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The ASCO Policy Statement on the 340B Drug Pricing Program

Jeffery C. Ward, M.D. Past Chair, ASCO Clinical Practice Committee

Chair, ASCO 340B & Payment Reform Workgroups

340B Workgroup Members • Dr. Jeffery Ward, CPC Chair • Dr. Roscoe Morton, CPC Immediate-Past Chair • Dr. Anupama Kurup, CPC Chair-elect • Dr. James Frame, SAC Chair-Elect • Dr. Ray Page, SAC Chair • Dr. Gina Villani, GRC & HDAG • Dr. Blase Polite, Cost of Cancer Care Task Force & HDAG

Benefits of 340B

• Essential that uninsured, under-insured, and indigent patients have access to care

• Allows institutions that truly serve the vulnerable to maintain operations

• For those entities meeting the spirit of the law, the program results in overall good

Areas of Concern • 340B qualification criteria: inpatient vs. outpatient • Expansion of program beyond original intent: potential use of program funds to

expand services into lucrative outpatient markets, not underserved markets • Contract pharmacies • An “unlevel” playing field: providers that see the bulk of the uninsured and

underinsured should be rewarded or incentivized, regardless of institutional status

• Program needs reform so that resources go to the patients that need them, regardless of setting

Workgroup Findings & Recommendations – The 340B program is essential for the hospitals it was designed to assist, and

ASCO should oppose efforts to scuttle the program without making provision for these institutions

– There are numerous serious concerns with the program that need to be addressed to protect its integrity and sustainability

– Workgroups efforts published…

Policy Statement on the 340B Drug Pricing Program by the American Society of Clinical Oncology

• Background – Basic description of the program – Significant financial implications

• Substantially reduces burden on entities providing uncompensated / undercompensated care • Covered entities benefit financially from the “spread” with private insurance or Medicare patients

• Discussion – Does the 340B program satisfy the original intent of the legislation? – Is the program size appropriate…or too large? – Are adequate safeguards in place to ensure compliance and oversight? – Do unique considerations related to cancer care warrant special attention by policymakers?

• Recommendations

Published on-line in JOP on April 15, 2014

Recommendation #1 When considering the future of the 340B Drug Pricing program, policymakers should focus on how to best meet the original intent of the program to provide resources and incentives to deliver high-quality care for uninsured, underinsured and low-income patients.

• Congress & HRSA should require covered entities to provide a full, comprehensive accounting of

the amount of 340B savings and the percent reinvested into care for uninsured, underinsured, and Medicaid patients on an annual basis

Recommendation #2 Policymakers should adopt policy changes that address the size and future growth of the 340B Drug Pricing Program.

• Congress should discard the current DSH formula, and other parameters derived

from inpatient data, for determining eligibility for an outpatient program • Replace with a formula that considers the percent of underinsured / uninsured

patients treated in the outpatient setting

Recommendation #3 Improve compliance and oversight by issuing guidance to clarify relevant definitions and provide funding for key oversight activities related to the 340B Drug Discount Program.

• Congress & HRSA should define and clarify the term “patient” and other

important criteria • HRSA should receive appropriate level of funding/staffing to engage in

necessary oversight

Recommendation #4 Policymakers should place special emphasis on understanding and responding to any adverse impacts that the 340B Drug Pricing program may have on patient access to high-quality oncology care.

• Decreasing numbers of independent oncology practices may be attributed in part to financial

pressures and incentives due to expansion of the program • Policymakers should consider if recent/current expansion of the program affects availability of

community oncology practices • 340B program could be better targeted to truly needy patients by appropriately identifying those

entities that serve such patients – regardless of site of care (i.e. institutional vs. private practice)

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The consequences of 340B expansions

Rena M. Conti, Ph.D. Assistant Professor of Health Economics and

Policy

Acknowledgements and disclaimer

• Support from National Cancer Institute K07 CA138906 grant to the University of Chicago.

• Grateful for the generosity of Walgreen’s. • Findings and opinions expressed are those of Conti, and not

necessarily those of the NCI, Walgreen’s, or the University of Chicago.

• This is preliminary work, please do not cite or circulate without the authors written permission.

14 Do not cite or circulate without author's permission.

The ugly…

15

A note on “prices” • 3 types • My focus: Supply side price, acquisition price:

– MD office practices and hospitals acquire many infused and injected drugs directly from manufacturer or through group purchasing organizations (GPOs) from specialty wholesalers.

– Pharmacies can search for lowest acquisition prices for drugs dispensed in retail setting.

