Cambridge Health Alliance is “deeply concerned” about proposed changes to a prescription drug discount program that few patients know about yet has helped nonprofit “safety net” health care systems such as the Alliance survive financially and delivered lower prices to low-income and uninsured patients. Spokesperson David Cecere said last week that CHA is “actively working with advocacy partners to persuade the federal government” not to make the changes.
The program, known as 340B after a section of the federal law that established it in 1992, has required some drugmakers to sell prescription medicines at a deep discount to thousands of hospitals and other health centers that serve many low-income patients. The medical centers can bill health insurers for the medications at full price, keeping the difference. The money is supposed to help hospitals and other recipients maintain and expand services, as well as reduce drug prices for patients.
The federal agency that oversees 340B is proposing to test a different model that would require hospitals to buy drugs at full price up front and get a rebate from manufacturers later. The rebate idea has been pushed by drugmakers.
Cecere said a rebate system instead of a discounted price “would present major challenges to CHA, requiring us to devote significant resources to compliance with additional and burdensome tracking and reporting requirements. While we cannot speculate on the full financial impact of the rebate model, it could, at a minimum, present cash flow issues because rebates will only be paid long after CHA has purchased and dispensed the subject drugs.”
It’s possible that “rebate amounts will, in total, be less than the amount of the discounts that we receive,” Cecere said. The Alliance is working with “our business partners and advisers to mitigate these risks,” he said.
The Health Resources and Services Agency, the federal agency that oversees the 340B program, asked drug manufacturers on July 31 to propose how they would implement a rebate system for 10 expensive brand-name drugs for which Medicare negotiated lower prices in 2023. The drugs are Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara and Fiasp/NovoLog.
The agency gave companies until Sept. 15 to outline how they would give rebates instead of discounts for any of the 10 drugs they make. It will approve proposals by Oct. 15. The rebates would become effective Jan. 1.
The government acted to consider rebates after a number of drug manufacturers claimed they had the right to switch to rebates. Four drugmakers sued the Department of Health and Human Services and HRSA in 2021. A federal district court judge refused in May to issue an injunction ordering the government to allow rebates, but also rejected a request to declare that the 340B legislation doesn’t permit rebates that was filed by an organization representing health care systems that get 340B discounts and individual recipients, including UMass Memorial Medical Center in Worcester.
Drugmakers and other critics have said the program is plagued with duplicate discounts and that recipients don’t have to disclose how much money they get from the drug price differential or report details about where the income goes and how it helps low-income patients. Critics have also said HRSA doesn’t monitor the program effectively.
The number of health care organizations eligible for 340B discounts has ballooned since the program began, especially in the past decade. Only 389 hospitals and other health care entities were eligible in 1992; the number rose to 5,085 in 2022, according to an analysis by the Commonwealth Fund, a foundation that supports research on health care issues, particularly for vulnerable populations. The number of pharmacies in the program rose much faster: to 41,917 in 2022 from 8,113 a decade earlier; HRSA decided in 2010 to allow hospitals and other eligible health care providers to make deals with an unlimited number of outside pharmacies, such as CVS, to fill prescriptions for the hospitals’ patients under the program. The contracted pharmacies charge fees to dispense the drugs.
The Health Alliance, like other 340B recipients, does not report what it earns from the 340B program; still, the income not only helps the health care system provide services but reduces drug costs for some patients, Cecere has said. As a safety-net health care system, the Alliance serves a large number of low-income and uninsured patients. More than half its patients had government insurance such as Medicaid and Medicare, and 8 percent were uninsured in 2023, according to the CHA annual report for that year.
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