Jennifer Kent Directr Califrnia Department f Health Care Services 1501 Capitl Avenue Sacrament, CA 95814 Subject: Draft All Plan Letter 18-XXX - Medicaid Drug Rebate Prgram Via e-mail: Jennifer.Kent@dhcs.ca.gv Dear Directr Kent: The Califrnia Hspital Assciatin (CHA), the Califrnia Children s Hspital Assciatin, the Califrnia Assciatin f Public Hspitals and Health Systems, Private Essential Access Cmmunity Hspitals, Inc., Califrnia Health+ Advcates and the District Hspital Leadership Frum appreciate the pprtunity t cmment n the Draft All Plan Letter (APL) 18-XXX n the Medicaid Drug Rebate Prgram (MDRP), published by the Department f Health Care Services (DHCS) n March 19, 2018. Ntably, the APL prvides clarificatin t all Medi-Cal managed care health plans (MCPs) abut the reprting requirements needed t avid duplicate discunts in the 340B Drug Discunt Prgram. We appreciate that DHCS has identified a prcess t eliminate the risk f duplicate discunts, and we ffer the fllwing cmments t ensure the 340B prgram s benefits cntinue t serve Califrnia s mst vulnerable patients and cmmunities. Benefits f the 340B Prgram Savings frm the 340B drug discunt prgram help safety-net hspitals and clinics preserve vital health care prgrams and services. The discunts prviders receive frm the pharmaceutical industry thrugh the 340B prgram supprt prviders effrts t imprve care fr all patients, including ffering specialized prgrams fr sme f ur mst vulnerable Medi-Cal ppulatins wh rely n safety-net prviders. These services include: Extended hurs f peratin fr cmmunity clinics and health centers HIV clinics that include a full range f health and mental health services fr patients Hepatitis C clinics, which are safety-net centers f excellence that prvide lifesaving, curative treatments fr Medi-Cal patients Pst-perative services, including meds t beds prgrams that allw patients t be discharged frm majr peratins, such as cardiac surgeries r rgan transplants, with critical medicatins needed fr prper recvery and ensure that patients receive necessary fllw-up with pharmacists Specialized treatments at infusin clinics, such as thse prvided t patients with cngestive heart failure, hemphilia, multiple sclersis and cancer
Page 2 Case wrkers fr individuals experiencing hmelessness and additinal supprt staff t address cmplicated care needs Increased access t specialty care thrugh expanded transprtatin services t patients withut reliable transprtatin Expanded pharmacy access fr Medi-Cal and uninsured patients s that pharmacies are available thrughut lcal cmmunities 340B Drug Discunt Prgram versus Medicaid Drug Rebate Prgram With bipartisan supprt, Cngress created the 340B Drug Discunt Prgram in 1992 t enable safety-net hspitals, cmmunity-based clinics and ther prviders that serve lw-incme, vulnerable patients t purchase utpatient medicatins at a discunt frm drug manufacturers. One year prir, the MDRP was initiated t help ffset federal and state Medicaid csts fr utpatient prescriptin drugs. Unlike the 340B prgram, the MDRP requires that states share the manufacturer rebates with the federal gvernment. Accrding t a recent reprt by the Legislative Analyst s Office 1, the state general fund was entitled t nly $1.3 billin f the $4.1 billin in Medicaid drug rebates in 2017-18. In cntrast, cvered entities are able t retain 100 percent f the savings available thrugh the 340B prgram, allwing them t expand health care services and prgrams that benefit the entire cmmunity and supprting the state s gal f ensuring Medi-Cal beneficiaries have access t high quality services. The Affrdable Care Act (ACA) amended the MDRP by requiring manufacturers t prvide rebates fr drugs dispensed t individuals enrlled in MCPs 2, but specifically excluded 340B MCP drugs frm the rebate requirements 3. Thus, 340B MCP drugs are nt eligible fr rebates. This means that the duplicate discunt prvisin in the 340B statute des nt apply t 340B MCP drugs, because that prvisin nly applies t 340B drugs that are subject t rebates. In sum, states have n authrity t cllect rebates n 340B MCP claims. Hwever, the 340B statute prtects manufacturers frm being subject t bth a Medicaid rebate and a 340B prgram discunt n 340B drugs that are subject t payment f a Medicaid rebate. The relevant prvisin states that a prvider shall nt purchase a drug thrugh the 340B prgram that is subject t the payment f a rebate t the state. 4 This language applies t 340B fee-fr-service (FFS) claims, as the statute des nt exempt these claims frm the states rebate eligibility. Thus, cvered entities have an bligatin t fllw the U.S. Department f Health and Human Services Secretary s guidance fr preventing duplicate discunts fr FFS claims. With this in mind, we recmmend amending the APL t clarify the federal differentiatin between FFS and MCP drugs as fllws: The 340B drug pricing prgram is a federal drug discunt prgram whereby drug manufacturers prvide utpatient drugs at a reduced rate t eligible cvered entities. Federal law prtects manufacturers frm being required t prvide bth the 340B discunt t a 340B cvered entity and a Medicaid drug rebate t the state (a duplicate discunt ). Cvered entities, as defined by the 340B drug pricing prgram, are prhibited frm seeking reimbursement n drug sales that are als eligible fr a Medicaid drug rebate. MCPs whse netwrks cntain, r have cntained, 1 Legislative Analyst Office The Gvernr s Medi-Cal Prpsal fr the 340B Drug Pricing Prgram (March 2018) 2 42 U.S.C. at 1396r-8(b)(1)(A). 3 Id. at 1396r-8(j)(1). 4 Id. at 256b(a)(5)(A)(i).
