ATTN: Comments on 340B Drug Pricing Program Omnibus Guidance

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1 October 27, 2015 Krista Pedley Director, Office of Pharmacy Affairs Health Resources and Services Administration 5600 Fishers Lane Rockville, MD ATTN: Comments on 340B Drug Pricing Program Omnibus Guidance Dear Commander Pedley, On behalf of the nation's Medicaid Directors, NAMD is pleased to submit comments on HRSA's proposed 340B Drug Pricing Program Guidance. We welcome HRSA's engagement on a number of issues in this draft guidance, though we have significant concerns with the operationalization of several of HRSA's proposals. As we identified in our 340B working paper in May of this year, the 340B program and the Medicaid program interact in a number of areas. These program intersections often introduce administrative complexity to Medicaid's day-to-day operations, particularly around the avoidance of duplicate discounts (the claiming of the otherwisemandatory Medicaid prescription drug rebate on drugs purchased at 340B pricing), which we identified in the working paper. Our comments here primarily focus on this administrative burden and the degree to which the proposed guidance mitigates or exacerbates this burden. They fall in three main areas: duplicate discounts, contract pharmacies, and timelines for 340B status changes. We also wish to note that any changes HRSA applies to the definition of a 340B patient should take into account the administrative burden imposed on states, and any such change should not increase this burden or impose additional requirements on Medicaid agencies. Please find our comments, organized by topic, below. 1. Duplicate Discounts in Fee-for-Service and Managed Care Duplicate discounts are a chief area of concern for the Medicaid program s interactions with 340B. Medicaid is required by statute to seek rebates on all fee-for-service (FFS) drug claims 444 North Capitol Street, Suite 524 Washington, DC Phone:

2 and, after the passage of the Affordable Care Act, on drug claims paid for by Medicaid managed care plans. However, statute prohibits Medicaid from claiming rebates on drugs purchased at 340B prices, in order to prevent manufacturers from paying two mandatory rebates on one drug. HRSA in the past has focused only on the Medicaid FFS environment via the Medicaid Exclusion File. Our white paper called for HRSA to address how states and managed care plans should work to avoid duplicate discounts in the managed care context. While we are glad that the proposed guidance addresses Medicaid managed care, we have serious reservations regarding the feasibility of HRSA s proposed approach. Part D; Prohibition of Duplicate Discounts (a)(1), Medicaid Fee-for-Service: We are supportive of the additional flexibilities afforded to states in the proposed guidance to prevent duplicate discounts in FFS Medicaid. Specifically, the inclusion of Medicaid provider numbers and National Provider Numbers (NPI) in the guidance s language has the potential to provide a robust approach to identifying covered entities choosing to carve in Medicaid. o We also note the summary of the guidance (Federal Register Vol. 80, No. 167, p ) states that covered entities wishing to bill Medicaid for non-340b eligible sites should obtain a different NPI from the state for that purpose, though we do not see a corresponding provision in the guidance itself. We want to stress that this flexibility is and should continue to be -- afforded at the option of the state and is not automatically available to covered entities. Some states may find an alternative NPI a useful approach, but for others it may present an additional administrative burden. States must have the flexibility to craft 340B policy that works best for their Medicaid programs. Part D; Prohibition of Duplicate Discounts (a)(2), Medicaid Managed Care: HRSA proposes that covered entities have the flexibility to choose whether to carve in or carve out 340B drugs for Medicaid managed care patients. The entity may differentiate their policy by both covered entity site and by managed care plan under the guidance. o While we support finding a mechanism to account for Medicaid managed care in the 340B program, we strongly object to the approach laid out in the proposed guidance. Allowing covered entities to differentiate policies by site and by plan, with the ability to change these policies on a quarterly basis as outlined at Part D, Prohibition of Duplicate Discounts (b), would shift tremendous new administrative burden onto the states and on managed care plans. Tracking these policy decisions across all 340B sites in the state and across all the state s Page 2 of 7

