MHA to MassHealth: Use Caution When Targeting 340B Drugs

The high cost of pharmaceuticals is well documented and the commonwealth is undertaking numerous efforts to achieve savings. For example, new budget language adopted this year improves the ability for the state to negotiate with pharmaceutical manufacturers on their pricing through the form of supplemental drug rebates in the MassHealth program. For many Massachusetts hospitals, the federal 340B program is the vehicle that provides needed savings for purchasing medication and drug therapies for their patients.
But now the Executive Office of Health & Human Services (EOHHS) has released proposed regulations that would give MassHealth the authority to designate and exclude from MassHealth coverage high-cost drugs that are purchased under the 340B program. Drugs that have been referenced as high-cost for purposes of the regulation are gene and cell therapy drugs that can cost more than $1 million per patient. If MassHealth is able to limit 340B coverage for certain drugs at its own discretion, then affected hospitals would have to – under federal guidelines – purchase the drugs at a higher cost.
Last week, MHA, after consultation with its members, wrote a letter to EOHHS, stating that any 340B savings that the state may gain by excluding certain expensive drugs “must be considered with great caution in recognition of the serious financial implications on disproportionate share, pediatric, and sole community hospitals, as well as other healthcare providers.” Hospitals heavily rely on 340B financing to support the medications and drug therapies provided to their patients, including those covered by MassHealth. The savings yielded by the 340B program also extend beyond pharmacy and help to support the entire mission of hospitals. Limitations on these savings therefore puts into question the financing that supports care provided to patients, MHA said in its letter. 
To better align with the intent of the proposed regulation, MHA advocated for greater clarification in the regulations related to the definition of “high cost” drugs that could be excluded. It also recommended changes to the reimbursement for such drugs and a more robust engagement process between MassHealth and 340B providers. MHA noted that the acquisition cost of complex drugs oftentimes does not factor in the cost of providing them to MassHealth patients. That is, the drugs are so complex in their formulation and application that hospitals incur costs in storing them, transporting them, or assembling teams of caregivers to apply them to patients.
MHA’s Senior Director of State Government Finance and Policy Dan McHale testified at a MassHealth hearing last Friday on the pharmacy proposal, stating, “Addressing the high and growing cost of pharmaceuticals is an effort we and our members are committed to collaborating on with MassHealth. The federal 340B program is a critical component to this effort, not only for hospitals but the commonwealth as a whole. MHA believes there is a path to using the proposed state approach in a very limited capacity if it incorporates hospital recommended changes to the proposed regulation and process. Otherwise, we would have significant reservations.”