340B: Latest Trends and Developments

Greg Doggett, Counsel, Powers Pyles Sutter & Verville PC, and Felicity Homsted, CEO, FQHC 340B Compliance, discuss the current legal and regulatory landscape of the 340B program. They cover the intersection of 340B with the Inflation Reduction Act, concerns about the Rebate Model, pharmaceutical manufacturer restrictions and data requirements for covered entities, AbbVie’s patient definition lawsuit, state reporting requirements, and potential Congressional action.

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Transcript

SPEAKER_02 0:04

This episode of AHLA Speaking of Health Law is brought to you by AHLA members and donors like you. For more information, visit AmericanHealthlaw.org.

SPEAKER_00 0:16

Hello everyone. I am Greg Doggett and welcome to this episode of AHLA's podcast. Before we get started, I want to introduce myself and have Felicity Holmstead, who's also joining me today, introduce uh herself. I am uh counsel, legal counsel with the law firm Powers Pile Sutter in Breville, uh based in Washington, DC. I work within the firms 340B and drug pricing uh practice. My practice focuses on working with safety net providers in the 340B program. I work with them on legal and compliance issues, but I also assist them with policy and advocacy matters as well. So I will now turn things over to Felicity.

SPEAKER_03 1:12

Thank you, Greg. And thank you for inviting me to join you for the podcast. I'm Felicity Homestead, I'm CEO at FQHC 340B Compliance. I am not an attorney. I am a pharmacist who has been in the 340B program uh essentially for my entire career. And currently I work in the consulting space primarily with federally qualified health centers, one of the covered entities in the 340B program, but also work with covered entities of all types. So looking forward to the discussion today. And while I have been in the weeds of 340B for multiple decades now, Greg, many of our listeners, I'm guessing, may not be as up to speed on 340B. And I thought it'd be a great opportunity for you to give a little bit of background overview of the program. How does it work?

SPEAKER_00 1:58

Sure, happy to. So the 340B program was established in the early 90s in response to something happened that something that happened after Congress created the Medicaid drug rebate program. So, as some of you all may know, the Medicaid Drug Rebate program allows states to get rebates on drugs from manufacturers. And after that program was established, manufacturers, pharmaceutical manufacturers became a bit reluctant to give discounted pricing that they had historically given to safety net providers because it would really trigger a new best price and really require them to give even greater Medicaid rebates to state Medicaid programs. So, in response to that, Congress in 1992 established the 340B program. And in a nutshell, what the 340B program does is it allows different types of safety net providers, such as disproportionate share hospitals, critical access hospitals, federally qualified health centers, Ryan White clinics, to access uh pharmaceuticals at discounted prices from manufacturers. And manufacturers are obligated to provide these discounts in exchange for having their drugs covered by Medicaid and Medicare Part B. So in addition to enrolling in the program, there are different requirements that safety net providers in 340B or otherwise known as covered entities have to meet. One of the biggies is that they can only use 340B drugs for patients that are 340B eligible. And the Health Resources and Services Administration, which is the agency that administers 340B, has sort of set up rules around that. Really, probably the biggest thing to know is that 340B can only be used for outpatients. It can't be used for inpatients at all. Some covered entities only use 340B for their in-house pharmacy if they have their own in-house pharmacy. Some providers also use 340B for clinic administered drugs. And then there are some safety net providers that don't use 340B for clinic administered drugs and don't have their own in-house pharmacies. And so what they instead do is they have contractual relationships with pharmacies that are legally separate from the covered entities. These could be anything from small independent pharmacies to larger pharmacy chains. And what those pharmacies do is they dispense drugs to the covered entities, 340B eligible patients. Before we kind of move on, any other sort of key overview issues that you would want to hit, Felicity?

SPEAKER_03 5:14

Yeah, I think that you gave a really great summary, just reminder of the federal intent. And unfortunately, it's not in the statute, but in the records from the House report, we do know that the 340B program was intended to stretch to stretch scarce federal resources, being able to allow the covered entities to provide more services to the patients and essentially extend the resources that are coming from the federal government without being a burden on the taxpayers. And so we see a lot of conversation about what is the intent of the program, but it's just good to level set that the goal is to help the covered entities in the program help serve their communities better.

