(Reprinted from the Drug Discount Monitor)
The chairwoman of the Senate Special Committee on Aging excoriated a Turing Pharmaceuticals executive during a hearing today for instructing a subordinate to dispute 340B claims in order to boost company profits.
The committee was holding its second hearing about Turing’s toxoplasmosis drug Daraprim and other decades-old off-patent drugs lacking generic competition whose prices have been raised by hundreds or thousands of a percent. Chairwoman Susan Collins (R-Maine) was questioning Turing co-founder and Senior Director of Business Development Michael Smith about transcripts of Skype chats between Smith and other Turing executives. In one conversation, Smith said he thought some reports of patients having problems accessing Daraprim – which went from $17.50 a pill to $750 pill after Turning bought the drug – were “fake.” In another, he expressed surprise that two patients “were paying cash” for Daraprim. “Rich (expletive deleted)? Wow. OMG,” he wrote.
In a third chat with fellow Turing executive Patrick Crutcher, “you then went on to discuss concerns that you had with the 340B…program,” Senator Collins said to Smith. “This is a program that provides needed medicines for our nation’s desperately poor. You expressed concern that it was cutting into Turing’s profits. So as we can see from the slides, your colleague Mr. Crutcher wrote ‘Time to dip out of the 340B claims (expletive deleted). F these guys.’ Your reply, ‘LOL. Yeah. I told her to start disputing the 340B claims.’ So Mr. Smith, that exchange alone, and there are many more I could have pointed to, make it very difficult for me to believe your statement when you express your deep concern for the patients.”
Smith responded, “There is some concern within the industry that the 340B program is fraudulently used….Those comments I was making in those informal discussion between coworkers…there are many stupid comments in here and regretful language.”
“Well, ‘LOL, yeah’ doesn’t sound like you’re really talking about fraudulent claims,” Senator Collins fired back. “The whole tenor of this exchange is ‘Can you believe there are suckers out there who are paying the full price…we have to start fighting back on the 340B program. There’s nothing in there that expresses an iota of concern for the patients who are getting help through the 340B program. Nothing at all.”
Earlier in during the hearing, the mother of a newborn daughter with congenital toxoplasmosis told the committee how “hopeless and depressed” she felt not knowing how she and her husband would find the $360,000 they needed to pay for year’s worth of Daraprim after the couple’s insurance company denied coverage.
“I spent days researching Daraprim to see if there was another way to obtain it,” Shannon Westgate said. She said she was “at a complete loss to do” when the University of North Carolina Medical Center infectious diseases specialist treating her daughter Isla called to say the hospital had obtained enough Daraprim “that we could be sure Isla would receive treatment for at least a year.” The Westgates are buying Daraprim directly from the UNC Medical Center pharmacy for only $48 per month. “I am so grateful that this option was found before it was too late for my daughter,” Westgate said.
UNC Medical Center participates in the 340B drug discount program. Many 340B healthcare providers say the reduced prices they pay enable them to provide medicines like Daraprim to families like the Westgates at reduced or no cost.
Check out 340B Health’s new YouTube video for an overview of 340B and how it works for hospitals and patients.
The 340B program came up at last week’s House Oversight committee hearing about drug company price gouging – the hearing during which ex-Turing Pharmaceuticals CEO Martin Shkreli pleaded the Fifth Amendment and tweeted that the committee members were imbeciles.
Shkreli and Turing Chief Commercial Officer Nancy Retzlaff were there to explain why Turing raised the cost of the anti-parasitic drug Daraprim from $13.50 to $750 per pill. Shkreli smirked. Retzlaff cited “mandatory statutory discounts and rebates like those in the 340B and Medicaid programs” among the reasons.
Wait a minute.
None of the over 250,000 pages of internal Turing documents that the committee released in advance of the hearing cites 340B or any other government program as a reason for the price increase. The documents instead show that Turing bought Daraprim – an off-patent drug with no competition – to exploit its monopoly position in the marketplace and make a killing. As Shkreli said in an email to Turing’s board of directors, “1 bn here we come.”
Retzlaff also said most Daraprim sales are associated with either Medicaid or 340B and “those programs receive penny-pricing.”
