president calls for overhaul of medicaid rebate program

President Calls for Overhaul of Medicaid Rebate Program Reforms Could Have Significant 340B Implications IN THIS ISSUE

OPA Continues to Grow Despite HRSA Budget Cuts

2

Auto-Enrollment of “Dual Eligibles” Raises Issues for 340B Providers

4

CMS to Allow Pharmacies to Contribute to Part D Out-of-Pocket Spending

5

California Lawmakers Consider 340B-Related Legislation

6

PHPC Calls On HHS to Address 340B “Drug Shortages”

9

340B Prime Vendor Program Adds Tenth Manufacturer

9

Subscription Info 12

Volume 2, no. 2 February 2005

In an effort to “increase efficiency and lower costs in Medicaid prescription drugs,” the President has included in his proposed budget for Fiscal Year 2006 a number of measures aimed at reforming the Medicaid program that could also have a significant impact on the administration of the 340B program. The most significant of these reforms would be an overhaul of the Medicaid drug

rebate formula resulting in the elimination of Medicaid “best price.” The budget summary argues that the current formula prevents large purchasers such as hospitals and health maintenance organizations (HMO) from negotiating deep discounts because pharma-ceutical manufacturers are obligated to offer their lowest private market price, or “best price,” to the Medicaid program. Pharmaceutical manufacturers are also obligated to provide their best price to 340B providers including the hospitals in the 340B program.

In the past, the Bush Administration has criticized the “best price” system, arguing that not only does it limit discounts, but it can be confusing because it is unclear which prices manufacturers must include when cal-culating and reporting its “best price” to the government. This year’s budget specifically proposes that “best price” be replaced with a flat re-bate so that manufacturers would not have a

disincentive to offer prices below their “best price” to customers in the private market. “Best price effectively acts as a price floor,” the budget states. “The Administra-tion proposes to replace best price with a budget neutral flat rebate, allowing private purchasers to negotiate lower drug prices.” Centers for Medicare and Medicaid Ser-vices (CMS) Administrator Mark McClellan recently told reporters that the rebate amount “would have to be a larger discount” than the current 15.1% discount off of Average

COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. This newsletter is protected by U.S. Copyright Law. Reproduction, photocopying, storage, transmission or any other sharing with any unauthorized third party of any portion of this newsletter by any means (including electronic redistribution) is strictly prohibited, except with the prior written permission of Powers, Pyles, Sutter & Verville, P.C. and payment of any applicable licensing fee. Violation of copyright may result in legal action, including civil and/or criminal penalties and immediate suspension or revocation of subscription services without refund. Those desiring authorization to copy or use any portion of this newsletter should contact Jared Bloom at [email protected] or (202) 349-4244 for further details.

The Inside Source on the Public Health Service 340B Drug Discount Program

continued on pg. 3

President’s Proposals for Medicaid Reform: 340B Implications • Eliminate “best price” from the Medicaid rebate program and replace it

with a single flat rebate • Reform the Medicaid pharmacy reimbursement system by implementing a

system based on Average Sales Price (ASP)

Despite the President’s plan to make significant cuts to the budget of the Health Resources and Services Admini-stration (HRSA), the Office of Phar-macy Affairs (OPA) appears to be pro-tected from the ax. On February 14, OPA added two new employees, bringing the agency’s total workforce to 10, close to the staff size it had during the Clinton admini-stration. Among the most recent hires is Richard Glabach, a Lt. Commander in the United States Public Health Service (PHS) Commisioned Corps with ad-vanced degrees in Pharmacy and In-fomatics. In the past, Glabach has served as the chief pharmacist of a fed-eral prison, an FDA field investigator, and an FDA Emergency Coordinator. Upon joining the staff, Glabach’s primary responsibility will be to assist Public Health Advisor Sharley Chen with the development and redesign of OPA’s information systems. The other most recent addition to the OPA staff is Karen Williams, also a member of the PHS Commissioned Corps. Williams is a graduate of the Howard University School of Pharmacy and holds a Master’s degree in Business Administration from Georgetown. She is currently pursuing a PharmD and has