SPEAKER_00 5:57

Yeah, you know, great addition, Felicity. While this is at the end of the day, you know, a program focused on pharmaceuticals, the program is structured in a way that it gives safety net providers sort of the leeway to determine really how to sort of best use sort of that financial benefit that they receive from participating in the program. Certainly, in many cases, that is free and discounted drugs, but because communities and patient populations can look very different, you know, how a particular safety net provider uses that benefit could look very different from one provider to another. So let's go ahead and jump into some of just the different issues that are kind of swirling in the 340B space these days. So a really big one is sort of the intersection of the Inflation Reduction Act with 340B. Um, you know, the inflation reduction act, uh just to kind of you know start this off for everyone, it is as many of you know, probably caps prices for selected Medicare drugs. But something that folks may not know is that it protects manufacturers of those selected drugs from having to provide both that capped price and the 340B ceiling price on the same claim. So, Felicity, you know, can you kind of explain maybe in a little more detail how 340B intersects with uh IRA intersects with 340B and how that is playing out for both covered entities and manufacturers?

SPEAKER_03 7:36

Yeah, I will say this has been one of the biggest changes that we've seen in the 340B program, right? So we have another piece of federal legislation in the Inflation Reduction Act coming in and as you say, right, intersecting with 340B. So there is a specific section of the IRA law that talks about the what they call a non-duplication with the 340B ceiling price. So that's section 1193. And to make the long story short, what it says is that the manufacturers shall not be required to provide access to the maximum fare price. If 340B is lower, then that will be the price that they're extending to the covered entities. But the inverse is also true. If for some reason the maximum fare price is lower than 340B, then there is an expectation that the manufacturers are going to pass that price on to the 340B covered entities. The IRA didn't dictate how those prices were going to enter the market. It had more to do with what the prices would be at the point of sale from the pharmacies. And so that has created an interesting situation. We've had one manufacturer who has reduced their list price to the maximum fare price that was negotiated. But for the other manufacturers, what we see is that the discount is on the price is coming as a rebate or a refund from the manufacturer after the time of sale. So the pharmacies are buying at the higher price up front on their regular inventory price. When the prescription bills to Medicare, it bills at the lower negotiated rate. The patient's copay is also adjudicated based on that lower negotiated rate. And then the prescription is sent off through a very complicated at this point system, right? So it leaves the pharmacy, it goes to the plan sponsor, plan sponsor will interact with it. Then the plan sponsor sends it over to another group within CMS called drug data processing system, which then sends it to the Medicare transaction facilitator, which then sends it to the vendor for the manufacturers. Right now we're seeing the manufacturers are using the Beacon MFP solution. And then it communicates back through and then back through. And ultimately what happens is that the manufacturers will send that rebate to the dispensing pharmacy. And as convoluted as that system sounds, I'm sure you can guess that things are challenging, especially since we've we've just rolled it out this year. There is a lot of times where we're not seeing even when the covered entities are adding modifiers, we're not seeing that make it all the way through to the end of the process for the manufacturers for them to know a prescription was 340B on the front end. And that's causing challenges. So the manufacturers now have to come up with surrogate ways through their vendor to identify what's 340b. And that's just really been, it's been interesting, right? We're trying to triangulate to information. And we have places where we are, you know, sharing data and the system is flowing, but I think that we all who are involved in it see a lot of opportunities for improvement. You know, whether you're an independent pharmacy with no relation to 340B or a 340B covered entity or a contract pharmacy, we have seen instances where everybody in the pharmacy ecosystem has been impacted by this. So lots of work to address challenges. We've also seen a great response from CMS being very interactive, holding almost monthly phone calls to help troubleshoot and address the challenges. But it has uh you know, it has definitely been a journey so far and continues to present challenges for how do we do this non-duplication of the 34B ceiling price with the maximum fare prices. So, Greg, with that, I I think that leads us into where we're seeing a lot of um new developments in the 340B program, right? Because the only thing that we have constant, it feels like in 340B is change. But we're hearing a lot from manufacturers about the need to be able to do deduplication. And one of the strategies that has been being suggested and was almost attempted at the start of this year is 340B rebate. And so you know, I think that it might be helpful, you know, recognizing that the program has operated for over three decades with the 340B ceiling price being given as an upfront discount at the time we purchase. And but talking about, you know, what are what are we seeing from HERSO? I mean, are they considering the rebate model? Where do we stand now?

