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A 340B Pricing Success Story and Recommendations for Improvement
Ted Slafsky
Founder and Principal of Wexford Solutions, Publisher, 340B Report
In April 2019, after a long-fought effort, including hospital litigation against the government, the Health Resources and Services Administration (HRSA) began posting 340B ceiling prices on its website and finalized regulations that would impose civil monetary penalties (CMPs) on drug companies that knowingly and intentionally overcharge 340B providers. As we celebrate the third anniversary of one of the program’s signature accomplishments, it is an excellent time to reflect on its success and provide recommendations for improving pricing oversight and transparency.
Background
After a series of HHS Office of Inspector General’s (OIG) office reports found that 340B entities were paying more for pharmaceuticals than the statutory ceiling price, Congress enacted several pricing transparency and oversight measures to address the matter. The OIG recommended these and included them in the Affordable Care Act (ACA) of 2010. They included:
- Creation of a 340B ceiling database to be posted on the Office of Pharmacy Affairs (OPA) website
- Imposition of CMPs of up to $5,000 for each instance of overcharges
- Establishment of a formal 340B dispute administrative process (ADR) to resolve claims by covered entities or manufacturers of non-compliance
Congress gave HRSA six months to implement these directives. The government only moved forward after hospital groups sued HRSA in 2018 over the ceiling price and CMP mandate and only after health centers and HIV and AIDS clinics sued over the ADR system. It was not until the last days of the Trump administration that HRSA finalized the ADR rules. The Biden administration has announced plans to revise those rules.
Big Advancement
Under the 340B ceiling pricing rules, manufacturers must submit quarterly pricing data to OPA. This includes the average manufacturer price (AMP), the unit rebate amount, the ceiling price, package size, and other elements. Covered entity representatives (limited to the authorizing official and primary contact) can access the site to see if the price for a particular product is accurate. Often any errors can be resolved by simply contacting the organization’s wholesaler and, if needed, the drug manufacturer itself. 340B providers and advocates I have conferred with praise the database as an essential tool to help ensure pricing accuracy. It has helped providers identify pricing discrepancies and potential pricing overcharges. Still, it has also been helpful to drug manufacturers, who can often locate pricing problems while preparing their quarterly pricing submissions.
The government has also benefitted enormously from the new pricing tool. An HRSA spokesperson told me that the agency “has seen a significant reduction in allegations of incorrect 340B prices in the market. The increased transparency in 340B pricing is significant for both covered entities and manufacturers. In addition, we continue to use the system internally to monitor manufacturer compliance by performing regular spot checks of prices and any necessary follow-up on pricing errors and discrepancies.”
As 340B Health’s Vice President of Pharmacy Services Steve Miller pointed out in an excellent recent podcast, “having that visibility never before available…has been so important.”
"The number of recalculations and offers for refunds that have been posted since implementation has drawn this picture for us," he points out, adding, “that there were only a handful of overcharge notices or refund offers before 2019.”
There has been a steady increase since that time. 340B Health says that overcharge announcements have increased from two in 2017 to 17 in 2021. So far, in 2022, there have already been 14 notices.
The data has also been beneficial in the government’s auditing efforts. HRSA audits five drug manufacturers to ensure they charge the correct amount each year. According to 340B Health, HRSA discovered overcharge evidence in slightly more than 6 percent of its manufacturer audits from 2015 to 2018. “Since the financial year of 2019, however, that average has jumped to nearly 67 percent with four out five manufacturers receiving findings in 2021.”
Recommendations for Improvements
While the ceiling price site has been welcomed, it has significant limitations. Some steps could be taken to improve its usefulness:
- Make the database more user-friendly: One of the universal complaints about the 340B ceiling price database is its limited functionality. Madeline Wallack, a co-author of the OIG reports and co-founder of consulting firm Rx|X, points out that the database is underutilized since the pricing files are not downloadable. As a result, it is difficult for her clients to conduct widescale price comparisons against wholesaler files. Rob Nahoopi, Senior VP of Pharmacy Services at consulting firm SpendMend, concurs and adds that it would be beneficial if HRSA would also load in Apexus subceiling discounts. Both acknowledge that HRSA has constraints because 340B pricing is confidential and cannot be shared with other parties.
- Open it up to more staff at a covered entity organization: As discussed, access to the database is limited to the entity’s authorizing official and the primary contact. The authorizing official is a senior executive, often the organization’s CEO or CFO. This official does not have the time to be looking up pricing discrepancies. The primary contact – usually based in the pharmacy – is more suited for the role. However, that person is also very busy with multiple responsibilities. It would be incredibly beneficial if HRSA provided access to the database to additional covered entity staff.
- Government should closely look at the underlying components: While the database includes much helpful information and HRSA does an excellent job resolving disputes, the agency relies on drug manufacturers to submit accurate prices and does not regularly review the raw data that the companies use to determine the 340B price. William von Oehsen, a long-time 340B attorney who helped draft the pricing provisions in the 340B law, says that the government should focus more resources on reviewing raw pricing data.
Steps You Can Take
Experts say it is a good idea to check the site routinely but that the best time to look closely is two weeks after the quarterly price submissions since there can be last-minute updates or revisions. Torey Lam, a community health center pharmacist who oversees the 340B Price Guide site, encourages covered entities to compare their invoices to their wholesaler accounts regularly. In addition, Apexus has a beneficial pricing tool that identifies quarterly price changes. Your 340B third-party administrator can also be an essential resource.
Remaining vigilant when it comes to overseeing prices is critical. You are helping your institution, but you also provide a service to the entire 340B provider community.
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Disclaimer
The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer, or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author(s). These views are always subject to change, revision, and rethinking at any time and may not be held in perpetuity.