practiced pharmacy in retail, long-term care, and ambulatory care settings at both the staff and managerial levels. Williams’ first responsibility will be to assist Mitchell with the preparation of the agency’s budget, though she will also be used in other areas. Mitchell believes that the addition of new staff members will allow the agency to address many issues in the 340B program that it was not prepared to address before. “Our collective skill set has taken a quantum leap in a matter of months,” says Mitchell, adding that the agency’s new employees bring with them knowl-edge and experience in such varied fields as pharmacoeconomics, infomat-ics, and business administration, as well as additional experience with pharmacy services. Mitchell says that the expansion of the staff was made possible by the con-tinued support that OPA has received from both HRSA Administrator Eliza-beth Duke and the Special Programs Bureau, the agency within HRSA that OPA was transferred to in November. These hires have been made despite the fact that the President’s budget for Fiscal Year 2006, released on February 7, did not specifically address OPA or create a line item for the agency.

The Monitor Managing Editor Jared Bloom Supervising Editors Ted Slafsky William von Oehsen

OPA Continues to Grow Despite HRSA Budget Cuts

COPYRIGHT 2005 BY POWERS, PYLES, SUTTER & VERVILLE, P.C. ALL RIGHTS RESERVED. Unauthorized photocopying is prohibited by law. See page one.

In fact, HRSA is marked for an $846 million budget cut, including a slight decrease in the amount of funding avail-able for “program development.” While OPA staff has increased sig-nificantly over the past year, there are still major questions about whether the agency can meet the many demands of running a department with over 11,000 covered entities and 600 pharmaceutical manufacturers. As a result, the Public Hospital Phar-macy Coalition (PHPC) and other cov-ered entity groups are encouraging Con-gress to provide adequate resources so that OPA can effectively oversee the program. One 340B provider group that would benefit from the President’s budget, however, is the community health cen-ters. The budget proposes a spending increase of more than $300 million—for a total of $2 billion—in order to expand the number of health centers and im-prove their effectiveness. Among the benefits of health cen-ters, HHS cites their ability to provide pharmaceutical services to low-income populations. All federally qualified health centers (FQHC) are automatically eligible to participate in the 340B program, accord-ing to the program’s statute.

The Federal Drug Discount and Compliance Monitor is a national monthly newsletter that covers the legal and political issues surrounding the Public Health Service 340B drug discount program and other developments in federal drug pricing law and policy. The Monitor also updates subscribers on breaking news stories through e-mail alerts. The Monitor is published by the Public Hospital Pharmacy Coalition, a non-profit organization that represents approximately 250 340B hospitals, and the law firm of Powers, Pyles, Sutter and Verville.

Federal Drug Discount and Compliance Monitor

1875 Eye St., NW, 12th Floor Washington, DC 20006 Phone: (202) 349-4244

Fax: (202) 785-1756 www.drugdiscountmonitor.com

For information on The Monitor, including advertising opportunities, contact Jared Bloom at [email protected] or (202) 349-4244.


Manufacturer Price (AMP). Democratic staff members on the Senate Finance Committee have ques-tioned the President’s proposal, arguing in a recent memo that “it is unclear whether this policy would lead to in-creases in drug prices under Medicaid.” Press reports also indicate that Senator Max Baucus (D-MT), the ranking De-mocrat on the committee, recently sug-gested raising the rebate percentage from 15 to 20 percent. While the President’s budget does not mention changes to the 340B pro-gram itself, reforming the Medicaid re-bate formula would also most likely impact 340B discounts because the 340B ceiling price for brand name drugs utilizes the same formula as the Medi-caid rebate program. In addition, there is a ceiling on annual price increases that prohibits manufacturers from raising prices above the consumer price index (CPI). Therefore, if Congress were to enact the President’s proposal, the new flat rebate would also likely apply to the 340B program. “The effect of this proposal on the 340B program is primarily dependent on the level at which the federal govern-ment sets the flat rebate,” says William von Oehsen, General Counsel to the Public Hospital Pharmacy Coalition (PHPC). PHPC plans to actively lobby Con-gress and the Bush Administration to ensure that any potential changes to the formula do not have a negative impact on 340B providers. PHPC is also con-cerned about press reports that the phar-maceutical industry sees the President’s proposal as an opportunity to eliminate the cap that prohibits companies from raising prices above the inflation rate for consumer goods. On the other hand, some believe that the elimination of “best price” could actually benefit 340B providers by cre-