SPEAKER_00 12:27

Yeah, happy to answer that question. So for the last 30 plus years, the 340B program has primarily operated as a discount program. In other words, covered entities access 340B ceiling prices as an upfront discount. A couple of years ago, uh, some pharmaceutical manufacturers wanted to proceed with rebate models where they would provide the 340 B ceiling price as a rebate on the back end. And some manufacturers decided to sort of go ahead and try to do this, and there was some litigation uh between Hearsa and those manufacturers, and you know, ultimately it was decided that you know it is the authority of Hearsa, you know, to really decide whether 340B pricing is offered as a rebate or a discount. And then HERSA proposed a rebate model uh for uh the first 10 drugs that were selected for Medicare Part D price caps under the IRA uh for 2026. And that rebate model would have gone into effect on January 1st of this year. However, there ended up then being litigation between HERSA and some safety net providers, and the court in that case said that HERSA could not proceed uh with that rebate model because the agency had not considered the impact of the rebate model on covered entities, and because the agency had not provided a reasonable explanation for changing its long-standing policy of requiring manufacturers to offer 340 B ceiling prices as upfront discounts. And HERSA kind of agreed, uh, you know, with that's basically they said to the court, like, if we do another, you know, rebate model, we're gonna kind of take certain steps along the way. Um, and so what we have seen HERSA do this year, starting early this year, is do a reset on the rebate model. And they've put out some documents and solicited stakeholder um input, and we're sort of still going through those procedural steps right now, but it really does appear that the agency is adamant about pushing for a new rebate model, a rebate model that would be similar to the one that they put out last year. Um, in one of these documents, they said that the rebate model would be a little bit broader and that it wouldn't just include uh the first 10 drugs selected for price caps for 2026, but it would also include 10 additional drugs selected for price caps for 2027. Um, so we're still kind of again going through those procedural steps, but we, you know, are very much looking at a potential rebate model in the near future.

SPEAKER_03 15:48

Um I actually had the offer, I was gonna say I had the opportunity to actually sit in the courtroom because the uh the lawsuit that was filed to to stop the rebate was here in Maine. And I will say it was uh it was evident even from uh just in the arguments and watching the judge's response uh that that we had a strong likelihood of having the ruling come back as it did. And and it was interesting because there was he he said it during the case and it came uh back in his response, but uh essentially attributing only to HURSA one line of administrative record uh for their initial version of the rebate pilot. So that I thought that was interesting, and that was just the line where they said that they had considered it and it may be burdensome to the covered entities.

SPEAKER_00 16:40

So it's probably putting it very mildly to say that covered entities and sort of manufacturers uh, you know, generally speaking, look at the rebate model very differently. And, you know, from working in the space, I know covered entities have numerous concerns about the model. Felicity, can you elaborate on what those concerns are?

