After the anticipated release of the President’s budget, the ongoing Congressional debate around appropriations and a possible reconciliation package, and the U.S. Supreme Court’s latest decision upholding the Affordable Care Act, there is renewed focus on the U.S. health care system and how it’s financed. The Biden-Harris Administration is requesting an unprecedented investment in public health infrastructure and in ending the HIV epidemic. Members of Congress are working on fixes to lower prescription drug costs and potentially expand Medicaid. Congressional appropriators are calling for investments in the health care system to fix deficiencies on which the COVID-19 pandemic has shone a bright light. There is energy to improve our often cobbled together system of public and private health care funding streams so that Americans can get quality, affordable health care regardless of where they live.
For those in the field of HIV health care – providers and people at risk for and living with HIV alike – we are used to piecing together funding streams to maximize the effectiveness of patient care and prevention. However, a major part of financing that health care system has been the 340B Drug Pricing Program – once-reliable savings that now are proving to be potentially precarious.
The 340B Drug Pricing Program
As background, pharmaceutical manufacturers participating in Medicaid agree to provide outpatient drugs to covered entities at reduced prices. These “covered entities” include certain hospitals, community health centers, Ryan White clinics and state AIDS Drug Assistance Programs (ADAPs), Medicare/Medicaid Disproportionate Share Hospitals, children’s hospitals, and other safety net providers. In the HIV health care space, this also includes sexually transmitted infection (STI) clinics and many of our providers who see a disproportionate number of uninsured and low-income patients.
The purpose of Section 340B(a)(4) of the federal health care law is to enable covered entities “to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”
By purchasing often cost-prohibitive drugs at a discount but receiving reimbursement for the full cost of the drug, providers can capture “savings” or “program income.” With those savings, they to can provide prescription drugs regardless of a person’s ability to pay and deliver the spectrum of care needs associated with prescribing these medications. This program allows providers to fill a critical gap in health care coverage among persons who are living with or at risk for HIV (and across the public-insurance marketplace).
On its surface, this may seem like an unusual arrangement or even a perverse incentive for keeping drug prices high: the higher the drug’s price, the greater “savings” a provider can use for delivering comprehensive care for patients without insurance. That’s partly true, but it’s complicated. Pharmaceutical manufacturers do realize benefit by participating in Medicaid and Medicare, and 340B discount drug purchases only account for somewhere between three and eight percent of all pharmaceutical sales. There is also a “drug ceiling
” that prohibits manufacturers from raising prices beyond a formulaic ceiling (if the Administration enforces the rule). There have also been high-profile stories about large public hospitals perhaps utilizing these discounts in ways that the program did not intend.
But the vast majority of providers rely on these savings for delivering necessary care to patients who need it, particularly in communities that have the greatest number of people living with and at risk for HIV. The loss of such savings could be catastrophic to many clinics’ operating budgets, something HIV providers are confronting right now. This issue is particularly pronounced in those states where Medicaid has not been expanded, and many patients fall through the coverage crack that the full law of the ACA, including Medicaid eligibility expansion, was meant to manage.
Impact on HIV Care Providers and Patients
Along with federal drug-pricing reform efforts on the horizon that could place pressures on the foundation of the 340B program, there have also been state-level attempts to curtail the effect of high drug costs by carving the pharmacy benefit out of Medicaid and moving to a fee-for-service model – altogether eliminating 340B discounts. Additionally, there are other complicating factors to the HIV health care delivery system: state Medicaid cost-savings proposals to move its pharmacy benefit to a “fee-for-service” arrangement; generic medications and the loss of 340B savings; and the recent Gilead announcement of its plans to change its Advancing Access Patient Assistance/Medication Assistance Program (PAP/MAP). To fully understand the impacts of those changes, it’s important to understand the issues within a broader context.
State Proposal to Shift to Medicaid Fee-for-Service
In an unexpected change in New York (and a move potentially to be emulated in other states), the FY’21 state budget included a proposal to carve the pharmacy benefit out of Medicaid by moving from Managed Care to a fee-for-service model. Using a fee-for-service (FFS) model would save the state in pharmacy benefit costs through Medicaid, but would also result in a loss of 340B discounts and cause devastating consequences for community health centers, Ryan White HIV providers, HIV Special Needs Plans (SNP) and the patients they serve. These organizations provide services by stretching scarce resources including savings from the 340B program. The 340B program exists precisely to provide eligible safety net entities the ability to purchase drugs at a discount, allowing them to then utilize their savings to continue to provide comprehensive care and support services. The loss of 340B savings would result in service reductions and clinic and hospital closures, leaving vulnerable patients without access to the prevention services and care they need.