ating more competition in the market-place. “Theoretically, [this reform] should not have any effect on 340B prices” because the proposal is budget neutral, says Anthony Barrueta, Vice President of Government Relations at Kaiser Foundation Health Plan, Inc. However, Barrueta says that a mar-ketplace without a “best price” could create an environment where manufac-turers will be more willing to offer lower prices to large purchasers, which could ultimately lend more leverage to 340B entities as they negotiate prices.

Kaiser, one of the biggest pharma-ceutical buyers in the country, has been advocating for the elimination of “best price” for several years. The National Governors Association (NGA), which recently created a task force to address the President’s Medi-caid proposals, is still reviewing the rebate proposal and plans to respond soon, according to an NGA official. This is not the first time that the ad-ministration has attempted to reform the rebate formula. In 2002, President Bush included in his budget a proposal that would have changed the rebate from the difference between a manufacturer's “best price” and AMP to the difference between the “best price” and Average Wholesale Price (AWP), which is esti-mated to be significantly higher than AMP. This was seen as an effort to drive down AWP, though the proposal died in Congress.

The 2006 budget also argues that the government should reform the Medicaid pharmacy reimbursement system by implementing a formula that “more closely aligns pharmacy reimbursement with pharmacy acquisition cost, while providing adequate payment for dis-pensing prescriptions.” According to the budget, the White House and the US Department of Health and Human Services favor a system based on Average Sales Price (ASP), which represents the weighted average of all non-federal sales to wholesalers and takes into account chargebacks, discounts, rebates, and other benefits tied to the purchase of the drug product. Under most current Medicaid reim-bursement systems, pharmacies that dispense Medicaid drugs are paid by the states at a discount off of AWP, a na-tional average of list prices charged by wholesalers to pharmacies. The AWP system has been criticized by many in the government as an inac-curate measure of a pharmacy’s acquisi-tion cost. In fact, the House Energy and Com-merce Committee recently held a hear-ing on the subject where Chairman Joe Barton (R-TX) pledged to reform the system by next year. Barton said that the committee is considering using ASP as the basis for a new system (The Moni-tor, December 2004). ASP has already supplanted AWP as the basis for reimbursement of pharma-ceuticals purchased through Medicare Part B. US Department of Health and Hu-man Services (HHS) Secretary Michael Leavitt recently addressed this issue in his first public speech on the Medicaid program. In a speech entitled “Medicaid: A Time to Act,” delivered on February 1, Leavitt argued that the Medicaid pro-gram must be reformed to prevent over-payments to providers and their pharma-cies, stressing the importance of limiting

Change in Medicaid Rebate Formula Could Affect 340B Prices

February 2005

HHS Secretary Michael Leavitt

continued on pg. 10

continued from pg. 1


Following the release of the final regulations for the new Medicare pre-scription drug benefit, government agen-cies and health care provider groups are bracing for what may be a difficult tran-sition for approximately 6 million low-income seniors from Medicaid to Medi-care drug coverage. According to the Medicare Moderni-zation Act (MMA), the federal govern-ment will have just six weeks to transfer all eligible Medicaid patients—known as “dual eligibles”—to Medicare before their current drug coverage is discontin-ued on January 1, 2006. The law states that beneficiaries may begin signing up for Medicare plans on November 15, though Medicaid beneficiaries will not have the luxury of waiting until the end of the first open enrollment period, which ends on May 15, 2006. The new regulations state that the Centers for Medicare and Medicaid Ser-vices (CMS) will automatically enroll dual eligibles into plans that offer basic drug coverage in the areas in which they live, unless they have already voluntar-ily enrolled in a prescription drug plan (PDP). In cases where there is more than one option, beneficiaries will be as-signed to programs randomly. The decision to enroll dual eligibles automatically was made following the failure of the Medicare drug discount card autoenrollment process, which managed to register just 100,000 benefi-ciaries out of the 1.9 million that were contacted by CMS. Unlike the discount card process, Part D autoenrollment will place benefi-ciaries in programs automatically rather than requiring beneficiaries to “activate” their membership in a program. Once enrolled, dual eligibles are permitted to switch plans during a spe-cial enrollment period or decline cover-age altogether if they do not want to take part in a Medicare plan. However,