SPEAKER_03 17:01

Yeah, I I will say I hear them on a daily basis from the covered entities that I work with, but on the administrative record, right, we have more than a thousand comment letters that came in both from the request for information and from the information collection requests that we had in February of this year. And so there were so many different areas that the covered entities highlighted, but just to group them up, right, we have concerns about the data sharing itself, particularly around privacy, because uh under the Health Insurance Privacy and Portability Act, um, we have that prescription numbers are actually considered to be PHI. And that has been one of the data elements that has been requested in both uh the previous iteration and that we're seeing requested as well in this iteration. So we have concerns about the privacy and the HIPAA implications. Difficulties with upfront pricing is another message that we heard consistently. So that's both for Medicaid, particularly Fee for Service, where we now have the covered outpatient drug rule that was put in in 2016 that expects the covered entities to pass on the 340B price up front. But if we don't have access to the 340B price, nor do we know if we're gonna actually receive the 340B price, it becomes very difficult for the pharmacies to be able to provide that information to Medicaid. And then almost more importantly, when you're in direct patient care, right, is the ability to offer those discounts. So if we're not buying medications at a discounted price with and don't have certainty that we're gonna receive that price, it becomes more difficult for the covered entities to extend the price to their uninsured and underinsured patients and compound that when you have smaller covered entities, like many health centers, especially in rural areas, they may not have the financial wherewithal to be able to extend those discounts in advance of receiving the discount on the medication themselves. We also heard a lot of concern about the administrative burden, the administrative cost, right? And then also that those losses in in revenue or the added costs that we would see from a rebate program would ultimately result in loss of services. But Greg, we know that there's two sides to the coin. Um, do you want to talk a little bit about why the manufacturers are looking for this model?

SPEAKER_00 19:25

Sure. And I will preface this while I do, you know, spend the bulk of my time working with uh Kubernetes. I certainly have sort of read a lot about the manufacturer viewpoint and this issue and have talked with folks in the manufacturer space. I think first and foremost, you know, going back to that intersection of IRA and 340B, manufacturers feel like they need some kind of mechanism in place to avoid providing both price gaps and 340B discounts on the same drug. Right now, um, there is no federal mechanism, you know, in place to uh prevent that from happening. And as Felicity mentioned, you know, kind of manufacturers have in the interim sort of had to come up with their own solutions. And I think they would say they feel more confident, you know, in a sort of a federally established mechanism, in this case, a rebate model. Um, speaking more broadly, I think that manufacturers feel like they just don't really have a lot of information and insight on sort of what is happening regarding 340B and that they don't know um if a claim is 340B unless they're getting information, you know, that has been vetted um, you know, by the covered entity. So, you know, getting this data through the rebate model would would not only sort of allow them to, I think, feel more confident that uh this deduplication under the IRA is happening, but that they would really have sort of more data to give them sort of much further um insight into sort of what is is happening and to sort of, I think, also maybe identify what they might think would be other, you know, potential areas of non-compliance by covered entities that you know they could then reach out to covered entities about if they have questions and um maybe conduct you know audits, which they're allowed uh to do under um the 340B statute. So I think they really feel like this could be a real you know game changer in terms of just how much they would be able to sort of really peer into what is happening with 340B. Um question you know, for you is as I was saying, you know, manufacturers really do sort of see the rebate model as a way to address this deduplication under issue under the IRA. Are you know covered entities or other stakeholders? Talking about other potential solutions to address some of those manufacturer concerns, but also, I guess, some of the concerns that covered entities have expressed about a rebate model.

SPEAKER_03 22:13

Yeah, so on the covered entity side, we definitely see the desire to keep the discounts on the front end. So keeping them as a prospective discount versus a retrospective rebate. And because we see that the industry and essentially the environment of 340B is evolving, right? There's a lot of requests for transparency. What we see is that covered entities are becoming more understanding of the expectation of data sharing, but there is a desire for it to be done through a neutral system, right? And so that that can be difficult, right? How do we have a neutral, uh, neutral system? And so typically they're referring to it as a neutral clearinghouse because currently the the processes that are in place uh for the maximum fare prices, so that's through a system that is uh paid for by the manufacturers. Ultimately, the Medicare transaction facilitator is neutral, but the determinations of what are of what are and are not either 340p or maximum fare prices happens outside of the Medicare transaction facilitator. And so there are a few different companies in the market that have had what I would say is as mixed success in gaining traction, right? I've heard some about some companies who maybe have found some manufacturers and are looking for covered entities that they could potentially try something with. Others that seem to have found some covered entities are looking for manufacturers. We have not seen any real neutral clearinghouses emerge in the market that I would say have the same presence as what we see with second-site solutions or now Truzo by Calderos, right? Those two have quite strong market presence on the manufacturer side being their systems. What I have excitement for is that CMS is actually developing a 340B data repository. It's going to be used for the inflationary penalty side of the IRA. So if the manufacturers increase prices on their drugs faster than the rate of inflation, IRA added penalties for the manufacturers to be imposed. And currently they're using a surrogate calculation that will estimate the volume of 340B in the market. But their goal is to move to something more accurate. And that's where the data repository comes in. So they are currently developing and doing testing on the data repository. We expect it to come this fall. And initially it'll be voluntary. The regulations do allude to an expectation that it could, could, would become mandatory in the future. But there are many in the space, including myself, who you know have hopes and dreams that the 340B data repository could be used for deduplication in the future. So that's just something for us to keep our eye on. But speaking about crystal balls, Greg, what are your thoughts for rebate in the next year?

