340B PARTNERSHIPS BETWEEN STATES AND COVERED ENTITIES

1
340B PARTNERSHIPS BETWEEN STATES AND COVERED
ENTITIES

• by
• Bill von Oehsen
• Principal
• Powers Pyles Sutter Verville, PC
• Prescription Drugs How States Can Use
• Federal Discounts
• NCSL Web-Assisted Audioconference
• Health Care Series
• October 15, 2003

2
Background On U.S. Pharmaceutical Market
Comparison Of Prices
Private Sector Pricing
Best Price
Source Stephen Schondelmeyer, PRIME Institute,
University of Minnesota. Data derived from
Prescription Drugs Expanding Access to Federal
Prices Could Cause Other Price Changes, U.S.
General Accounting Office, GAO/HEHS-00-118,
August 2000 and How the Medicaid Rebate on
Prescription Drugs Affects Pricing in the
Pharmaceutical Market, Congressional Budget
Office Papers, January 1996.
Powers Pyles Sutter Verville, PC
Bill von Oehsen
[phone]
William.vonOehsen_at_ppsv.com
3
Background On U.S. Drug Market Comparison Of
Prices
100.0
Average Wholesale Price
80.0
60.5
49.0
Cash Customers
44.8
PBM and Other Private Insurance
Medicaid
FSS
340B
Market Share
VA
25
60
11
1
1
1
Market Share
Chart is based on rough estimates
Powers Pyles Sutter Verville, PC
Bill von Oehsen (202)
466-6550
William.vonOehsen_at_ppsv.com
4
Medicare Drug BenefitPossible Impact Of Lower
Prices
100.0
Average Wholesale Price
Price Reduction for Medicare Patients
80.0
60.5
51.7
49.0
44.8
Cash Customers
Medicaid
PBM and Other Private Insurance
FSS
340B
Market Share
VA
25
60
11
Market Share
1
1
1
Chart is based on rough estimates
5
Medicare Drug BenefitPossible Impact Of Lower
Prices
Average Wholesale Price
51.7
49.0
Cash Customers
44.8
PBM and Other Private Insurance
100.0
Medicare
80.0
Medicaid
60.5
Market Share
340B
VA
40
11
10
35
Market Share
1
1
1
Chart is based on rough estimates
Powers Pyles Sutter Verville, PC
Bill von Oehsen [phone]
William.vonOehsen_at_ppsv.com
6
340B Opportunities For States

• Encouraging eligible facilities within the state
  to enroll in 340B
• Using 340B-discounted drugs for state and county
  prisoners
• Maximizing use of 340B within state-funded
  managed care plans
• Including 340B providers in state bulk purchasing
  initiatives
• Sole source contracts with 340B providers to
  furnish high-cost chronic care drugs

Powers Pyles Sutter Verville, PC
Bill von Oehsen (202)
466-6550
William.vonOehsen_at_ppsv.com
7
340B Opportunities For States Encouraging 340B
Participation

• 340B program reduces Medicaid reimbursement for
  outpatient drugs because 340B providers are
  required to bill Medicaid substantially below
  state reimbursement rates to offset state loss of
  rebates
• For example, according to a recent analysis, 340B
  hospitals are saving state Medicaid programs an
  average of almost 300,000 per hospital per year
• Many hospitals, community health centers, and
  other eligible facilities are not participating
  in 340B
• By assisting eligible entities with 340B
  enrollment, states can lower their Medicaid drug
  expenditures

Powers Pyles Sutter Verville, PC
Bill von
Oehsen [phone]
William.vonOehsen_at_ppsv
.com
8
340B Opportunities For States Extension To
Prisons

• States and counties may contract with 340B
  hospitals or other 340B facilities to provide
  health care services, including pharmacy
  services, to correctional populations
• Prisoners must be patients of the 340B provider
  to be eligible to receive discounted drugs
• Texas implemented this approach as a result of
  legislation passed in 2001 (S.B. 347)
• This partnership strategy is being pursued by
  state and local governments to extend 340B
  pricing to mental health populations, and recent
  Texas legislation (H.B. 2292) specifically
  encourages this concept

Powers Pyles Sutter Verville, PC Bill von
Oehsen [phone]
William.vonOehsen_at_ppsv.com
9
340B Opportunities For States State-Funded
Managed Care

• Drugs are about 35 percent more costly when
  purchased through PBMs instead of 340B program
• Shifting drug purchases from PBMs to 340B
  providers can lower costs for the plan which can
  be passed on
• to the state
• For Medicaid programs, this is an alternative to
  states carving out pharmacy from the plans
  benefits package and returning it to a
  fee-for-service program in order to collect
  Medicaid rebates.
• Application to managed care plans for state
  employees?

Powers Pyles Sutter Verville, PC Bill von
Oehsen [phone]
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10
Managed Care Disease Management

• 340B providers participating in managed care
  plans can develop disease management programs for
  enrollees having high drug costs
• Plans can steer enrollees suffering from chronic
  diseases to these 340B-based disease management
  programs (e.g., AIDS, diabetes, asthma, heart
  disease, etc.)
• 340B providers can use mail order or contracted
  retail pharmacies to increase access by getting
  federal approval as an alternative methods
  demonstration project

Powers Pyles Sutter Verville, PC Bill von
Oehsen [phone]
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11
340B Opportunities For States Bulk Purchasing

• Volume plus preferred drug list moves market
  share and creates savings
• By pooling their volumes, 340B providers and
  states can theoretically negotiate better
  discounts
• Savings equals subceiling discounts for 340B
  covered entities and supplemental rebates for
  state
• In states pursuing supplemental rebates for
  Medicaid drugs, a 340B strategy could be applied
  to disease groups carved out of the supplemental
  rebate program
• For state purchases that do not qualify for best
  price exemption (schools, employees, etc.),
  two-tiered price negotiations will be needed

Powers Pyles Sutter Verville, PC Bill von
Oehsen [phone]
William.vonOehsen_at_ppsv.com
12
340B Opportunities for States Bulk Purchasing
State Mental Employees Prisons Schools H
ealth AMP

Rebates or Upfront Discounts
Best Price
P R I C E S
State Pharmacy Assistance Programs
Medicaid
340B
Supplemental Rebates/Subceiling Pricing
Powers Pyles Sutter Verville, PC
Bill von Oehsen [phone]
William.vonOehsen_at_ppsv.com
13
340B Opportunities For States Sole Source
Contracts

• To meet patient definition requirements, 340B
  provider must provide other services than
  pharmacy case management and disease management
  are possibilities
• For Medicaid, a 1915(b) or 1115 waiver is
  required to waive the patients freedom of choice
• Utah Medicaid program has a sole source contract
  with University of Utah for providing factor
  products and case management services to
  hemophilia population statewide

Powers Pyles Sutter Verville, PC Bill von
Oehsen [phone]
William.vonOehsen_at_ppsv.com