– High capital costs clearly incent the search for low prices.

– Mismatches between prices also create incentives.


GPOs, Medicaid and 340B Provide Discounted Acquisition Costs


Much worry over the consequences of 340B expansions

• Essentially a lump sum transfer from pharmaceutical manufacturers to providers. – In exchange for charity care provision.

• Creates arbitrage opportunities for 340B-qualified providers. – Generate income by treating patients with insurers that reimburse at

rates well above the discounted acquisition costs of the drugs. – Medicare reimbursements do not reflect 340B.


Two research projects

• Designed to examine consequences of program expansions.


Rena M. Conti, Peter B. Bach

THE CHANGING PATIENT POPULATIONS SERVED BY THE 340B DRUG DISCOUNT PROGRAM


Study purpose

• Provides the first empirical evidence that the opportunity to profit off the 340B program has created an impetus for providers to push the envelope on the program’s intent. – By opening outpatient clinics or pursuing affiliations in affluent

communities where patients will be well insured.


340B Entities, Sites, Contract Pharmacies, and Medicaid Exclusions

22

Type of 340B Provider Number of

Unique Entities

Number of Sites

Sites per Entity

Contract Pharmacy

Relationships

Contract Pharmacies per Entity

# of Entities that are not Carving-out

Medicaid

% of Entities that are not Carving-out

Medicaid Disproportionate Share Hospital 969 7,552 7.8 23,984 24.8 660 68.1%

Sole Community Hospital 120 498 4.2 424 3.5 42 35.0%

Critical Access Hospital 840 1,749 2.1 1,879 2.2 246 29.3%

Pediatric Hospital 40 202 5.1 344 8.6 22 55.0%

Cancer Hospital 2 5 2.5 0 0.0 2 100.0%

Family Planning 3,635 3,635 1.0 590 0.2 66 1.8%

Consolidated Health Center 1,117 5,491 4.9 17,595 15.8 312 27.9%

STD Clinic 1,758 1,758 1.0 328 0.2 15 0.9%

TB Clinic 1,346 1,346 1.0 73 0.1 8 0.6%

Ryan White Clinics 447 447 1.0 1,121 2.5 25 5.6%

Other 683 1,062 1.6 1,837 2.7 156 22.8%

Total 10,957 23,745 2.2 48,175 4.4 1,554 14.2%

Source: Avalere Analysis of HRSA Enrollment Data as of November 5, 2013

Focus on DSH because most prominent 340B qualified hospital provider with the most number of affiliate sites.

Do not cite or circulate without author's permission.

Analytical methods • Use nationally representative publicly available

administrative datasets. • Cross-sectional intertemporal design in which

the 2012 socioeconomic status of local patient populations served by DSH and clinics are compared using chi-square tests.

• Construct a difference measure (Clinic-DSH) to test whether socioeconomic characteristics vary by year of affiliation.


Data

• HRSA data on all 340B qualified DSH and clinics. • Clinic affiliation determined by the HRSA assigned

“340B ID”, prefix and suffix. • Matched each DSH and clinic by zip code, city and

state to the American Community Survey. • zCTA level: percent unemployed, median and mean

household income and percent population below poverty line.

• County level: percent uninsured (2011). 24 Do not cite or circulate without author's permission.

0

200

400

600

800

1000

1200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Hospitals, newly qualified Hospitals, qualified cumulative count


0

500

1000

1500

2000

2500

3000

3500

4000

4500

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

clinics, newly qualified clinics, qualified cumulative count


0

10

20

30

40

50

60

70

80

90

100

% Unemployed % Uninsured* % population belowfederal poverty level

Median householdincome ($2012 0000s)

Mean household income($2012 0000s)

A comparison of local population socioeconomic characteristics served by 340B qualified DSH,

affiliated clinics and all US in 2012

DSHs (n=510) DSH affiliated clinics (n=4836) All US (n=32096)


-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

% Unemployed % Uninsured % population below federalpoverty level

% Median household income($2012)

% Mean household income($2012)

Percent difference in 2012 local population socioeconomic characteristics between affiliated

clinics and disproportionate share hospitals by year of 340B qualification (compared to differences in

1992-2004)

2005-2006 2007-2008 2009-2010 2011-2012


Summary of findings

• Program core goals have likely been eroded by program expansions.


CLARK B1, HOU J1, CHOU C2, HUANG ES2, CONTI RM2 1WALGREEN CO. 2UNIVERSITY OF CHICAGO

National outpatient prescription dispensing patterns through contract pharmacies serving the 340B drug discount program in 2012


Study purpose

• To describe national, contemporaneous 340B qualified prescriptions compared to all prescriptions dispensed in the contract pharmacy setting in 2012.


