTS

The language in the final rule reads: “We [CMS] believe that reducing payments on 340B purchased drugs to better align with hospital acquisition costs directly lowers drug costs for those beneficiaries who receive a covered outpatient drug from a 340B participating hospital. Further, to the extent that studies have found that 340B participating hospitals tend to use more high cost drugs, we believe that this 340B payment policy helps address drug pricing in the hospital outpatient setting by lessening the incentive for unnecessary utilization of costly drugs.”

340B PROGRAM BACKGROUND

The Omnibus Reconciliation Act created the CMS’ Medicaid Rebate Program in 1990. In order to be reimbursed by the federal government, and as a prerequisite for entry into the Medicaid and Medicare Part B markets, the Act requires drug manufacturers to offer formula based rebates on certain outpatient drugs.

To mitigate the unintended consequences of the rebate program — a rise in prescription drug costs for safety net hospitals and other entities that provide health care services to low income patients — Congress passed the Veterans Health Care Act of 1992 which created Section 340B of the Public Health Service Act. The Act requires pharmaceutical manufacturers to provide point of sale discounts to 340B-covered entities.

340B PROGRAM SNAPSHOT

The HRSA’s Office of Pharmacy Affairs administers the 340B Drug Pricing Program.

Qualifying hospitals and other 340B-covered entities receive discounts from pharmaceutical manufacturers participating in government-sponsored health care programs that have entered into a pharmaceutical pricing agreement with the Department of Health and Human Services Secretary.

Manufacturers participating in Medicaid agree to provide outpatient drugs to covered entities at significantly reduced prices. All covered entities must register and annually re-certify their eligibility as 340B providers, agree to adhere to all program requirements, and accurately report how they bill Medicaid fee-for-service drugs on the Medicaid Exclusion File (MEF).

The MEF is a coding mechanism employed by 340B-covered entities and states to prevent duplicate discounts for drugs subject to Medicaid rebates. By law, drug manufacturers are not allowed to provide a discounted 340B price and a Medicaid drug rebate for the same product.

WHY THIS MATTERS 

By authorizing the CMS to continue with its plan to cut the 340B Drug Pricing Program by $1.6 billion, Medicare hospital reimbursement payments for 340B hospitals will decrease exponentially. According to the hospital associations involved in the lawsuit, this decision will profoundly undermine patient access to affordable prescription drugs. Proponents of 340B program cuts disagree… Only time will tell.

O.W.B Public Affairs Digest
O.W.B Public Affairs Digest

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Managed Care and Rural Health: Medicaid and CHIP Managed Care Final Rule

In FY 2016, total Medicaid Expenditures — including the US Territories, administrative costs, and accounting adjustments — exceeded $574 billion. Meanwhile,  rural health outcomes are poor, and the health care utilization rate among rural residents is low compared with the nation’s urban residents.

Rural Health Care

Provider shortages, poor transportation infrastructure, socio-cultural dynamics, and inadequate broadband internet access are factors that diminish rural health care access. As a strategy to contain rising health care costs and improve rural health outcomes, states across the country are transitioning rural Medicaid beneficiaries from fee-for-service health care arrangements to Medicaid managed care.

Medicaid Managed Care

Managed care organizations (MCOs) have demonstrated an ability to provide Medicaid coverage that results in efficiency in the provision of government-sponsored health care and effectiveness in improving the health outcomes of rural residents through features such as telemedicine (if possible), allied health professionals, community health workers, and non-emergency medical transportation (NEMT).

NEMT is a mandatory Medicaid benefit but states can, and do, limit the availability of NEMT services via federal waivers. However, full-risk capitation arrangements incentivize MCOs to provide services such as NEMT.

Medicaid and CHIP Managed Care Final Rule 

The extent of recent reports detailing the ways in which rural hospitals are struggling to stay open further illustrates the benefit of managed care.  Specifically, MCOs must adhere to network adequacy requirements as established by the CMS’ 2016 Medicaid and CHIP Managed Care Final Rule. The network adequacy provisions require states to establish and enforce certain time and distance standards with contracted MCOs.

