A Quick Look at the 340B Program Improvement and Integrity Act of 2009

By Matt Hotz, CIS Senior Associate
matthotz@cis-partners.com

The 340B Program Improvement and Integrity Act of 2009, known as S.1239 [1] in the Senate, would bring some significant changes to the 340B program if enacted. Sponsored [2] by Sen. Jeff Bingaman [D, NM], the bill has been referred to the Senate Committee on Health, Labor, Education, and Pensions for review.

To familiarize our clients and blog readers with the bill and the changes it could bring, CIS has prepared a summary of the proposed changes and what these changes could mean to you.

Key changes in the bill include:

1. More Covered Entities – Several new types of facilities, including children’s hospitals, rural referral centers, and critical access hospitals, would be eligible to participate as covered entities in the program.
2. Broader Coverage – Discounts would be expanded to cover drugs prescribed in both inpatient and outpatient settings. Currently, the 340B program only covers drugs prescribed in an outpatient setting.
3. Integrity and Program Management Improvements – More administrative structure will be implemented on the management of the program, including heightened scrutiny and oversight on manufacturers as well as guidance regarding calculations and restatements.

Key components to improve the management and integrity of the program include:

1. Pricing data submitted by manufacturers will be more closely scrutinized.
2. Recalculations and resubmissions may be required of manufacturers in cases when covered entities are overcharged.
3. The Office of Pharmacy Affairs (OPA) will be authorized to establish standard methodologies for calculating prices and to develop a process for handling recalculations and resubmissions.
4. Selective proactive audits of manufacturers and wholesalers may be conducted.
5. Sanctions will be imposed on manufacturers and wholesalers in cases of knowing and intentional overcharging.
6. Sanctions will be imposed on covered entities in cases of knowing and intentional fraud, including the possibility of removal from the 340B program.

Potential impact for manufacturers could include:

1. Manufacturers may have to revise their PHS policies and procedures to match the standardized methodologies that could be established by the bill, potentially increasing their administrative costs.
2. Manufacturers may also need to calculate two Average Manufacturer Prices (AMPs), one for Medicaid and one for the PHS program. This is one of the biggest areas of uncertainty – there are pending legislative changes regarding AMP calculation on the Medicaid side as well.
3. Administrative costs may increase in cases where recalculations and/or resubmissions are required.
4. Audit risk may increase with more oversight and selective proactive audits.
5. Financial exposure may increase with the establishment of sanctions for fraud.
6. Revenues may decrease as discounts are expanded to include drugs prescribed in both inpatient and outpatient settings.

A slightly different version of this bill (HR444) is circulating in the House of Representatives [3], but the two bills are very similar in both content and their implications for the industry. The main points of both bills are covered in this primer.

CIS continues to monitor and analyze both the House and Senate bills and related proposed legislation. If you want to know more about this issue, what it could mean to pharmaceutical manufacturers, and what you can do during this interim phase, please contact CIS.

Sources:
[1] S. 1239: http://thomas.loc.gov/home/gpoxmlc111/s1239_is.xml
[2] Press Release from the Office of Sen. Jeff Bingaman regarding S. 1239: http://bingaman.senate.gov/news/20090611-02.cfm
[3] H.R. 444: http://thomas.loc.gov/home/gpoxmlc111/h444_ih.xml