Analytic methods • Claims data contain drug name and brand/generic. • Drugs were categorized into Anatomic Therapeutic

Class by primary indication by the Medi-Span™ system.

• Scripts are categorized by 340B qualification based on a variable required by HRSA regulation.

• “Specialty” if high value, high-touch and/or complex.

• Chi-square tests were used to test for statistical differences between 340B prescriptions compared to all prescriptions.




Policy considerations I

• Our findings suggest gaining access to the discounts may be one motivating rationale for merger and acquisition activity.

• These activities can raise prices with no change in quality of care delivered.


Policy considerations II

• Discounts are averaging around 3-10% of drug revenue. – Likely bind on drugs in top 340B classes. – Suggest launch prices and price increases are reflecting 340B

exposure.


Do the benefits of the expanded program outweigh the costs?

• Program likely maintains access to care for some vulnerable patients. – Calculus varies substantially by entity type. – Can only be monitored with improved transparency.

• Hospitals are in a unique position to retain revenue under these expansions. – Worry about improved access, spending since patients

pay reimbursements as if 340B discounts didn’t exist.


THANK YOU!

Rena M. Conti Assistant Professor of Health Policy and Economics The University of Chicago [email protected]


mailto:[email protected]

Policy considerations III

• Hospital-outpatient department consolidation and patient socioeconomic mix calls into question DSH payments based on inpatient payer mix alone.

39

Congressional Research Service. Medicaid DSH Payments. 7-5700, December 2013.

Do not cite or circulate without author's permission.

Distribution of Outpatient vs. Inpatient Revenues, 1992 – 2012

Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2012, for community hospitals.

Gross Inpatient Revenue

Gross Outpatient Revenue

Do not cite or circulate without author's permission. 40

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National Leadership Summit on 340B Aaron Vandervelde, Director, Berkeley Research Group

Washington, DC June 10, 2014

Legal Made Me Do It

• The opinions expressed in this presentation are those of the presenter and do not necessarily represent the opinions of BRG or its other employees and affiliates. The information provided in this presentation is not intended to and does not render legal, accounting, tax, or other professional advice or services, and no client relationship is established with BRG by making any information available in this presentation, or from you transmitting an email or other message to us.

Page 43 Nothing in this document should be construed as tax, legal or regulatory advice.

Physician-based Oncology Practice Acquisition Study - Overview

• Study Objectives: – Understand historical trends in physician-based oncology practice acquisitions by entities

participating in the 340B program (“Covered Entities”) – Measure impact of such acquisitions on 340B chargebacks – Compare timing of such acquisitions with the registration date on the OPA database as a sub-entity

of the covered entity (“Child Site”) for purposes of 340B participation

• Study Design:

– Six manufacturers provided 340B chargeback data for oncology related products – Acquired practices were identified by correlating new registrations in the OPA database with

significant increases in oncology-related 340B chargeback volume at the parent entity – Trends in 340B chargeback volume before and after the acquisition were analyzed to assess timing

and size of increase in 340B chargebacks attributable to oncology practice acquisitions – A subset of acquired practices were further analyzed to compare timing of acquisition relative to

registration date on OPA database


Physician-based Oncology Practice Acquisition Study – Key Findings

• Acquisitions of physician-based oncology practices by 340B Covered Entities have increased significantly over the 2009 – 2012 time period and preliminary 2013 data indicate this trend continued

• Average oncology-related chargeback volume at Covered Entities that acquired a physician-based oncology practice (“Acquiring Covered Entities”) was comparable to those entities that did not acquire a physician-based oncology practice (“Non-Acquiring Covered Entities”) in 2009, but grew to be three times greater than Non-Acquiring Covered Entities by 2012

– The vast majority of this growth is attributable to 340B purchases by the acquired physician-based oncology practice (“Acquired Site”)

• Over half of the Acquired Sites were located 10 or more miles from the Acquiring Covered Entity and 85% of the Acquired Sites were located in higher median income locations when compared to the Acquiring Covered Entity

• There does not appear to be any correlation between higher oncology-related chargeback volume and higher charity care costs at Acquiring Covered Entities

– 28 of the 63 (~45%) Acquiring Covered Entities generated more oncology-related chargebacks than they reported in total charity care for the same fiscal year; these chargeback data only represents the oncology-related products from the six participating manufacturers, so including the total 340B chargebacks for all products would increase this number

Page 45

Nothing in this document should be construed as tax, legal or regulatory advice.