3 o o Medicaid managed care plans leaves states open to serious duplicate discount risks and adds new costs for both states and plans. Further, it would add to rather than minimize the risk and uncertainty for duplicate discounts in managed care programs. Additionally, this proposed approach would make the state s development of actuarially sound rates for managed care plans much more burdensome. If a covered entity s cost of care varies quarter by quarter based on 340B carve in decisions for a plan and/or a site, it will be very difficult for states to accurately project cost scenarios that impact rate development. This would make Medicaid managed care rate development and approvals more administratively burdensome, more time-consuming, and more resource intensive for the states. Instead, we request that HRSA provide states the authority to review and approve covered entity decisions to carve in 340B for managed care plans. States approvals would be contingent upon the entity s and the plan s processes and policies for avoiding duplicate discounts. Additionally, states should have the option to require a consistent carve in policy by covered entities across the entire Medicaid program, regardless of the delivery system used. This approach will ensure consistency across FFS and managed care, and thus help minimize the risk of duplicate discounts. Part D; Prohibition of Duplicate Discounts (d), State notification: We support the provision requiring covered entities to have mechanisms in place to notify states in instances when a 340B drug is unable to be dispensed to a FFS or managed care Medicaid patient, a circumstance that we highlighted as occurring at times in our white paper. However, we reiterate here the same caveats of the white paper on this measure namely, that any approach must include thoughtful consultation with states to minimize administrative burden and unintended consequences. 2. Contract Pharmacies The proliferation of contract pharmacies in the 340B program has garnered substantial attention from stakeholders, including state Medicaid agencies. Contract pharmacies add an additional layer of complexity on the already complex interactions between Medicaid and 340B, complexities which are exacerbated by the growth in their number. The proposed guidance takes steps to address the issues raised by contract pharmacies, and we are generally supportive of its provisions. Page 3 of 7

4 Part D; Prohibition of Duplicate Discounts (c), Contract pharmacy: HRSA proposes that contract pharmacies will be presumed to not dispense 340B drugs to FFS or managed care Medicaid patients, unless otherwise noted on the public 340B database. If a covered entity wishes to have a contract pharmacy to carve in Medicaid, it must provide a written agreement between the contract pharmacy and the state Medicaid agency or managed care plan detailing how duplicate discounts will be avoided. o We view this as a positive step towards improving the overall integrity of the 340B program. However, the Medicaid agency is ultimately responsible for the collection of drug rebates, and as such should be the entity that a covered entity and contract pharmacy make agreements with to carve in Medicaid at the contract pharmacy level. We request that HRSA clarify the state s necessary participation in this agreement and note that an agreement with only a Medicaid MCO is not sufficient. We note that the language found at Part E Contract Pharmacy Arrangements, (b)(2) comports with our request that the state be the main entity that the covered entity liaises with for this agreement, rather than an MCO. We request that the language in Part D be made consistent with this language. o Additionally, we request that HRSA make available model agreements for states, covered entities, managed care plans, and contract pharmacies to inform this process. These model agreements should outline the expected roles of each entity, detail how and by whom oversight will be conducted, and how 340B claims will be identified by the contract pharmacy and reported to the state and/or MCO. The proposed guidance does not include a limit on the number of pharmacies a covered entity may contract with. We remain concerned that the absence of a mechanism to control the overall growth of contract pharmacy arrangements in 340B will contribute to the overall complexity of administering the program from the Medicaid agency perspective, particularly if covered entities seek to carve in many or all of their contract pharmacies. 3. Timelines for Retroactive Changes in 340B Eligibility Status and Purchases We are concerned that the guidance does not address the timelines for when a manufacturer or covered entity may dispute a drug's 340B status. We request that HRSA include such parameters as it works to finalize the regulation. Page 4 of 7