The only reason Daraprim’s 340B ceiling price is one cent is because Turing and the company it bought the drug from raised Daraprim’s price through the roof. A drug’s average manufacturer price (AMP) is a component of the Medicaid rebate and 340B ceiling price calculations, and it is indexed for inflation. When a drug’s AMP increases at a rate faster than inflation, the manufacturer has to charge 340B covered entities less (and give Medicaid bigger rebates). Under a federal government policy, the lowest a 340B price can go in these circumstances is a penny.
The chorus has been growing for months and now it’s official: Americans across the political spectrum agree that prescription prices are too high. The drug industry could hardly have done a better job uniting the country.
A new poll from the Kaiser Family Foundation finds that 72 percent of Americans believe drug costs are “unreasonable.” And in a sign of real trouble for the drug industry, 83 percent say they favor giving the government the power to negotiate Medicare drug pricing.
How did it come to this? Rampant profiteering. And the drug industry has shown a surprisingly tin ear to the fallout, choosing to fall back on the tired trope of high R&D costs. Nobody’s buying that anymore given the staggering earnings enjoyed by pharmaceutical companies lately. A prime example: Gilead Sciences, maker of the high-cost hepatitis drug Sovaldi, posted profits of $4.5 billion for the second quarter.
As a result, pricing transparency bills have cropped up in state legislatures from California to New York. While drug industry lobbyists rush to stamp these out, 118 leading oncologists recently decried unsustainable chemo prices in a commentary in the journal Mayo Clinic Proceedings.
“There is no relief in sight because drug companies keep challenging the market with even higher prices,” say the oncologists. “This raises the question of whether current pricing of cancer drugs is based on reasonable expectation of return on investment or whether it is based on what prices the market can bear.”
The 340B program was created in a similar environment of drug price increases and it remains as important today as when it was made law in 1992. Safety-net providers depend on the program to keep pharmaceutical costs under control and to provide invaluable health services to their communities.
Drug and biotech companies released a study this week which they claim shows that hospitals in the 340B drug pricing program are more likely than non-340B hospitals to acquire independent physician practices. In fact, a closer look at the data used in the study shows there is fundamentally no difference.
340B requires drug companies to reduce drug prices to hospitals and other health care organizations that serve our most vulnerable. The savings are invested into stretching scarce resources to care for vulnerable patients and providing vital care.
The study about physician practice acquisitions was performed by Avalere Health. It was paid for by AIR 340B, a lobby led by Pharmaceutical Research and Manufacturers of America and Biotechnology Industry Association. PhRMA and BIO want to drastically reduce the number of safety-net hospitals that access lower drug prices and make participation in the 340B program onerous for those that remain.
Although the Avalere study is entitled “Hospital Acquisitions of Physician Practices and the 340B Program,” it actually doesn’t include a single fact about such purchases.
Instead, it estimates acquisitions by assuming that an increase in the number of patients receiving certain types of drug therapy at a hospital “may” indicate that a hospital bought a physician practice where such services had been rendered. There is no indication that the study did anything to validate this hypothesis. There’s also no indication that the study considered and adjusted for other explanations such as a hospital opening and staffing a clinic itself. What’s more, the study itself indicates that there are many other reasons other than a clinic acquisition to explain why the volume patients receiving these drugs increased.
An AIR 340B news release says the study “found hospitals participating in the 340B Drug Pricing Program were more likely to acquire independent physician practices than non-340B hospitals.” BIO repeats the same statement in a blog post. Drug-industry funded groups such as the Community Oncology Alliance were quick to echo the misleading narrative.
That statement is false. The study made no such finding. The report concludes “it is beyond the scope of this study to determine whether 340B itself is contributing to physician practice acquisitions.”
It’s noteworthy that Avalere Health issued a separate news release stating that a higher percentage of 340B hospitals than non-340B hospitals in the study “were identified as potentially acquiring physician practices” (emphasis added).
Avalere studied 4,865 hospitals: 45 percent in 340B and 55 percent not.
During the five years between 2009 and 2013, out of those 4,865 hospitals, Avalere says it identified only 143 “as possibly acquiring at least one physician practice.”
On that basis alone, this study should have been shelved.
Of that tiny number of possible buyers, Avalere counts just 87 as 340B hospitals. Those 87 hospitals comprise:
- 71 hospitals that “participated in 340B both during and prior to the [potential] acquisition month
- 13 “enrolled in 340B after the [potential] acquisition month”
- 3 that potentially acquired a practice after exiting 340B.