Study Results: Change in Study-Eligible 340B Chargebacks Following Site Acquisition


• Following registration of an Acquired Site as a Child Site on the OPA database, the increase in Study-Eligible 340B Chargebacks was almost always immediate

• Within two months of OPA registration, the total chargeback volume at the Acquired Site represented ~40% of total Study Eligible 340B Chargebacks for the Acquiring Covered Entity, on average

• These acquisitions represent an immediate and sizeable increase in revenue and product margins to the Acquiring Covered Entity due to the increased utilization and lower drug expense

Study Results: Change in Study-Eligible 340B Chargebacks Following Site Acquisition


• Although average Study-Eligible 340B Chargeback volume per Covered Entity was comparable in 2009, by 2012 Acquiring Covered Entities had over three times as many Study-Eligible 340B Chargebacks as Non-acquiring Covered Entities

– In 2012, 75% of the disparity in average Study-Eligible 340B Chargebacks per entity was attributable to the Acquired Sites

• CAGR of Study-Eligible 340B Chargebacks differed widely when accounting for the effect of Acquired Sites – Acquiring Covered Entities plus Acquired Sites: 58.2% – Acquiring Covered Entities Alone: 34.3% – Non-acquiring Covered Entities: 24.0%

Study Results: Characteristics of Acquired Sites


• Acquiring Covered Entities appear to be selecting physician-based oncology practices located in higher median-income communities

– Only 14 of the 144 Acquired Sites (9.7%) were located in a zip code with a lower median income than the Acquiring Covered Entity and represent 8.5% of the Study-Eligible 340B Chargeback volume at Acquired Sites

– Half of all Acquired Sites were located 10 or more miles from the Acquiring Covered Entity and 89% of these Acquired Sites were located in a higher median-income community than the Acquiring Covered Entity

Note: 47 Acquired Sites are excluded from this analysis because they have the same median income as the Acquiring Covered Entity.

14 Acquired Sites

83 Acquired Sites

Study Results: Comparison of Study-Eligible Chargebacks to Charity Care Costs


• For 28 of the 63 (~45%) Acquiring Covered Entities, the Study-Eligible 340B Chargebacks paid by manufacturers exceeded the charity care costs provided by those entities in accordance with their charity care policies as reported on the most recently filed cost reports

• The average yearly Study-Eligible 340B Chargebacks appear not to be correlated with the volume of charity care provided by the Acquiring Covered Entity

Note: Charity care costs calculated using the hospitals’ operating cost-to-charge ratio

Impact on Medicare Payments of Shift in Site of Care for Chemotherapy Administration Study

• Study Objectives: – Measure historical trends in shift of site of care for chemotherapy claims from physicians’ offices to

hospital outpatient departments – Understand the role of 340B hospitals’ acquisitions of physician-based oncology practices on this

shift in site of care – Estimate the increased Medicare and Medicare beneficiary payments attributable to increased

utilization and higher reimbursement rates for chemotherapy claims billed in hospital outpatient departments

• Study Design: – Analyzed Medicare FFS hospital outpatient and physicians’ office claims – Acquired practices were identified by correlating increases in Medicare hospital outpatient claims

with the timing of physician-based oncology practice acquisitions – Chemotherapy claims attributable to the 340B hospitals’ acquisition of physician-based oncology

practice acquisitions were identified by comparing pre and post acquisition claims volume – Chemotherapy claims were re-priced using average physician office claim reimbursement for the

same procedures to estimate additional Medicare payments attributable to higher reimbursement rates for hospital outpatient departments

– Average chemotherapy claims cost in physicians’ offices was compared to the re-priced claims attributable to 340B hospitals’ acquisition of physician-based oncology practice acquisitions to estimate additional Medicare payments attributable to differences in utilization

Page 50


Impact on Medicare Payments of Shift in Site of Care for Chemotherapy Administration Study – Key Findings

• From 2008 to 2012, Medicare chemotherapy claims for services performed in the hospital outpatient departments increased from 1.20 million annually to 1.94 million annually and now account for 29.1 percent of total Medicare claims volume for chemotherapy.

• Between 2009 and 2012, 86 340B hospitals acquired at least one physician-based oncology practice that resulted in a measurable increase in Medicare oncology claims. Primarily through these acquisitions, these hospitals’ share of the overall Medicare hospital outpatient chemotherapy claims volume increased from 5.1 percent in 2008 to 11.0 percent in 2012.