they will not be able to keep their cur-rent Medicaid coverage. According to CMS, one of the most important goals of the new regulations was to “[e]nsure that dual eligible bene-ficiaries who have both full Medicaid and Medicare benefits are automatically enrolled in a drug plan if they fail to sign up by the middle of December, so that they have no gap in coverage with the transition to the Medicare benefit.” CMS has also planned an extensive outreach campaign aimed at educating low-income seniors about their options once the new benefit is introduced.

Yet despite the government’s plan to cover all seniors currently receiving Medicaid drug coverage, some patient and provider groups are concerned that automatic enrollment could prove to be problematic if patients’ current pharma-cies are not included in their approved networks. In the case of 340B entities, for in-stance, transferring Medicaid patients to Medicare plans that do not include their 340B pharmacies could potentially limit a patient’s access to 340B drugs and threaten to disrupt the patient’s continu-ity of care. A number of groups made similar arguments when CMS intro-duced automatic enrollment for low-income seniors into the Medicare drug discount card program (The Monitor, November 2004).

Many low-income beneficiaries also worry that in 2006 they may enter plans that will not cover their most commonly used drugs. According to a survey conducted by the Kaiser Commission on Medicaid and the Uninsured, “most [low-income sen-iors] are pleased with their current Medicaid prescription drug coverage and say it is working well, so they worry that they will be worse off under Medi-care.” Furthermore, some groups have voiced concerns that CMS may not have the organizational capacity to automati-cally enroll all of the eligible beneficiar-ies without creating some coverage gaps. According to a report released by the Kaiser Commission, “gaps in data and information, or inaccurate data, could mean that some dual eligibles will not be picked up by the automatic enroll-ment process, at least initially.” As a result, beneficiaries could potentially lose their Medicaid coverage without being assigned to a Medicare plan. Robert M. Hayes of the Medicare Rights Center (MRC) called the transi-tion “a train wreck waiting to happen,” arguing that the government must allow Medicaid coverage to continue tempo-rarily for those who are in the midst of transferring to a Medicare program. MRC also suggests that Medicare pro-grams be required to offer open formu-laries or honor Medicaid formularies until the end of 2006. Another obstacle that must be over-come in enrolling Medicaid beneficiar-ies into Medicare is the time period dur-ing which this transition must take place. The Kaiser Commission’s report argues that the brief window for enroll-ment will make it difficult for Medicaid beneficiaries to make an informed deci-

Auto-Enrollment of “Dual Eligibles” Raises Issues for 340B Providers

IN FOCUS MEDICARE RX: ISSUES AFFECTING 340B STAKEHOLDERS

continued on pg. 10

“Most [low-income seniors] are pleased with their current Medicaid prescription drug coverage and say

it is working well, so they worry that they will be worse off under

Medicare.”

Kaiser Commission on Medicaid And the Uninsured


February 2005

Pharmacies that choose to either waive their patients’ copayments or as-sist patients with their cost-sharing obli-gations under the new Medicare Part D benefit will be permitted to count their contribution towards their patients’ true out-of-pocket spending (TrOOP), ac-cording to the Part D final regulations released by the Centers for Medicare and Medicaid Services (CMS). As a result, patients who rely on their safety-net pharmacy to help pay for their Medicare drugs will be able to con-tinue accumulating out-of-pocket spend-ing even after they can no longer afford to pay for their medications. This is particularly significant for providers that serve indigent patients who may find themselves in the “doughnut hole,” the range of spending during which Medicare offers no assis-tance to standard beneficiaries and lim-ited coverage to those who receive low-income subsidies. According to the Medicare Moderni-zation Act (MMA), beneficiaries must reach a certain level of out-of-pocket spending—$3,601—before they leave the doughnut hole and reach the catas-trophic limit, at which point Medicare covers 95%-100% of drug costs. The new regulations clearly state