Page 3 cvered entities participating in as described by the 340B drug pricing prgram must ensure that rebate claims are prperly identified as such prir t submissin t DHCS as part f the MCP s encunter data reprt. This prper identificatin requirement is in place t avid requests fr duplicate discunts. In additin, the ACA amendment t the MDRP that allws states t cllect manufacturer rebates n MCP claims des nt expressly allw MCPs t cllect drug rebates. Therefre, we wuld recmmend the fllwing change t the APL: States became eligible t cllect rebates fr cvered utpatient drugs dispensed by Medi-Cal managed care rganizatins, including MCPs, became eligible t cllect drug rebates fr cvered utpatient drugs dispensed t Medi-Cal members with the March 23, 2010, passage f the Patient Prtectin and Affrdable Care Act (ACA). Claim-Level Identificatin f 340B Drugs The APL includes the fllwing reprting requirement fr drugs purchased thrugh the 340B prgram: Encunters utilizing 340B-purchased cvered utpatient drugs must be identified with the apprpriate indicatrs as utlined in the mst recent DHCS Cmpanin Guide fr X12 Standard File Frmat and Pst Adjudicatin Payer sheet 2.2 r 4.2 fr the Natinal Cuncil fr Prescriptin Drug Prgrams standard file frmat. Our understanding is that this requirement refers t the need fr cvered entities t apply a mdifier (UD fr physician administered claims and 20 fr pharmacy claims) t all drugs purchased thrugh the 340B prgram. In turn, the MCPs can identify thse claims n the encunter data files t ensure the state des nt claim a rebate. Assuming ur interpretatin is crrect, we cncur that this is a reliable way t avid duplicate discunts and we recmmend DHCS update the APL t cnvey this expectatin mre clearly. Absent such clarificatin, prviders wh are less familiar with the DHCS Cmpanin Guide fr X12 Standard File Frmat and Pst Adjudicatin Payer sheets may nt understand the expectatin. 340B Cntract Pharmacy Arrangements Existing federal laws allw a cvered entity, regardless f the availability f an in-huse pharmacy, t cntract with ne r mre licensed pharmacies t dispense 340B drugs t eligible patients, prvided the arrangement is in accrdance with all ther statutry 340B requirements. In additin, Health Resurces and Services Administratin (HRSA) guidance allws cntract pharmacies t dispense 340B-purchased drugs t Medicaid patients nly if the cvered entity, the cntract pharmacy, and the state Medicaid agency have established an arrangement t prevent duplicate discunts. As cnfirmed in a 2016 Office f Inspectr General reprt 5, the HRSA requirement fr an apprved three-way agreement nly applies t FFS drugs because it was develped befre the ACA expanded the MDRP t include MCP drugs. The APL appears t impse this requirement n 340B drugs dispensed t MCP patients, and implies that this requirement exists within the HRSA guidance and Califrnia Medicaid State Plan. Based n the OIG reprt, we disagree that there is a federal requirement that cvered entities have apprved three-way agreements in place prir t using cntract pharmacies t dispense 340B purchased drugs t MCP patients. 5 Office f Inspectr General - State Effrts t Exclude 340B Drugs frm Medicaid Managed Care Rebates (June 2016)
Page 4 In additin, SPA 17-0002, Prescribed Drugs, has the fllwing requirement under sectin 7.c: A cntract pharmacy, under cntract with a 340B cvered entity described in Sectin 1927(a)(5)(B) f the Scial Security Act may nly use 340B drugs t dispense Medicaid prescriptins if the cvered entity, the cntract pharmacy, and the State Medicaid agency have established an arrangement t prevent duplicate discunts as utlined in the HRSA Final Ntice regarding Cntract Pharmacy Services published at 75 Fed. Reg. 10272 (Mar. 5, 2010) and the details f that arrangement have been shared with HRSA. As nted abve, the HRSA requirements were published prir t the ACA expansin f the MDRP t include MCP drugs. Therefre, as cnfirmed by the OIG, the HRSA requirement and