If one truly wants to see if there is a correlation between hospital participation in 340B and potential acquisition of physician offices, the fair number to look at is not 87, but 71 – the number of hospitals that were actually in 340B when the potential purchases occurred.
71 is basically 50 percent of 143. 340B hospitals were 45 percent of all of the hospitals in the study. That’s awfully close to even, especially given that a tiny change in the distribution of 340B to non-340B hospitals in a group as small as 143 will be huge on a percentage basis.
In other words, using this study’s own data, the only reasonable conclusion is that 340B hospitals are fundamentally no more or no less likely than non-340B hospitals to have “potentially acquired” a physician’s practice between 2009 and 2013.
Some private cancer clinics blame the 340B program for their financial problems. In an article in The Journal of Oncology Practice, two nationally recognized oncologists argue that 340B isn’t at fault.
Blaming 340B for the the shift in cancer care from doctors’ offices to hospitals and restricting 340B in response “would not address the major causes of this shift and would adversely affect vulnerable patients currently helped by safety-net providers,” write Dr. Hagop Kantarjian, professor and chair of leukemia at the University of Texas MD Anderson Cancer Center in Houston, and Dr. Robert Chapman, director of the Josephine Ford Cancer Institute at Henry Ford Health System in Detroit.
Rather, the pair attributes the trend toward hospital care mainly to “declining profits and revenues in private oncology practices as a result of the Medicare Modernization Act of 2003 and the average sales price plus 6% reimbursement rule.” They also cite declining reimbursement rates for visits and procedures; financial pressures and payment models that do not consider the complexities involved delivering care in an office setting; and increased practice expenses for electronic medical records systems, information technology, billing documentation, and regulatory compliance.
Kantarjian and Chapman offered several solutions, including allowing private oncology practices to qualify for 340B if they agree to shoulder the same burden of care for vulnerable patients as hospitals in the drug discount program. They also recommend modifying the reimbursement formula for delivering cancer chemotherapy in the doctor’s office “to account for the complexities of care,” and moving away from fee-for-service reimbursement and towards bundled care.
The article appeared online on June 2 and will appear in the July 2015 print edition of the journal.
Just this morning, someone on Twitter asked: “With ACA, is 340B still needed with uninsured numbers dropping?” A new study from the financial rating firm Moody’s Investors Service helps explain why 340B is, indeed, needed more than ever.
Although public and nonprofit hospital bad debt and charity care trended downward in 2014, the first year of Medicaid expansion under the Affordable Care Act, hospitals in expansion states “are not uniformly transforming lower bad debt expense into higher cash flows and are not reporting financial results that are materially better or different” from those in non-expansion states, Moody’s said in a June 3 report.
Moody’s notes that bad debt in expansion states represented 4.8 percent of median hospital revenue in 2013, the year before expansion, “so big drops in bad debt do not necessarily lead to big improvements in operating performance.”
Also, “reductions in bad debt are being consumed by other expense growth, including salaries and pensions, and strategic investments in population health management,” Moody’s said.
“A reduction in bad debt will not in and of itself result in stronger (hospital) margins,” the report concludes.
Some in the drug industry insist
that a small percentage of 340B hospitals actually help low-income patients. A new comparative study of 340B DSH hospitals and non-340B hospital sets the record straight.
The study found that:
- As a percentage of total patient care costs, 340B disproportionate share hospitals provide nearly twice as much care as non-340B hospitals – 41.9 percent versus 22.8 percent – to Medicaid beneficiaries and low-income Medicare patients.
- 340B hospitals provide nearly 30 percent more uncompensated care than non-340B hospitals – $24.6 billion to $17.5 billion. Although 340B hospitals accounted for only 35 percent of all hospitals included in the analysis, 340B hospitals provided 58 percent of all uncompensated care. In addition, when taking hospital size into account and looking at uncompensated care as a percent of total patient care costs, 340B hospitals across all hospital sizes provided consistently high levels of uncompensated care.
- A higher percentage of 340B DSH hospitals provide public
health and specialized services – many of which are unprofitable but essential to their communities – than non-340B hospitals. Examples include emergency trauma care, care to persons with HIV/AIDS, crisis prevention, neonatal intensive care, etc.
If you support and want to protect 340B, help spread this news.