SPEAKER_00 25:16

Sure. Well, you know, based on what we have seen with HRSA's handling of the rebate model so far and including this reboot of the rebate model, I think that unless the agency takes the different direction, which I'm not anticipating at this point, I do think that we are going to look at them establishing a rebate model sometime in the third or fourth quarter of this year. And then that rebate model scheduled to go into effect a couple months later. I mentioned earlier that when the court struck down the first rebate model, the agency agreed to take certain procedural steps if they pursued another rebate model. One of those steps was they said that they would uh set the effective date for any new rebate model 90 days out after approving a manufacturer plan to participate in the rebate model. So even once the agency gets the rebate model in place, there's going to be about a quarter before it would take effect. Um I will say that I am pretty confident that there will end up being some kind of lawsuit, you know, challenging a rebate model. And that could also, you know, affect the timing depending on sort of how the court hearing that case ends up deciding. So, you know, we're not necessarily super far off from a rebate model, but it's not like a rebate model is going to happen tomorrow. I think the soonest it would happen would be the fourth quarter of this year. I think we're more likely looking at the first quarter of um next year. So moving on from uh the rebate model topic, um, but one that is sort of, you know, I would say kind of features many sort of the tensions that we see with the rebate model issue is uh the issue of manufacturers sort of putting different uh rules, restrictions, um, conditions um in place uh related to 340B. Um, Felicity, can you sort of address like what has been the trend of manufacturer restrictions and data requirements for covered entities?

SPEAKER_03 27:41

Absolutely. So I will give just a little bit of a history lesson and then catch us up to where we are today. So in the summer of 2020, we actually had our first uh contract pharmacy restriction come from a manufacturer that was Eli Lilly, and it was limited to one drug, it was Cialis. So it was all of the Cialis NDCs. But we did not see a response at that time from the Office of Pharmacy Affairs. So pretty quickly after that, we saw both Eli Lilly increase their list of uh of medications that were being restricted, as well as other manufacturers follow suit. We'll talk a little bit about litigation in a minute, but where we are today now is more than 40 manufacturers are actually putting data requirements or some sorts of restrictions around use of 340B drugs at contract pharmacies. And where we started was it originally it was you could have either a single pharmacy that you would designate and you didn't typically have to share data with that, or if you share data, you could restore access to all of your contract pharmacies. Now, today we've seen a trend away from that, and we're still having to designate a single pharmacy, but we actually have to now share data as well to maintain access to that pharmacy, and a mixed bag of whether or not there are distance restrictions. So typically it will be a 40-mile radius that you can have a pharmacy within, and we most frequently see that with specialty manufacturers. But I alluded to uh that we've seen lots of litigation in the courts. One of the reasons is we've seen a trend for states to pass what they're typically referring to as contract pharmacy protection bills. And I believe we are at about 23 states that have had some sort of protection bill that's passed. But Greg, do you want to talk a little bit about what are we seeing with the litigation that's come from those bills? And do we think it'll go to the Supreme Court?

