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Matsui Leads Bipartisan Effort to Save 340B Drug Pricing Program, Preserve Prescription Drug Discounts for Safety Net Providers

WASHINGTON, D.C. – Today, Congresswoman Doris Matsui (D-CA) led a bipartisan letter with 216 representatives to U.S. Department of Health and Human Services (HHS) Secretary Alex Azar, urging immediate action to protect prescription drug discounts for safety net providers provided through the 340B program.

Recent reporting indicates that private company Kalderos is working with large pharmaceutical manufacturers to implement changes to the 340B program – without the approval of Congress or HHS – that would replace the 340B system of up-front discounts with post-sale rebates, resulting in a severe increase in the up-front cost of prescription drugs to 340B-covered providers. A post-sale rebate model would also give big drug companies tremendous leverage over participating clinics and hospitals, and potentially put manufacturers in violation of their statutory responsibility to provide 340B pricing.

The letter urges HHS Secretary Alex Azar to take immediate action to prevent Kalderos and pharmaceutical companies from changing the 340B program from a discount to a rebate model. The healthcare providers that benefit from 340B discounts – and who could be facing significant price increases if the change goes through – include Federally Qualified Health Centers, Ryan White HIV/AIDS clinics, rural hospitals, children’s hospitals, and safety-net hospitals that serve low-income Americans.

Congresswoman Matsui led the letter alongside co-leads U.S. Representatives Abigail Spanberger (D-VA), Cindy Axne (D-IA), David McKinley (R-WV), Dusty Johnson (R-SD), and John Katko (R-NY).

“Overhauling the longstanding 340B discount model and replacing it with a rebate system will make it significantly more difficult and expensive for all 340B hospitals and community clinics to access 340B savings, and could result in denial of 340B pricing altogether,” said Maureen Testoni, President and CEO, 340B Health. “We appreciate the leadership of Rep. Matsui and this large, bipartisan group of lawmakers standing up for 340B and urging Secretary Azar to take immediate action to protect 340B hospitals and the low-income patients who depend on them.”

Today’s letter builds on Congresswoman Matsui’s enduring support for the 340B Program. In July, she introduced a bipartisan bill to provide temporary waivers for certain 340B program eligibility requirements due to the COVID-19 health emergency. The bill will protect 340B hospitals from losing their covered entity status and allow for greater flexibility in sourcing drugs during the pandemic. Text of that bill can be found here.

Full text of the letter is available below and here.

Dear Secretary Azar,

We write to express our grave concern about measures being considered by drug manufacturers that threaten safety net providers’ lawful access to discounted drugs through the 340B Program. It is doubly troubling that these actions, which threaten the needs of the most vulnerable patients and the integrity of the health care safety net, are occurring in the midst of a global pandemic. We urge you to take action to prevent significant changes to the program that could enable widespread noncompliance with manufacturers’ statutory responsibility to provide discounted drugs to safety net providers.

Following the creation of the Medicaid Drug Rebate Program, Congress enacted the 340B Drug Pricing Program in 1992 with the intent to “stretch scarce federal resources to reach more eligible patients and provide more comprehensive services.” As you know, Section 340B of the Public Health Service Act requires drug manufacturers, in exchange for having their drugs covered by Medicaid and Medicare Part B, to enter into a pharmaceutical pricing agreement with the Department of Health and Human Services (HHS). The Health Resources and Services Administration (HRSA) administers and oversees the program, including the authority to issue guidance and ensure compliance with 340B program requirements.

340B program covered entities – including Federally Qualified Health Centers, Ryan White HIV/AIDS Clinics, safety net hospitals, rural hospitals, and children’s hospitals – help improve access to affordable prescription drugs and essential health services in underserved areas. Right now, these providers are also working to protect the health and safety of their patients as we combat COVID-19. The safety net providers in our districts have been good stewards of the 340B program, and it is critical they can continue to participate in the program to meet their communities’ health care needs.

We are deeply concerned by reporting that Kalderos, a third-party vendor, is working with pharmaceutical manufacturers seeking to change how covered entities receive 340B drugs by shifting from a discount to a rebate formula. On September 8th, Kalderos announced the launch of 340B Pay, a software system it claims, “allows manufacturers, covered entities and Medicaid agencies to work together to effectuate discounts compliantly and efficiently.” However, unilaterally forcing 340B participants to purchase drugs at list price and then request rebates would give drug manufacturers tremendous leverage over covered entities.

This action is also inconsistent with HRSA’s long-standing guidance that the 340B program is an up-front discount program. HRSA issued guidance in both 1993 and 1994 stating that discounts must be made available to 340B covered entities.  In addition, HRSA has previously only allowed the use of a rebate model in a limited case, and only after issuing guidance through the notice-and-comment process and soliciting feedback from stakeholders. This platform could make participation in 340B more difficult for covered entities, effectively reshaping the 340B program in a way that only serves manufacturers’ and these third-party vendors’ financial interests. These tactics open the door for significant compliance issues, threatening to put manufacturers in violation of their statutory obligation to provide 340B pricing.

With these concerns in mind, we request the following information by November 30, 2020:

  1. Has Kalderos, any other third-party vendor, or any drug company sought input from HHS regarding the use of a rebate model covered entities?
  2. What guidance has HHS provided to Kalderos, any other third-party vendors, or drug companies regarding the use of a rebate model for covered entities?
  3. What oversight, if any, would HRSA have into the operations of 340B Pay or similar third-party platforms that provide manufacturers with significantly more authority over the 340B program and jeopardize their compliance with 340B statutory requirements? 
  4. What steps would be taken to ensure that drug companies not deny 340B pricing to covered entities and that covered entities would be able to access 340B pricing in a timely manner and without facing unnecessary administrative or financial burden?

We are deeply concerned that the use of a rebate model could threaten the ability of covered entities to access 340B savings and provide accessible, affordable prescription drugs and critical health care services to millions of low-income Americans the 340B program is intended to serve. To protect safety net providers and their patients, we urge you to make clear that manufacturers may not implement a 340B rebate model without approval from HRSA. Further, we urge HRSA not to approve the use of a rebate model without first soliciting feedback and publishing guidance through the notice-and-comment process, consistent with past actions by HRSA.

Thank you for your prompt attention to these matters.

Background:

Since 1992, the 340B Drug Pricing Program required that pharmaceutical companies give safety-net and rural healthcare providers discounts on their drugs, in exchange for having their drugs covered by Medicaid.

The program protects patients who are low-income, live in underserved communities, or suffer from serious chronic illnesses from skyrocketing prices for the drugs they depend on the most. Limiting access to 340B discounts would cause safety-net providers and vulnerable patients to face significant price hikes in the middle of a global pandemic, at a time when both providers and patients are under serious financial strain.

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