that CMS “will allow waivers or reduc-tions of Part D cost-sharing by pharma-cies to count toward TrOOP.” According to CMS, this change in policy was made in order to simplify the process by which Medicare drug plans determine a beneficiary’s TrOOP level. “Not allowing such waived or re-duced cost-sharing to count toward TrOOP would make it more burdensome for Part D plans given the need to track down whether cost-sharing was actually incurred by a beneficiary rather than a pharmacy,” according to the regulations. However, the final rule is clear that providers must not advertise these waiv-ers and must only offer them to patients who meet a consistent set of criteria based on financial need. The regulations also state that CMS views this “pharmacy waiver safe har-bor” as consistent with the definition of TrOOP. According to CMS, this figure takes into account both beneficiaries’ own spending and spending “on behalf of a Part D enrollee by another person.” “We believe this option is consistent both with the definition of ‘person’ in the proposed rule…and with Congres-sional intent,” the regulations state. Prior to the release of the final regu-lations, a number of patient advocacy

groups expressed concern that some low-income patients could potentially be stuck in the doughnut hole forever if assistance from their pharmacies and from manufacturers who sponsor patient assistance programs (PAP) were not included in TrOOP. CMS responded to these concerns by providing guidance as to what kinds of third-party contributions can be counted towards TrOOP. In addition to phar-macy waivers and reductions, TrOOP will also include assistance provided by manufacturers, charitable organizations, family members, and some state patient assistance programs (SPAP). In fact, the regulations state that the only spending that will not count as TrOOP is that which is contributed by either insurance plans or health care programs that are financially supported with federal funding, such as Medicaid, the Veteran’s Administration (VA), and AIDS Drug Assistance Programs (ADAP). In the case of SPAPs, such spending may only be counted as TrOOP if the funding for the SPAP, with limited ex-ception, does not include federal funds, provided that the SPAP meets all other requirements (e.g., it may not discrimi-nate against any particular plan or plans).

CMS To Allow Pharmacies to Contribute to Part D Out-of-Pocket Spending

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IN FOCUS MEDICARE RX: ISSUES AFFECTING 340B STAKEHOLDERS

The California State Assembly is currently considering a number of bills aimed at restructuring the way that the government purchases pharmaceuticals for state agencies, including a measure that would require the Department of Corrections to contract with a 340B cov-ered entity to provide care and pharma-ceutical services to the state’s prison population. Introduced on January 3 by Assem-bly Majority Leader Dario Frommer (D-43) and six of his colleagues, Assembly Bill 77 would authorize the Department of Corrections to launch a pilot program in order to “determine whether the department may reduce the cost of providing health care to inmates, includ-ing the furnishing of prescrip-tion drugs to inmates at a dis-counted price,” by partnering with one or more 340B entities. This type of partnership, which has been proposed in a number of states and counties, would require that the covered entity provide health care ser-vices to prison patients beyond simply dispensing pharmaceuticals. (For more, see The Monitor, December 2004.) The bill states that the Department would begin purchasing discounted drugs through a covered entity on Janu-ary 1, 2006, and would issue a report on the program’s success by May 1, 2007. Also sponsored by Frommer, As-sembly Bill 76 calls for the creation of the Office of Pharmaceutical Pricing, which would be responsible for purchas-ing pharmaceuticals for a host of state agencies including the Department of Health Services, the Department of Cor-rections, and the Department of Veter-ans Affairs. The bill states that other government entities, including those on the district, county, city or municipal levels, could also apply to be included in the Office’s purchasing pool. In order to secure the lowest price