SPEAKER_00 29:44

Yes, really uh big question uh for 340B stakeholders. Uh, there have been dozens of lawsuits where uh Pharma the Trade Association and individual manufacturers have challenged the state contract pharmacy laws. They have presented a variety of legal arguments, but probably the legal argument that has gotten the biggest attention is that uh essentially 340B is a federal uh program and it was really not set up for the states uh to regulate. And there have been a mix of court decisions. While the overall majority of the court decisions have upheld the state laws, there have been some court decisions that have been favorable uh to manufacturers. And so I think kind of what stakeholders are waiting to see is if there ends up sort of being a what is so known as a circuit split where one federal appellate court you know decides the issue one way and another federal appellate court decides the issue another way. If that happens, and we see this with other legal issues, it greatly increases the odds that the Supreme Court uh could take up the issue. And so, you know, ultimately, you know, this issue to kind of reach some kind of final resolution may require the Supreme Court um to weigh in. I think that is very likely where we um have had it. Um the Supreme Court has actually considered 340B issues in the past, not on the specific issue, but other topics. And so we could once again um find uh 340B before um the Supreme Court.

SPEAKER_03 31:31

So sticking to this topic of Can I interject with one fun fact though, because we had a circuit split for a minute, right? The Fourth Circuit did rule both uh for a case from West Virginia and from Maryland uh in the favor of manufacturers, while all of the other circuits that had uh had heard the cases for the different states had ruled in favor of the covered entities. But the West Virginia and Maryland uh cases uh are being taken back up by the Fourth Circuit for an en banc hearing. So that is uh a rare occurrence and something exciting that we're watching.

SPEAKER_00 32:10

Yes. So you know, just we thought that maybe we had sort of reached that split. Uh, not yet. Um we will see what sort of that full appellate court hears when they kind of re-hear the case. So sticking to the issue of restrictions and data requirements, but going a little bit broadly than just contract um pharmacy. We have seen a growing number of uh pharmaceutical manufacturers in recent months require covered entities to submit data for all of their 340B claims, not just contract pharmacy claims as a condition of 340B uh pricing. And we actually recently saw the first manufacturer um shut off 340B pricing for covered entities that were not submitting. Um, we know covered entities are very concerned about this. What are some of those concerns, Felicity?

SPEAKER_03 33:09

Yeah, and so um what I will say is that it's just uh one, very similar to what we talked about with the 340B rebate program, uh, where you know we're looking at administrative burden of providing more information. We're having the PHI concerns. Um, my understanding from what has been made clear in the public space is that particularly with Eli Lilly, they are the ones who have um they were technically the second to uh impose these types of expectations on covered entities, but they have been the first ones to be uh active in responding to lack of data submission with actually looking at uh first letting covered entities know that if they don't submit the data, that they will be cutting pricing. And then currently our understanding is there's a small subset that have had pricing cut. In in what's been made uh public from the back and forth is that the many of the covered entities express those concerns about the um the patient health information and and and the expectations around that. But right now we've got uh 12 manufacturers that are asking for the data from all of the areas of the covered entity, right? So we had contract pharmacy, the way that we had the Third Circuit and the DC circuit rulings come back, it definitely foreshadowed that we would expect uh manufacturers to request data from the entity-owned pharmacies, because it it the rulings never distinguish between contract pharmacy and entity-owned pharmacy, even though the lawsuits were all related to contract pharmacy requirements. But where I think we all um had hoped it would not go, and part of what is so challenging, particularly if you're a smaller covered entity, is that they're not only asking for data from the pharmacies themselves for the prescriptions that are being dispensed, but they're also asking for medical claims data. That is not, uh, even though we do, you know, we do billing, that is not a standard data set, particularly from the federally qualified health centers side. We're paid under prospective payment systems. So for the medications that we're administering in our office visits, by and large, those go into a bundled rate and we are not separately billing for them. So most of them aren't even making it to a discrete place on a claim that we could report out. So there are many health centers and other smaller covered entities that are still on paper logs. And so just getting the data uh into a form that can be shared is one place where we're seeing a challenge. But Greg, to you, have we seen any sort of response from HERSA about these policies, particularly where I mentioned Lily is now cutting off pricing to covered entities. Have we seen any responses?