Facts on Rural Health 

  • The incidence of diabetes among rural residents is 17% higher than urban residents.[1]
  • Mental health comorbidities are more common in rural, long-term care populations.[2]
  • Limitations in activities of daily living are more prevalent among rural residents.[3]
  • The prevalence of hypertension is higher in rural populations than in urban populations.[4]
  • Rural Medicaid beneficiaries are more likely than their urban counterparts to be dually eligible for Medicaid and Medicare, and are overwhelmingly low income, elderly and disabled; dual eligibles are considered the most costly, at-risk, and vulnerable population.[5]

[1] Lorenz, G., Levey, M., and Case, R. (2013). Integrated Care Through Education: Improving Care for Those with Serious Mental Illness and/or Intellectual Disability and Diabetes in Rural Indiana. Journal of Rural Mental Health.

[2] Quinn, M. (2016). New Medicaid Rules Could Ease Rural Health Care’s Problems. Governing. Retrieved from http://www.governing.com/topics/health-human-services/gov-cms-medicaid-managed-care.

[3]Rural Health Information Hub. (2016). Medicare and Rural Health. Retrieved from https://www.ruralhealthinfo.org/topics/medicare.

[4] Ibid.

[5] CMS. (2015). People Enrolled In Medicare and Medicaid: Medicare-Medicaid Coordination Office Fact Sheet. Retrieved from https://www.cms.gov/Medicare-Medicaid-Coordination//Medicare-and-Medicaid-Coordination/Medicare-Medicaid -coordination-Office/Downloads/MMCO Factsheet.pdf.

Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs

Health care policies are implemented through expenditure decisions made by government officials. On Wednesday, the Centers for Medicaid & Medicare Services (CMS) published a final rule, which among other things cut Medicare hospital reimbursement payments for hospitals that participate in the Health Resources and Services Administration’s (HRSA’s) 340B Drug Pricing Program by $1.6 billon, effective January 1, 2018. Rural, children’s and cancer hospitals are not subject to reimbursement decreases.

The justification for cutting  hospital reimbursement payments? The language in the final rule reads: “We [CMS] believe that reducing payments on 340B purchased drugs to better align with hospital acquisition costs directly lowers drug costs for those beneficiaries who receive a covered outpatient drug from a 340B participating hospital. Further, to the extent that studies have found that 340B participating hospitals tend to use more high costs drugs, we believe that this 340B payment policy helps address drug pricing in the hospital outpatient setting by lessening the incentive for unnecessary utilization of costly drugs”.

340B PROGRAM BACKGROUND

The Omnibus Reconciliation Act created the CMS’ Medicaid Rebate Program in 1990. In order to be reimbursed by the federal government, and as a prerequisite to entry into the Medicaid and Medicare Part B markets, the Act requires drug manufacturers to offer formula based rebates on outpatient drugs.

To mitigate the unintended consequences of the rebate program — a rise in prescription drug costs for safety-net hospitals and other entities that provide health care services to low-income patients — Congress passed the Veterans Health Care Act of 1992 which created Section 340B of the Public Health Service Act. The Act requires pharmaceutical manufacturers to provide point of sale discounts to 340B-covered entities.

340B PROGRAM SNAPSHOT

The HRSA’s Office of Pharmacy Affairs administers the 340B Drug Pricing Program

Qualifying hospitals and other 340B-covered entities receive discounts from pharmaceutical manufacturers participating in government-sponsored health care programs that have entered into a pharmaceutical pricing agreement with the Department of Health and Human Services Secretary.

Manufacturers participating in Medicaid, agree to provide outpatient drugs to covered entities at significantly reduced prices.

All covered entities must  register and annually re-certify their eligibility as 340B providers, agree to adhere to all program requirements, and accurately report how they bill Medicaid fee-for-service drugs on the Medicaid Exclusion File (MEF).

The MEF is a coding mechanism employed by 340B-covered entities and states to prevent duplicate discounts for drugs subject to Medicaid rebates. By law, drug manufacturers are not allowed to provide a discounted 340B price and a Medicaid drug rebate for the same product.

Click here for information on how to become a 340B hospital/covered-entity and/or how to become a 340B pharmaceutical manufacturer.

Advances in science and medicine require the FDA to adapt its structure and processes.
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