arguably the apprved SPA 17-0002 are nly applicable t FFS drugs. That said, we share DHCS desire t prevent duplicate discunts n 340B drugs dispensed thrugh cntract pharmacies t MCP patients and ffer the fllwing suggestins: As nted abve, the APL already requires that 340B entities and MCPs identify 340B claims using the apprpriate indicatrs. We recmmend that the same requirement apply t 340B drugs dispensed t MCP patients thrugh cntract pharmacies. This wuld eliminate the need fr a three-way agreement between the cvered entity, state and cntract pharmacy. MCPs culd cntractually require 340B cvered entities t cmply with their plicies and prcedures t prevent duplicate discunts. We recmmend that MCPs and 340B entities wrk tgether t identify any ther prcesses and prcedures that may be necessary t track claims apprpriately. Partnership HealthPlan f Califrnia has prven that these methds fr preventing duplicate discunts are effective, and has been using a mdel t flag 340B cntract pharmacy claims since 2014. We recmmend sharing the Partnership mdel bradly with ther MCPs and cvered entities that may be interested in adpting a similar system fr preventing duplicate discunts. In additin, we prpse striking the language belw, as the APL already requires 340B indicatrs that wuld prevent duplicate discunts: 340B Cntract Pharmacies On March 5, 2010, the Health Resurces and Services Administratin (HRSA), an agency f the U.S. Department f Health and Human Services, released the final rulemaking ntice regarding 340B Cntract Pharmacy Services. 6 Unless a cvered entity, 7 its cntracted pharmacies, and the state Medicaid agency have established an arrangement t prevent duplicate discunts, the ntice prhibits the cvered entity and its cntracted pharmacies frm allwing drugs purchased under the 340B prgram t be dispensed t Medicaid members. In additin, the ntice stipulates that the cvered entity must reprt t HSRA n any arrangement t prevent duplicate discunts. If the cvered entity des nt utilize cntract pharmacies, n such arrangement with the state Medicaid agency is required. Cnsistent with the abve HRSA ntice and the Califrnia Medicaid State Plan, the terms f the required arrangement must be frmalized in the MCP s plicies and prcedures apprved by DHCS prir t the MCP allwing r initiating a cntract pharmacy arrangement within its prvider netwrk. The MCP s cntract pharmacy plicies and prcedures must be submitted 6 Federal Register Vl. 75, N. 43 7 Cvered entity definitin is cdified in 42 U.S.C. 256b(a)(4) and is available at http://uscde.huse.gv/
Page 5 separate and apart frm any ther pharmacy r prvider netwrk related plicies and prcedures. Implementatin Timeline The 340B Drug Discunt Prgram is a lifeline fr vulnerable patients and lcal cmmunities. Califrnia hspitals and clinics are cmmitted t ensuring that the prgram s integrity is maintained and patients cntinue t have access t life-saving care. T that end, it is critical that DHCS allw ample time fr MCPs t update plicies and prcedures and ensure that all infrmatin systems have the infrastructure in place t accurately capture 340B drugs befre the encunter data is submitted t the state. We encurage DHCS t include an implementatin timeline in the APL that allws fr cllabrative dialgue between all stakehlders. We appreciate the pprtunity t prvide input n the draft APL, and lk frward t cntinued cllabratin n this imprtant tpic. If yu have any questins, r wuld like t schedule a time t meet abut this critical matter, please cntact Amber Ott at (916) 552-7669. Sincerely, Califrnia Hspital Assciatin Califrnia Assciatin f Public Hspitals and Health Systems Califrnia Children s Hspital Assciatin Califrnia Health+ Advcates District Hspital Leadership Frum Private Essential Access Cmmunity Hspitals, Inc. cc: Ms. Mari Cantwell, Chief Deputy Directr, Health Care Prgrams Ms. René Mllw, Deputy Directr, Health Care Benefits & Eligibility Mr. Nathan Nau, Chief, Managed Care Quality and Mnitring Divisin