SPEAKER_00 36:00

As of the recording of this podcast, um, we have not seen HERSA sort of publicly make any kind of statement or take any kind of enforcement action regarding, you know, EI Lilly shutting off pricing for some covered entities or these other manufacturers threatening uh to uh do so. You know, that being said, it is possible that the agency is sort of doing something um behind the scenes, that there could be some subsequent action by the agency. I think before we move on to the next topic, I'm just gonna say that even maybe regardless of whether the agency takes any action, I think we are very likely to see some covered entities that lose their 340B pricing, um file claims alleging overcharges under what is known as the 340B administrative dispute resolution uh process. Um, just a little note is that we would see really covered entities using that ADR process as opposed to going to court because, based on a Supreme Court decision from many years ago, um, covered entities don't have a right under the 340B statute to enforce a pharmaceutical manufacturer's uh 340B pricing obligations. The only way to sort of pursue any concerns about manufacture compliance um, you know, in a formal way is to go through that ADR process. So moving on, um, question for you, Felicity. You know, I'm aware that pharmaceutical manufacturer AVI has filed a lawsuit against HERSA related to the agent's 340B patient definition guidelines. Um, what can you tell me about that lawsuit?

SPEAKER_03 37:57

So um I enjoy sort of getting into the weeds on these things. I have read through API's initial filings and then also HERSA's response. And to summarize where API is coming from, they did good faith inquiries for two different covered entities. One was a hospital, one was a federally qualified health center. And they, APV, at the end of those good faith inquiries, wanted to conduct HERSA approved audits of the 340B program. So they felt that they had grounds to go in and audit the covered entities further. When HERSA received their audit protocol, they asked APVI to change a couple things. One, they asked them to limit the data, the purchase data that they were requesting just to 340B purchases, which AVI found to be acceptable according to the documents. But they also asked them to use the 1996 patient definition. So we have had the 1996 patient definition in place for 30 years. Uh, and also we had a ruling, the Genesis healthcare ruling, that um while there were questions about patient definition there, uh affirmed, uh I would describe it as affirmed the 1996 patient definition. But where where we see that AV was dissatisfied with HERSA's response was that when they asked again to use their own patient definition, HERSA said that they could conduct the audit, but they would not enforce the findings if AVI chose not to use the 1996 patient definition. Subsequently, HERSA has filed their response and they've requested that the case be dismissed, several grounds. Um being that they do not consider their back and forth with AVI to be a final binding agency action. But the other is that they included the rationale that HERSA did authorize the audit. So we shall see, but Greg, uh I think this is something that it has implications to all stakeholders. And I was hoping you could comment on that.

SPEAKER_00 39:59

Yes, I think there's like two important things to keep in mind about this case. I think one is there's sort of a you know challenge to sort of the guidance and the rules that PRSA has established regarding which individuals can receive 340B drugs from covered entities. I think the other issue is the degree to which you know manufacturers are able to monitor covered entity compliance, um, sort of based on their own view of what is compliance and sort of going back to the issue that Felicity spoke in detail about, which is these requirements for 340B in-house pharmacy claims data. Some of the manufacturers are just saying we want the data, but some of the manufacturers are going a little bit further. And I and I think either sort of more explicitly or implicitly, they're saying we really want this data to sort of be able to, you know, not just sort of detect uh potential non-compliance based on HERSA's rules, but that we want to be able to use this data to assess whether we think covered entities are compliant with our view on what constitutes compliant conduct, um, including as it relates to 340B uh patient definition. So I think really, you know, that I this lawsuit and sort of its outcome, I think could really kind of get at like the legitimacy of Purse's patient definition guidelines, but also the degree to which manufacturers may be able to imply, apply, and use their own uh interpretations of what is again compliance by a covered entity.

SPEAKER_03 41:44

Yeah, there was there was definitely the request from ABV for a low-per-bright interpretation of patients. So if we get that, if the case is not dismissed, I think that it could have uh very significant implications across the the 340B uh community.

