APA WF# 24-32 340b Drug Discount Program Policy Revisions

Georg:

Can the OHCA provide quarterly updates to the 11-digit NDC medications that are included in the supplemental rebate agreement?

OHCA Response: OHCA will post the list similarly to the High Investment Drug Carve Out List that is available on OHCA's pharmacy page where drugs are specified by trade name and include the applicable timeframe. OHCA will notify carved in 340B providers when changes are made to this list.

Zack:

The proposed rule to designate drugs as 340B carve outs for Oklahoma Medicaid creates undue operational challenges for 340B covered entities. In the broader 340B landscape, Covered Entities are already navigating manufacturer restrictions and rebate models that have added to operational complexities. This proposed rule creates additional operational and compliance challenges. First, while the circulation document references that the carved out drugs will be based on supplemental rebate agreements, the language recommended for addition does not specify the supplemental rebate and leaves the selection of drugs open ended. Second, third party administrator software systems may not be designed for this type of nuisance. Typically, Covered Entities may carve out Medicaid entirely, or carve out a specific drug entirely, not a combination of the drug and the payor. This proposed rule may lead to Covered Entities being forced to forego discounts on the drug entirely regardless of payor or create significant operational burden to ensure compliance. For example under the proposed rule, if Drug A is dispensed to a Medicaid patient then it would require a UD modifier to indicate that it was not purchased under 340B, but if the same drug was purchased under 340B pricing for a Medicare patient, it would require a TB modifier. This list of medications would have to be differentiated in the electronic medical record and would require the Covered Entity to monitor the OHCA website for changes. In addition, if a patient qualifies for Medicaid after their initial intake, all of the charges would have to be updated to different modifiers and the 340B purchase would have to be reversed to avoid the situation of obtaining a duplicate discount. On the other hand, to avoid these operational challenges and compliance risk, some Covered Entities may choose to carve out Medicaid completely which would increase cost. Lastly, it is unclear how crossover claims (claims for Medicare/Medicaid) would be handled. If OHCA imposes this rule on all Medicaid claims, the Covered Entity would lose the 340B benefit on patients that are dual eligible.

OHCA Response: Thank you for your comments/questions. The OHCA takes every comment under advisement. As it relates to drugs being included on the carved out drugs list, there is no cost savings, or operational advantage, for the OHCA to include drugs where there is not a supplemental rebate agreement in place so the scope of drugs considered would be limited to those products with a supplemental agreement. Additionally, any drug with a standard supplemental agreement in place that is added to the list would create an operational burden for the state as well so the reduced rebates associated with 340B utilization would need to be considerable.

Considerations are largely attributed to, but not limited to, the new CMS-led Cell and Gene Therapy (CGT) Access Model, where additional savings are offered to State Medicaid agencies (SMA) as part of an Outcomes-Based Agreement with CGT Manufacturers where potential payment to SMAs would be in the form of a Supplemental Rebate which would require these drugs to be carved out of 340B to prevent duplicate discounts. There is no current, and little prior, utilization of CGTs for our members from carved in 340B providers therefore the inclusion of these drugs should not widely impact carved in 340B providers. In order to realize the savings offered to states through this model we have proposed this rule to ensure the state has the means to collect these additional savings on these high cost drugs, when these additional savings are available to the state. The state presently has one CGT supplemental agreement in place that would be included on the referenced carve-out list and would later include any additional high cost CGTs the state enters into a supplemental rebate agreement for therefore this list must be amendable. There is currently no utilization from carved in 340B providers for this CGT product. As products are added to the list, actively carved in 340B providers will be notified by the team managing 340B operations at the OHCA that the list provided via our public website has been updated.

Regarding the example for use of 340B modifiers, the state already requires physician administered drugs (PADs) billed from carved in 340B providers to utilize modifiers TB for 340B purchased drugs and UD for non 340B purchased drugs. This currently applies to any outpatient/hospital claim, crossover or otherwise, billed to SoonerCare, or SoonerSelect plans, from carved in 340B providers. SMAs are required to submit utilization for federal rebates for claims whether Medicaid, or Medicaid managed care plans, are primary or secondary. This is similarly applied to the current 340B shared savings model. Crossover claims will have the same requirements as non-crossover claims regarding our 340B rules, which is currently the case as well.

