HRSAs 340B Drug Pricing Program10th Annual Pharmacy Purchasing Networking Conference August 9, 2005 Las Vegas, NV Christopher Hatwig, M.S., R.Ph.

Objectives

Provide an overview of 340B Drug Pricing Program Discuss the relationship between the OPA, the PSSC, and the PVP Discuss how hospitals qualify for the program and optimize it benefits Discuss program challenges and potential legislative related to the program

Background The Uninsured

49 million Americans without health insurance in 2002 23% of Americans under 65 have no prescription coverage 27% of uninsured said they needed a prescription but did not get it, compared to 10% of the insuredKaiser Family Foundation 2002

42% of uninsured with hypertension not taking medication compared to 25% of insured Health Net ofCalifornia, June 2001

Background Economic Disparity

Uninsured, non-elderly spent an average of $30.76 for prescription compared to insured patients who paid $9.96 and $5.53 for a brand or generic prescription respectively.Health Net of California, June 2001

Drug prices paid by those without drug insurance are 15% higher than those with insurance.Kaiser Family Foundation 1996

Medication Access Strategies

Medication Samples Patient Assistance Programs Drug Discount Cards/Coupons Bulk Donation/Purchasing Pharmacy Benefit Management 340B Drug Pricing Program

Background: 340B Drug Pricing Program

1990 -Congress created Medicaid rebate law

Drug manufacturers responded by increasing prices

1992 - Congress passed Veteran Health Care Act (VHCA) intended to extend relief to govt payers of drugs

Act stated that manufacturers participating in Medicaid must sign a Pricing Agreement to participate in the 340B program Provides discounts on outpatient covered drugs Required drug manufacturers to give best price to disproportionate share hospitals and certain covered entities grants Also referred to as Section 602, PHS or 340B pricing

Program Administration

Three Legs of the 340B Program

Office of Pharmacy Affairs (OPA) Pharmacy Services Support Center (PSSC) 340B Prime Vendor Program (PVP)340B Program

PSSC

OPA

PVP

Office of Pharmacy Affairs (OPA) Mission, Functions and FundingFederal Register 9/21/2004

Responsible for management and oversight of the 340B Programs Promote access to (Comprehensive Pharmacy Services) clinically and cost effective pharmacy services through:

Maximizing the value of participation in 340B Developing innovative pharmacy services Being a Federal resource for pharmacy practice

$2.97 Million Line item in FY2007 Presidents Budget Request

Why 340B?

Reduce prescription drug expenditures by safety net providers in order to:

Expand health services access to:

Low-income individuals/families Vulnerable populations

Reduce taxpayer burden

Average savings 25-50% for covered medications(NACHC Survey)

Comprehensive Pharmacy Services

Estimated Prices For Selected Public Purchasers, as Percent AWPvon Oehsen; Pharmaceutical Discounts Under Federal Law: State Program Opportunities

0% AWP AMP Medicaid (Min.) Medicaid Net FSS 340B FCP VA Contract

20%

40%

60%

80%

100% 100.0%

80.0% 67.9% 60.5% 51.7% 49.0% 47.9% 34.6%Private Sector Pricing

Stephen Schondelmeyer, PRIME Institute, University of Minnesota (2001)

340B Eligible Covered Entities

Federally Qualified Health Centers (FQHC) Hemophilia Treatment Centers (CHTC) Ryan White Programs (RWI, RWII, RWIII, RWIV) Sexually Transmitted Disease/Tuberculosis Programs (STD/TB) Title X Family Planning Clinics Urban / 638 Tribal Programs Federally Qualified Health Center Look-Alikes (FQHC-LA) Disproportionate Share Hospitals (DSH) Childrens Hospitals (pending clarification of S.1932, the Deficit Reduction Act of 2005)

Annual Growth of Section 340B Covered Entity Sites by Agency6,000 5,000 Number of covered entities

4,000

3,000

2,000

1,000

0 1998 2000 2002 2004 2006 2008 (Projected)

Year (as of July 1) CMS/ HRSA DSH CDC (STD/TB) IHS (638 & Urban) OS Family Planning HRSA Grantees and FQHC-LA

Annual Total Growth of Participating Section 340B Covered Entity Sites14,000

12,16212,000

11,442 10,325

11,926

12,168

12,410

Number of covered entities

10,000

9,193 8,035 7,972 8,239 8,605

8,000

6,000

4,000

2,000

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (Projected) (Projected)