California Lawmakers Consider 340B-Related Legislation

for government agencies, the bill en-courages the Office to “pursue all op-portunities…to achieve savings through the federal 340B program” and develop “cooperative agreements” with 340B covered entities in order to increase ac-cess to discounted drugs for those re-ceiving pharmaceutical services through state agencies. The bill also calls upon the state to develop an outreach program to educate eligible providers about the 340B pro-gram and encourage them to enroll. Both of Frommer’s bills closely re-

semble recent recommendations made by the California Performance Review (CPR), a commission created by Gover-nor Arnold Schwarzenegger (R) that issued a comprehensive report late last year suggesting ways to make govern-ment more efficient. CPR recommended in its report that the state hire a pharmacy benefit man-ager (PBM) to purchase pharmaceuticals for state agencies, which is encouraged in AB 76. The report also argued that the state could save more than $50 mil-lion by partnering the Department of Corrections with a 340B covered entity (The Monitor, December 2004). The introduction of AB 76 and AB 77 comes at a time when the Governor and other state officials are looking for ways to assist low-income uninsured individuals with their drug costs. For instance, the Governor has set aside $4 million in his 2005-2006

budget for the implementation of the California Pharmacy Assistance Pro-gram (Cal Rx), which would assist indi-viduals who meet certain requirements in accessing manufacturer-sponsored patient assistance programs (PAP) and would provide discounted drugs to low-income uninsured individuals who do not qualify for PAPs. The Governor announced in his State of the State address in January that Cal Rx would provide assistance to 5 million uninsured Californians “at prices competitive with those from Canada”

through manufacturer dis-counts and rebates and addi-tional assistance at the counter. The Cal Rx proposal relies on a “single point of entry” approach, meaning that quali-fied individuals would be given access to a Web-based clear-inghouse of PAPs. Those who do not qualify for these pro-grams but are eligible for Cal Rx would be able to bring their prescriptions to pharmacies and receive a discount of up to 40% off of retail prices, according to

the Governor’s budget website. To qualify for the Cal Rx program, individuals would be required to have an income of less than 300% of the Federal Poverty Level and would not be permit-ted to have any outpatient prescription drug coverage, including Medi-Cal, the state’s Medicaid program. Governor Schwarzenegger also hopes to acquire federal recognition of Cal Rx as a state patient assistance pro-gram (SPAP) so that manufacturers can exempt sales to Cal Rx from “best price” calculations. The Cal Rx plan was introduced in the California State Senate in December as Senate Bill 19. The bipartisan bill was brought to the floor by Senator Deborah Ortiz (D-6) and co-authored by Senator Charles Poochigian (R-14). The Governor has set a target date for implementation of the program for January 1, 2006.


California 340B Legislation • AB 76

Would establish an Office of Pharmaceutical Pricing to purchase drugs on behalf of state agencies and encour-age eligible providers to participate in 340B.

• AB 77 Would authorize the Department of Corrections to partner with a 340B covered entity to provide care and pharmaceutical treatment to the state’s prisoners.

Present

Medicare Rx: Key Issues for 340B Stakeholders

A conference designed for health care providers, the pharmaceutical industry, pharmacy service com-panies, and other entities that are impacted by the Public Heath Service 340B drug discount program.

Hyatt Regency Islandia and Marina

San Diego, CA March 16-18, 2005

www.phpcmedpin.org

The Medicare Modernization Act is the most sweeping health reform legislation in four decades. It has a major impact on all parties involved in the delivery of pharmaceutical care and will have a profound effect on the various stakeholders involved in the acquisition and delivery of pharmaceutical care to our nation’s low-income and uninsured populations. The law also has major implications for various federal drug discount programs including the Public Health Service 340B and Medicaid rebate programs.

The Public Hospital Pharmacy Coalition (PHPC) and Medicine for People in Need (Medpin) invite you to attend a conference on the effect of the new Medicare Rx Benefit on safety net providers and the pharmaceutical industry. Topics to be discussed include:

• 340B Introduction Class

• Lessons Learned from the Medicare Rx Discount Cards

• Co-Branding 340B/Medicare Rx Plans

• How to Maximize Subsidies for Low-Income Patients

• Update on 340B Inpatient Discounts

• How the New Benefit Will Affect PAPs and State Rx Programs

• Legislative Update

To learn more and register for the conference, visit www.phpcmedpin.org. For more information, contact Carrie Parrish at (510) 302-3300 or [email protected].