Blake:

I don't think that carved-in health centers and systems will appreciate the clarity involved in this rule change. This does allow the state to have the flexibility they would like when deciding the lists, but there is nothing that prevents the state from adding any drug they would like. When prompted for a list, they could not provide one. While a good rule for the state, a good business plan for health centers is not "trust me, it won't affect you". I would not approve without a list of NDCs affected or without a process of approval to add NDCs.

OHCA Response: Thank you for your comments/questions. The OHCA takes every comment under advisement. Responses to previous comments that are similar in nature will be included here. Drugs listed on the carve out list will be specified by trade name and include the applicable carve out timeframes. As products are added to the list, actively carved in 340B providers will be notified by the team managing 340B operations at the OHCA that the list provided via our public website has been updated. As it relates to drugs being included on the carved out drugs list, there is no cost savings, or operational advantage, for the OHCA to include drugs where there is not a supplemental rebate agreement in place so the scope of drugs considered would be limited to those products with a supplemental agreement in place.

Considerations are largely attributed to, but not limited to, the new CMS-led Cell and Gene Therapy (CGT) Access Model, where additional savings are offered to State Medicaid agencies (SMA) as part of an Outcomes-Based Agreement with CGT Manufacturers where potential payment to SMAs would be in the form of a Supplemental Rebate which would require these drugs to be carved out of 340B to prevent duplicate discounts. There is no current, and little prior, utilization of CGTs for our members from carved in 340B providers therefore the inclusion of these drugs should not widely impact carved in 340B providers. In order to realize the savings offered to states through this model we have proposed this rule to ensure the state has the means to collect these additional savings on these high cost drugs, when these additional savings are available to the state. The state presently has one CGT supplemental agreement in place that would be included on the referenced carve-out list and would later include any additional high cost CGTs the state enters into a supplemental rebate agreement for therefore this list must be amendable.

Maggie:

On behalf of the Oklahoma Hospital Association, we would like to provide the following comment to proposed policy change, APA WF# 24-32: The proposed rule to designate drugs as 340B carve outs for Oklahoma Medicaid creates undue operational challenges for 340B covered entities. In the broader 340B landscape, Covered Entities are already navigating manufacturer restrictions and rebate models that have added to operational complexities. This proposed rule creates additional operational and compliance challenges. First, while the circulation document references that the carved out drugs will be based on supplemental rebate agreements, the language recommended for addition does not specify the supplemental rebate and leaves the selection of drugs open ended. Second, third party administrator software systems may not be designed for this type of nuisance. Typically, Covered Entities may carve out Medicaid entirely, or carve out a specific drug entirely, not a combination of the drug and the payor. This proposed rule may lead to Covered Entities being forced to forego discounts on the drug entirely regardless of payor or create significant operational burden to ensure compliance. For example under the proposed rule, if Drug A is dispensed to a Medicaid patient then it would require a UD modifier to indicate that it was not purchased under 340B, but if the same drug was purchased under 340B pricing for a Medicare patient, it would require a TB modifier. This list of medications would have to be differentiated in the electronic medical record and would require the Covered Entity to monitor the OHCA website for changes. In addition, if a patient qualifies for Medicaid after their initial intake, all of the charges would have to be updated to different modifiers and the 340B purchase would have to be reversed to avoid the situation of obtaining a duplicate discount. On the other hand, to avoid these operational challenges and compliance risk, some Covered Entities may choose to carve out Medicaid completely which would increase cost. Lastly, it is unclear how crossover claims (claims for Medicare/Medicaid) would be handled. If OHCA imposes this rule on all Medicaid claims, the Covered Entity would lose the 340B benefit on patients that are dual eligible.

OHCA Response: Thank you for your comments/questions. The OHCA takes every comment under advisement. Responses to previous comments that are similar in nature will be included here. As it relates to drugs being included on the carved out drugs list, there is no cost savings, or operational advantage, for the OHCA to include drugs where there is not a supplemental rebate agreement in place so the scope of drugs considered would be limited to those products with a supplemental agreement. Additionally, any drug with a standard supplemental agreement in place that is added to the list would create an operational burden for the state as well so the reduced rebates associated with 340B utilization would need to be considerable.