Year (as of July 1)

Eligibility Criteria for Hospitals

Must meet one of the following:

Owned or operated by state or local government Granted governmental powers by state or local government Private non-profit with contract with state or local government to to provide health care services to low income individuals not eligible for Medicare or Medicaid Medicare DSH adjustment % of 11.75 or greater Must withdraw from group purchasing arrangement (GPO) for outpatient covered drugs

Additional requirements:

Including pharmacy wholesalers generic source programs

Disproportionate Share (DSH)

DSH patient percentage defined as:

(Medicaid, Non-Medicare Days) / (Total Patient Days)

+(Medicare SSI Days) / (Total Medicare Days)obtained from CMS_________________________________________________________________

DSH Percentage

Disproportionate Share Hospital (not sites) 340B Participation (July 1, 2006)

Eligible, Not Registered 722 50.24%

Eligible, Registered 715 49.76%

Eligible, Registered, Urban 544 76.08% Eligible, Registered, Rural 171 23.92% N = 715 organizations

N = 1,437 organizations

Eligibility defined as DSH adjustment percentage > 11.75% - to register other criteria must be met.

Getting Started with HRSAs Pharmacy Services Support Center (PSSC)

American Pharmacists Association (APhA)

American Association of Colleges of Pharmacy, American Society of Health-systems Pharmacists and other partners

5-yr. Contract Services to OPA and 340B covered entities

Information and analysis Relationships and networking Program development/Technical Assistance Partner with schools of pharmacy to encourage students to develop projects in 340B Safety-net organizations

Free to eligible covered entities

How Does a Hospital Register to Participate in 340B Program?1.

Determine the hospitals DSH Adjustment Percentage (must be >11.75%) Complete 340B Drug Program Enrollment Letter Complete form to certify non-participation in outpatient Group Purchasing Organization (GPO) Complete form for adding outpatient facilities (as appropriate)Access registration forms at http://www.hrsa.gov/opa/dsh.htm

5.

7.

Enrollment Periods with OPAApplication deadline:

Begin purchasing:(upon written confirmation from OPA)

December 1 March 1 June 1 September 1

January 1 April 1 July 1 October 1

NOTE: Database of covered entities updated quarterly. Few exceptions

What Drugs Are Covered?Covered drugs:

Non-covered drugs:

Outpatient Prescription drugs Over-the-counter drugs (if accompanied by a written prescription) Clinic administered drugs within eligible facilities ER drugs Drugs in other amb care settings (e.g. day surgery)

Vaccines Drugs given to the patient in inpatient care settings

Manufacturers Role - Pricing Structure for 340B and Medicaid

Medicaid and 340B entities receive prices based on either Best Price or Average Manufacturer Price (AMP) 15.1% for branded drugs

Additional discounts are applied if price increases exceed the Consumer Prime Index (CPI)

Generic manufacturers are required to provide a discount of 11% off of AMP

Best Price is not part of generic calculation

Pricing are recalculated and submitted quarterly Discounts are upfront..no rebates

Dilbert on Rebates.

Manufacturers Role (cont.) 340B/Outpatient Pricing

Manufacturers must provide 340B pricing if their drug is to be covered by Medicaid Manufacturers cannot sell covered drug above 340B ceiling price to covered entity Manufacturers are not prohibited from selling outpatient drugs at below 340B ceiling price

Various methods (direct, via wholesaler or PVP) Not required to offer negotiated sub-ceiling price to other covered entities or Medicaid

Prices offered covered entities are exempt from best price calculation Sub-ceiling prices extended covered entities are exempt from the VAs Non-FAMP calculation ONLY WHEN offered through HRSAs Prime Vendor

Patients meet eligibility requirements when.1) The covered entity has established a relationship with the individual by maintaining records of the individuals health care 2) The individual receives services from a provider either employed, contracted, or referred by the covered entity and responsibility for care remains with covered entity Note - An individual is not considered a patient if the sole health care service received is the dispensing of a drug Q: Would a hospitals employees be eligible to receive 340B priced drugs?

Program Billing Restrictions

In most cases, covered entities must bill Medicaid at acquisition cost plus dispensing fee.

Drugs purchased under 340B cannot be subject to both the 340B discount and Medicaid rebate (Duplicate Discount Rule)

No billing restrictions for non-Medicaid patients or in situations where Medicaid is not line-item billed for outpatient drugs

Clinic administered medications Medic