5 The failure to timely identify a drug purchase as 340B puts the Medicaid program at risk for repayment of claimed Medicaid drug rebates, as Medicaid is statutorily required to claim these rebates on all FFS and managed care drug claims. If a circumstance arises in which a drug purchase dating several years prior has its 340B status retroactively changed, Medicaid agencies have to dedicate their finite resources and staff time to burdensome analysis of old drug claims to resolve rebates which were initially correctly applied. This is an inefficient use of taxpayer dollars. Additionally, we are concerned that HRSA's framework for handling changes in covered entity eligibility status for 340B would pose administrative difficulties for Medicaid agencies. Comments on specific provisions of the guidance follow: Part A; Loss of eligibility (Non-Hospital Covered Entities (c) and Hospital Covered Entities (c); Registration and Termination (b)): For both hospital and non-hospital covered entities and their child sites, HRSA proposes immediate termination of 340B program eligibility when the covered entity fails to meet 340B eligibility requirements. HRSA also proposes that the covered entity report this loss of eligibility effective date and the last date of a 340B drug purchase to HRSA, and notes that the entity is liable to manufacturers for repaying the 340B discount in periods of program ineligibility. o Our understanding is that, for example, the date a covered entity submits a Medicare cost report indicating a disproportionate share percentage below that required for 340B eligibility would also be the effective date of eligibility termination. We are concerned that such a reading may leave states uninformed of a covered entity's program termination in time for the Medicaid agency to perform the proper claiming of drug rebates from these entities. These cost reports (and many other changes to entity status) are filed on a quarterly timeline, and without proper notification to the state Medicaid agency of the termination, it is not possible for states to include an entity's claims into the proper Medicaid "carve in" or "carve out" status until after the fact. This could leave states in the position of making retroactive Medicaid drug rebate claims, which is administratively burdensome. o We propose that HRSA require covered entities which choose to carve in Medicaid to, upon their termination from the 340B program, notify their Medicaid agency of this change in status. Alternatively, HRSA could publish a postdated termination date to allow the Medicaid agency to take appropriate measures in response. In general, we request that HRSA publish 340B contract Page 5 of 7

6 information for each state to facilitate notifications and communication of state 340B policy. Part A; Group Purchasing Organization Prohibition for Certain Covered Entities (a)(2): HRSA proposes that a GPO-purchased drug provided to an inpatient who is identified and reclassified by a subsequent review as an outpatient for payment purposes is eligible for 340B pricing. o We are concerned that no timeline or structure of these reviews is offered, nor is there a detailed specification of what entities may conduct these reviews. As proposed, these reviews leave too much uncertainty and ambiguity around the 340B status of GPO-purchased drugs and pose a significant risk for duplicate discount issues. We request that HRSA provide more detail around these reviews, including when and by whom they may be conducted. We note in the summary of the guidance (Federal Register Vol. 80, No. 167, p ) that HRSA discusses the concept of covered entities "banking" 340B drugs via reviewing previous drug purchases that were identified as non-340b and re-characterizing them as 340B. We do not see a corresponding provision in the proposed guidance itself. However, the language used in the summary is concerning. It states that covered entities are responsible for requesting 340B pricing at the time of purchase, but may recharacterize prior purchases contingent on providing auditable records supporting this claim. There is no timeframe for how far back such re-characterizations may be made, despite HRSA's noting that such reviews can extend back several years. As noted above, such extensive retroactive changes pose serious administrative burdens on the Medicaid program. We request that HRSA place a limit on such retroactive reviews at no more than three years, after which the initial determination of a non-340b purchase stands, and that any time such a change is requested the entity must notify the state. HRSA s proposed guidance on the 340B program is a welcome and positive step towards bringing consistency to the program s overall administration, and we are appreciate the opportunity to provide our recommendations for further strengthening the guidance. However, a number of issues remain to be resolved as both Medicaid and 340B continue to grow, intersect, and reform. NAMD stands ready to assist in engaging in thoughtful, creative solutions to these challenges. If you have any questions about our comments, please contact Andrea Maresca [andrea.maresca@medicaiddirectors.org] or Jack Rollins [jack.rollins@medicaiddirectors.org]. Page 6 of 7

7 Sincerely, Matt Salo Executive Director Page 7 of 7