Public Hospital Pharmacy Coalition

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*CBS Rx, although based in New England, offers consulting services in all states.


February 2005

PHPC Calls on HHS Secretary to Address 340B “Drug Shortages”

The Public Hospital Pharmacy Coa-lition (PHPC), an organization consist-ing of approximately 250 disproportion-ate share hospitals in the 340B program, has formally requested that the US De-partment of Health and Human Services (HHS) investigate claims by pharmaceu-tical manufacturers and suppliers that they are unable to offer certain drugs at 340B prices due to drug shortages. In a February 17 letter addressed to HHS Secretary Michael Leavitt, PHPC argues that these claims are unjustified because the manufacturers and suppliers in question continue to offer these drugs to health care providers in the private market and, in some cases, to 340B pro-viders at significantly inflated prices. “These product ‘shortages’ arise, according to our information, because all available supplies of the drugs have been committed to other purchasers un-der commercial contracts,” the letter states. “According to the manufacturers, fulfilling these contractual obligations must take priority over making the drugs available at discounted 340B prices.” The letter states that PHPC members have experienced particular difficulty in acquiring 340B pricing on various intra-venous immunoglobulin (IVIG) prod-ucts, which are often used in hospital settings to reinforce patients’ immune systems and treat diseases such as multi-ple sclerosis.

The letter specifically mentions Bax-ter’s Polygam, Bayer’s Gamunex, and ZLB Behring’s Carimune as drugs that PHPC members have struggled to ac-quire through the 340B program. PHPC argues that these manufactur-ers should not be permitted to prioritize the demand of their commercial pur-chasers over the needs of 340B provid-ers and requests that HHS take “appropriate action” to discourage this practice.

According to the letter, the legisla-tive history of 340B strongly implies that Congress intended for manufactur-ers to offer discounted drugs to 340B entities as long as their products were available to consumers. The letter argues that the purpose of the 340B program—to help covered entities “stretch scarce federal resources as far as possible”—is undermined when these drugs are not made available at discounted prices. One of the consequences of these shortages is that disproportionate share

hospitals who are not able to acquire drugs at the 340B price are forced to purchase these drugs at retail prices due to the provision in the 340B statute which prohibits covered entities from purchasing their outpatient drugs through a group purchasing organization (GPO). As a result, some hospitals are forced to pay up to two or three times more for drugs than they would if they had access to the 340B price. “Thus, entirely contrary to the intent of Congress, 340B hospitals are actually disadvantaged by their participation in the program when seeking to purchase drugs in short supply,” the letter states. Specifically, the letter offers two solutions to the shortage issue. First, PHPC requests that further program guidance be issued to 340B stakeholders clearly stating that manufacturers are responsible for making their 340B cov-ered drugs available to covered entities at the appropriate price as long as the product is available to any consumers. The letter also requests that HHS revise the Pharmaceutical Pricing Agreement (PPA)—the contract be-tween a manufacturer and the Secretary that governs the 340B program—to ex-pressly state that manufacturers may not charge 340B entities any price above the statutorily-defined 340B ceiling price.

“340B hospitals are actually disad-vantaged by their participation in the program when seeking to pur-

chase drugs in short supply.”

Public Hospital Pharmacy Coalition

The 340B Prime Vendor Program (PVP) announced on February 2 that it has contracted with its tenth manufac-turer, X-Gen Pharmaceuticals, which will offer discounts to program partici-pants on anti-infective generic drugs. PVP Director Chris Hatwig says that the contract with X-Gen is significant because it will allow program partici-pants to gain access to discounted drugs such as Ethambutol tablets, which are used to treat tuberculosis. X-Gen Corporate Vice President J.