Considerations are largely attributed to, but not limited to, the new CMS-led Cell and Gene Therapy (CGT) Access Model, where additional savings are offered to State Medicaid agencies (SMA) as part of an Outcomes-Based Agreement with CGT Manufacturers where potential payment to SMAs would be in the form of a Supplemental Rebate which would require these drugs to be carved out of 340B to prevent duplicate discounts. There is no current, and little prior, utilization of CGTs for our members from carved in 340B providers therefore the inclusion of these drugs should not widely impact carved in 340B providers. In order to realize the savings offered to states through this model we have proposed this rule to ensure the state has the means to collect these additional savings on these high cost drugs, when these additional savings are available to the state. The state presently has one CGT supplemental agreement in place that would be included on the referenced carve-out list and would later include any additional high cost CGTs the state enters into a supplemental rebate agreement for therefore this list must be amendable. There is currently no utilization from carved in 340B providers for this CGT product. As products are added to the list, actively carved in 340B providers will be notified by the team managing 340B operations at the OHCA that the list provided via our public website has been updated.

Regarding the example for use of 340B modifiers, the state already requires physician administered drugs (PADs) billed from carved in 340B providers to utilize modifiers TB for 340B purchased drugs and UD for non 340B purchased drugs. This currently applies to any outpatient/hospital claim, crossover or otherwise, billed to SoonerCare, or SoonerSelect plans, from carved in 340B providers. SMAs are required to submit utilization for federal rebates for claims whether Medicaid, or Medicaid managed care plans, are primary or secondary. This is similarly applied to the current 340B shared savings model. Crossover claims will have the same requirements as non-crossover claims regarding our 340B rules, which is currently the case as well.

Brent:

Oklahoma Primary Care Association is the association of community health centers deemed federally qualified health centers statewide in Oklahoma. Oklahoma’s community health centers serve over 340,000 patients and served over 145,000 Oklahoma Medicaid covered patients in 2023.

Oklahoma health centers are highly committed to the health and wellness of SoonerCare members and look forward to working with the Oklahoma Health Care Authority (OHCA) on future initiatives to achieve this goal.

For over 30 years, the 340B program has been crucial to help safety net providers like health centers purchase outpatient medications at significantly reduced costs, enabling them to provide affordable discounted or free medications to uninsured and underinsured patients. By law and policy, health centers are required to invest every penny of 340B savings into activities that expand access to care for their patients. The 340B program generates savings that are reinvested in the health center to meet the unique needs of their communities, such as dental care, behavioral health, specialty care, translation services, food banks, housing support, and co-pay assistance programs. Health centers heavily rely on contract pharmacies to expand their community reach by providing their patients affordable, accessible medications. Additionally, health centers operate on razor-thin margins and cannot afford to lose access to certain 340B-priced medications for their Medicaid patients, especially because Medicaid patients are the majority of patients that health centers serve.

OKPCA appreciates the efforts OHCA has made to develop a revision to 317:30-5-87, 340B Drug Discount Program, at (a)(4) regarding the removal of certain drugs from the 340B program. We understand the State’s concerns about high-cost drugs and their impact on the State budget. On behalf of the health centers and patients we serve, OKPCA seeks to provide constructive feedback on some of the unintended consequences of this proposed revision. We wish to ensure health centers’ opportunities for participation in the 340B program remain intact and that the policy does not negatively impact health center pharmacies or patients. We greatly appreciate the opportunity to provide feedback on this proposal.

This proposed revision could impact a health center’s participation in the 340B program. Health center patients are four times more likely to have incomes below the Federal Poverty Level (FPL) and twice as likely to have income under 200% of FPL as compared to the U.S. population, making them eligible for the health center’s sliding fee discount program. This subset of patients is also more likely to have been diagnosed with diabetes, asthma, high cholesterol, or hypertension compared to the U.S. population and rely on medications purchased through the 340B program. Health centers estimate that more than half of their patients would go without needed medications if they did not have access to 340B discounts, which could translate to 3 million nationally or more patients struggling to access prescription drugs.