• By 2012 approximately 0.77 million claims had shifted into the hospital outpatient department setting on an annual basis. Chemotherapy claims attributable to 340B hospital acquisitions of physician-based oncology practices (0.12 million) account for at least 15.6 percent of the shift in the site of care from physicians’ offices to hospital outpatient departments.


Impact on Medicare Payments of Shift in Site of Care for Chemotherapy Administration Study – Key Findings

• Medicare and Medicare beneficiaries incurred additional costs (allowed amount) of $196.55 million for chemotherapy claims attributable to the 86 340B hospitals’ acquisitions of physician-based oncology practices. These additional costs represented 39.8 percent of the total allowed amount and were a function of increased utilization and higher reimbursement rates in hospital outpatient departments.

• Differences in utilization of chemotherapy drugs and services between hospital outpatient departments and physicians’ offices resulted in an estimated increase in Medicare and Medicare beneficiary payments of $167.28 million. Over 93 percent of the additional payments were related to chemotherapy and other chemotherapy-related drugs.

• Between 2009 and 2012, Medicare reimbursed these 340B hospitals $23.29 million more and Medicare beneficiaries and other payers paid $4.05 million more for the oncology claims attributable to the physician-based oncology practice acquisitions than if the services had been billed as a physicians’ office claim.

Page 52


Contact Information


• For further information on these studies, please contact Aaron Vandervelde of Berkeley Research Group at:

– 202.480.2661 – [email protected]

About Berkeley Research Group, LLC

Berkeley Research Group, LLC (www.brg-expert.com) provides independent expert testimony, advisory services, and data analytics to major law firms, Fortune 500 corporations, government agencies, and regulatory bodies around the world. BRG experts and consultants specialize in the provision of sophisticated economic, financial, and analytical advice across a wide range of disciplines including antitrust and competition policy, complex damages, finance, health care, intellectual property, valuation, and workforce issues. In addition, the firm assists clients in major industry sectors with compliance, business process improvement and strategy consulting.

About the Author

Aaron Vandervelde is a Director with Berkeley Research Group’s Health Analytics practice in Washington, DC. He has over 10 years of experience providing strategy, health policy, and litigation consulting services to clients in the health care industry. He specializes in financial and economic analysis of health policy and provides litigation consulting services related to issues arising from contracts and transactions between health care entities. Specifically, he focuses on deriving strategic insight through the integration and analysis of large, complex data sets including claims data, internal and external sales data and publicly available health data.

This study was funded by Biotechnology Industry Organization

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Changing Sites of Care for Cancer Patients and Potential Implications Murray Aitken, Executive Director AIR 340B Forum June 10, 2014

CHANGES IN ONCOLOGY PRACTICES

Source: Community Oncology Alliance (COA) Practice Impact Report, 2012, 2013. The State of Cancer Care in America: 2014. www.asco.org/stateofcancercare

Oncology Practice Measure

Result (2012, 2011 % change)

Referring drug infusions elsewhere 47 v. 48, no change

Merged / acquired (non hospital) 132 v. 111, 19% increase

Closed 241 v. 199, 21% increase

Acquired by hospital 392 v. 314, 24% increase

Struggling financially 442 v. 369, 20% increase

34%

28%

37%

30% 29%

42%

2012 2013

1-2 Physicians 3-6 Physicians More than 7 Physicians

AIR 340B FORUM 061014 56

HOSPITAL OUTPATIENT COSTS COMPARED TO PHYSICIAN OFFICE COSTS

Source: IMS PharMetrics Plus, 2012.

AIR 340B FORUM 061014 57

PAYER AND PATIENT COST DIFFERENCES

Source: IMS PharMetrics Plus, 2012.

$ difference / dose paid by payor

$ difference / dose paid by patient

Therapy HOP v MD Office HOP v MD Office

Alemtuzumab 6,251 -10

Bevacizumab 6,298 312

Cetuximab 2,764 374

Epirubicin 1,231 -2

Fulvestrant 1,054 -9

Leuprolide Acetate 1,756 121

Mitoxantrone 991 116

Pertuzumab 5,792 0

Rituximab 4,330 398

Trastuzumab 2,354 35

AIR 340B FORUM 061014 58

TREATMENT PERSISTENCE AND TOTAL COSTS Early-stage ER+/PR+ breast cancer patients who discontinued adjuvant hormonal treatment

Source: IMS Health IMS Oncology EMR and PharMetrics Plus , 2006 – 2012.

AIR 340B FORUM 061014 59

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