Robin Liles said that his company shares the Prime Vendor Program’s commitment to offering discounted drugs to those in need. The PVP currently offers 1,500 dis-counted products to the program’s 1,000 participants, according to a PVP press release. “We would encourage all qualified health care providers to join the pro-gram, which offers discounts up to 35 percent off of drugs, supplies, and de-vices which already have been dis-

340B Prime Vendor Program Adds Tenth Manufacturer

counted by the 340B program,” said Hatwig. Office of Pharmacy Affairs (OPA) Director Jim Mitchell says he is pleased with the program’s progress and be-lieves that it will continue to offer even greater value to its participants. “The program is doing an out-standing job,” says Mitchell. “[The PVP staff] understands both the problems and solutions in obtaining discount pricing, and they continue to bring significant value to 340B providers.”


www.rxforaccess.org Volunteers in Health Care (VIH) and Medicine for People in Need (Medpin), nonprofit leaders in the field of pharmaceutical ac-cess, invite you to subscribe to Rx for Access. Rx for Access brings together the information safety net providers need to manage phar-maceutical services in today’s health care environment.

The bimonthly newsletter explores effective strategies for balancing cost and access issues, ways to incorporate drug companies' patient assistance programs into pharmacy operations, dispensing options for clinics, steps to qualify for and better use 340B dis-counts, and trends in federal and state policies affecting pharmaceutical access.

340B Entities Wary of Dual Eligible Enrollment

sion about which private plan best fits their needs prior to being enrolled. “The short time frame in which dual eligibles are expected to sign up for a private Medicare drug plan will make a deliberate and voluntary choice of plans difficult,” the report states. “While most

Medicare beneficiaries will have the full six-month initial enrollment period to select a plan, dual eligibles need to en-roll within six weeks to avoid a disrup-tion in coverage.” The transition of dual eligibles to the new Medicare drug benefit was recently addressed during the confirmation hear-ing of Michael Leavitt, Secretary of the

US Department of Health and Human Services (HHS). “I agree that it is critical that we work to ensure as smooth a transition as possible for the dual eligible popula-tion,” Leavitt stated. “As Secretary, this will be a priority of mine and I hope to work with [Congress] as we move for-ward on these efforts.”


state pharmaceutical spending. “We must stop overpaying for pre-script ion drugs,” Leavit t said. “Pharmacies and Medicare buy drugs wholesale for a low price. But under Medicaid, state governments usually pay a much higher price. We must change the law so that states pay the same low rate.” Leavitt said that such reforms would save the federal government $15 billion over ten years and cut state spending by $11 billion during the same period. During his speech, Leavitt also dis-missed speculation that HHS would seek to block grant Medicaid, which would result in states receiving lump sums from the federal government to imple-ment their own Medicaid programs with few restrictions.

The idea of block granting Medicaid first gained momentum in 1995 when it was proposed by Republicans in Con-gress, and some believed that Secretary Leavitt would support the idea if con-firmed. “Some are concerned that we will propose a block grant system, like the one that was discussed in 1995,” Leavitt said. “[Not] so. There will be no block grant system for Medicaid.” The notion of a block grant system was especially troubling for 340B pro-viders. A state-run Medicaid program could conceivably not require pharma-ceutical manufacturers to enter into pric-ing agreements with HHS, as the 340B program currently does. Under the pricing agreements, manufacturers must participate in the 340B program as a condition of Medi-caid covering their drugs. In the absence

of enforceable pricing agreements, a manufacturer would have no financial incentive to participate in the program. Block grants could also potentially limit the federal government’s oversight of the 340B program. While block grants appear to be off the table, provider groups, including disproportionate share hospitals, are preparing for significant Medicaid cuts. The Administration’s budget proposal calls for $60 billion in Medicaid sav-ings. The proposed savings include $11.9 billion from ensuring that Medicaid pays for only net provider expenditures, $4.5 billion from closing loopholes on asset transfers for long-term care eligibility, and $6.2 billion from phasing down existing “safe harbors” for state taxes on providers.

HHS Secretary Addresses Issues Impacting 340B Stakeholders


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president calls for overhaul of medicaid rebate program

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