The proposed revised language would make it impossible for a closed-door pharmacy to operationalize and curtail medication access. Many health center pharmacies are closed door pharmacies (a pharmacy that only dispenses to its patients), meaning that because they are a 340B pharmacy due to being affiliated with a 340B covered entity (their health center), they lack a Wholesale Acquisition Cost (WAC) account. This makes it impossible to purchase drugs that are carved out of the 340B program, because they cannot purchase them on their 340B account. In turn, this means the pharmacy will have no way to fill the prescription of those carved out medications and dispense them to their Medicaid patients, inadvertently constricting patient access to medications they need the most.

This proposal could also place significant operational burdens on the pharmacy. If the pharmacy is an open-door pharmacy, meaning they fill prescriptions for patients even outside of their health center, they have separate inventories for 340B patients and non-340B patients. This proposal would prove cumbersome and difficult for the pharmacy to track that this specific list of drugs does not get dispensed to Medicaid patients. While some pharmacies can more easily track their inventory if they are getting their medications via a virtual replenishment model1, most pharmacies have set inventories, and staff would need to physically track within the pharmacy which drugs can and cannot be dispensed to these Medicaid patients. Additionally, it is unclear how often this list of drugs carved out will be updated, further contributing to difficulties for pharmacies to keep up to date with all drugs that cannot be dispensed to Medicaid patients.

Health center pharmacies may experience adverse financial outcomes because of this proposed revision. Many health centers face significant financial instability because they provide patients care, regardless of their ability to pay, and therefore provide a lot of uncompensated care. One national study found that more than half of community health centers operate with margins below 5%, with 11 million patients served by health centers operating with negative margins in 2022.2 Health centers use 340B savings to maintain essential clinical functions, hire staff, and support operations to provide care and prescription drugs. They also rely on 340B savings to maintain core clinical services; they use these savings to expand comprehensive clinical and enabling services they otherwise may be unable to provide, such as non-billable services and providers and care coordination or enabling services.

Because certain drugs will be carved out of 340B, health centers will have to purchase drugs upfront at a higher cost. This will result in increasing their inventory costs, which could be difficult to absorb given the financial constraints health center pharmacies experience. Additionally, increased costs may require the pharmacy to increase their credit limits with their wholesaler, which is not always a quick process or feasible in every instance.

These comments are also in consideration that the list of drugs in a supplemental drug rebate and to be carved out of 340B participation in Medicaid is seemingly unknown at this time and amendable by OHCA.

Moreover, the potential impact appears to create significant concern to an already vulnerable environment for nonprofit community health centers which are facing restrictions from other sources in regard to the 340B drug pricing program.

We understand the State’s intent behind this proposal and the concern with high-cost medications, and appreciate the opportunity to provide feedback on how this proposal could negatively impact health center pharmacies and our patients. We look forward to continuing to work with OHCA to provide affordable, accessible medications to SoonerCare recipients.

OHCA Response: Thank you for your comments/questions. The OHCA takes every comment under advisement. While the OHCA understands there may be some burden associated with this rule change for carved in 340B providers the OHCA must make every effort to offset rising drug costs. It would be operationally burdensome for, and is not the intent of, the OHCA to include every drug with a supplemental agreement on the carve out list but the OHCA must have the ability to ensure the state is not losing considerable rebates from manufacturers due to 340B utilization on a product.

Considerations are largely attributed to, but not limited to, the new CMS-led Cell and Gene Therapy (CGT) Access Model, where additional savings are offered to State Medicaid agencies (SMA) as part of an Outcomes-Based Agreement with CGT Manufacturers where potential payment to SMAs would be in the form of a Supplemental Rebate which would require these drugs to be carved out of 340B to prevent duplicate discounts. There is no current, and little prior, utilization of CGTs for our members from carved in 340B providers therefore the inclusion of these drugs should not widely impact carved in 340B providers. In order to realize the savings offered to states through this model we have proposed this rule to ensure the state has the means to collect these additional savings on these high cost drugs, when these additional savings are available to the state. The state presently has one CGT supplemental agreement in place that would be included on the referenced carve-out list and would later include any additional high cost CGTs the state enters into a supplemental rebate agreement for therefore this list must be amendable. There is currently no utilization from carved in 340B providers for this CGT product. As products are added to the list, actively carved in 340B providers will be notified by the team managing 340B operations at the OHCA that the list provided via our public website has been updated.

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