SPEAKER_00 42:01

So moving on to um 340B state reporting requirements, um, while this issue has not necessarily garnered the attention of the state uh contract pharmacy laws, it certainly is an issue that has uh picked up steam. Um this started um a few years ago when a couple of states decided to start to establish reporting requirements uh for uh covered entities. And really, I think the rationale is, I think they've the rationale varied a little bit, but I think a lot of the rationale was, you know, we're hearing a lot from stakeholders about 340B. 340B is a program that's gotten large. You know, sometimes we hear concerns about, you know, uh the impact of 340B on the state Medicaid program or the impact that it has on uh consumers more broadly. And so I think the the general intent, while these laws do vary, was to really sort of get more data around 340B so that state policymakers could understand 340B better and then potentially use that data to sort of maybe change policies um regarding 340B, including maybe, for example, policies around uh contract pharmacy um use. Um now that these laws have been in place for a couple of years, we've started to see states issue reports based on the data that they've got from covered entities. So, you know, Felicity, can you speak to sort of what some of these reports have revealed about 340B and covered entities? And actually, before I do that, I was gonna say one thing. Um most of the reports have, most of the reporting requirements have focused. On covered entities. We did recently see Washington state become the first state with reporting requirements to have requirements that apply not just to covered entities but to manufacturers. So I think that is kind of likely to be the beginning of a new trend that we might see when it comes to state policymaking around 340B. So now I'll hand it over to you, Phil Speed. We'll sort of talk about what's in these reports.

SPEAKER_03 44:26

Absolutely. So I was involved in some of the work for the contract pharmacy protections in Maine, and we had hoped potentially to introduce manufacture transparency at that point in time. Fortunately, these things moved so quickly that by the time we realized that transparency was going to be added to the protection bill, we we drafted language, but we missed the window to be able to include it. So really excited that Washington has it in theirs. But we at this point have two different states, and they were the first two to pass transparency measures who have provided reports back. We have Minnesota, and they've actually reported out twice on their transparency data requests, and then Maine has reported out for the first time this year. Both have given us a lot of data. Maine has also within their ask looked for having information that is a narrative about how the savings is used. And while we didn't see the actual narratives from the covered entities, we did get a list from the state where they essentially condensed down what the different responses were. So it's very interesting to see how all of the different covered entities are using their savings. One of the most impactful ones, Greg, was one and being familiar with it, one very rural hospital here where they actually stated that if it wasn't for the 340B program, they would be out of business. But just really quickly for us to wrap up, we've given an overview of everything that's going on in the 340B program. What do you think are our potential for seeing something from Congress, either legislative changes this year or with the coming Congress for that would be coming in for next year?

SPEAKER_00 46:18

Good question. While Congress definitely remains interested in drug pricing more broadly and 340B in particular, I think that the later we get into the year, the likelihood of any kind of 340B legislation decreases. And I think that already those odds are fairly low. I think first, you know, as we get later in the year, members of Congress will become increasingly focused on elections. You know, also we do have a lot of disagreement in Congress. So really getting anything done is very challenging these days. Probably two of the bigger, more recent developments uh related to Congress that happened is that uh Senator Cassidy from Louisiana uh, who was is the chair of the Senate Health Committee, um, he lost his primary, so he is not going to be in the Senate again next year. And then Representative Buddy Carter from Georgia, who was one of the largest critics of 340 B in the House, he also lost um his primary. So I think that could affect um, you know, what we might see um in Congress uh next year. You know, I think that we are looking at, you know, possibly one or two chambers of the of Congress um switching from Republican control to Democratic control. You know, I think that the Democrats have already made clear through some information they put out that you know drug pricing would be a priority to them. And I know that just from conversations, 340B is on the radar. So um, you know, even if there is some changes of power in power, I think that you know 340B could still sort of be on the table. Um, but again, you know, talking about 340B is very different than sort of all the hurdles that you have to clear to get uh 340B legislation in effect.

SPEAKER_03 48:32

And with that, Greg, thank you so much for having me join you with this podcast. I appreciate the opportunity.

SPEAKER_00 48:41

Yeah, I know. Thank you so much, Felicity. This was a great um conversation. And you know, to those of you listening, um, you know, if this prompted any questions or you want to talk uh more deeply about 340B, um Felicity and I are both very active on LinkedIn and we both have fairly unique names, so we can be found fairly easily. So definitely uh don't hesitate uh to reach out. And thank you for joining us and listening to the podcast today.

SPEAKER_02 49:14

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