Additionally, the savings to the state are unlikely to come close to the losses that will be endured by the affected clinics and by the community. A study by the Community Healthcare Association of New York State (CHCANYS) shows that if New York State moves forward with the current pharmacy carve out plan, fallout including health center closures, lay-offs of hundreds of staff, and loss of over $100 million in client services may occur.
A more recent study by End AIDS NY shows 15 providers surveyed would be denied a total of $56.1 million in annual revenue from 340B Medicaid savings, ranging from $325,500 to $16.8 million annually per provider, which represents the tip of the iceberg of the anticipated losses.
While sweeping opposition by the public and many state legislators forced Gov. Cuomo to table the proposal, the issue is not dead. As suggested, similar Medicaid pharmacy carve-out moves may be considered in other states as well.
In 2012, the Food and Drug Administration (FDA) approved the first anti-retroviral medication for the prevention of HIV, a truly ground-breaking step in ending the HIV epidemic. With broad utilization of pre-exposure prophylaxis (PrEP), people with any level of risk for HIV could take a highly effective daily pill and prevent HIV infection. (Recent data shows
that HIV infections dropped 8 percent from 2015 to 2019.) Gilead sold PrEP under the brand name of Truvada and in 2019, got approval for a second formulation, Descovy. The prices for both drugs were around $1,800 per month. In 2020, Teva Pharmaceuticals became the first company to manufacture a generic version of Truvada (TDF/FTC), but after the expiration of a six-month exclusivity deal, other manufacturers began offering their own generic versions. In some instances, prices are as low as $30 per month.
Since providers reliant on capturing 340B “savings” cannot see that revenue drop to zero, they are inadvertently incentivized to prescribe name brand drugs over generics. And because as generics enter the marketplace, they drive down the cost of name brand drugs, 340B savings also drop accordingly, thus destabilizing the funding system that so many providers have come to rely upon (There are even more complicated factors influencing the system described in this Health Affairs article
In April, Gilead announced changes to its Advancing Access Patient Assistance/Medication Assistance Program (PAP/MAP) set to go into effect in January 2022. Gilead’s PAP/MAP currently provides cost-free medication to certain uninsured individuals in the U.S. Essentially, pharmacies dispense the HIV medication to the patient free of charge, then submit a claim to Gilead, which reimburses the pharmacy. The pharmacy is then able to capture those “savings” and use them to pay for the services that accompany prescribing the medication. As we know, people at risk for HIV don’t simply get a prescription for PrEP and that’s it – rather, there are other services involved that could include an office visit, labs, and other interventions to ensure adherence. The truly unique approach of HIV care providers is one that considers the ‘whole person’ – something that can’t be reduced to a simple administrative fee.
Smaller clinics have estimated a loss of a few thousand dollars per year, whereas larger health care providers have estimated that loss at a few million dollars per year. As in the previous section on generics, if 340B savings cannot be realized through high drug prices and they’ll only be reimbursed for the “amount paid” for each bottle of medication (plus dispensing fees for the pharmacy), it is not a far reach to understand that certain providers simply will not be able to overcome the loss in revenue. The manufacturer’s rationale for this reduction in reimbursement rates is that the federal government and state governments need to provide greater funding for comprehensive HIV prevention and care and not rely on the company (and manufacturers generally) to do so. Of course, the backdrop for these decisions is a global pandemic that has strained our health care system in unprecedented ways and caused millions of people to lose their health care coverage, while pharmaceutical companies continue to make record profits. There are many factors at play, with everyone feeling the pressure of a fractured health care system.
Reaching a Solution
There are many complicated factors that have contributed to our arrival at this point in time. To ensure that HIV care remains accessible to many, particularly the communities at greatest need, we must remain vigilant about identifying any and all solutions. To truly reach an end to the HIV epidemic, providers must be able to care for those living with HIV while also providing preventive care to every other person at risk. But meaningful reforms cannot come from siloed solutions that only address one segment at a time. It will take comprehensive reform that boosts funding across each agency playing a role in the Ending the HIV Epidemic initiative, including more funding for the Ryan White program, a reinvestment of drug savings back into programs, an expansion of Medicaid or ACA coverage eligibility, among many other reforms on the table. The Academy will stay committed – alongside all of our partners in HIV prevention and care – to do what we’ve always done: take care of our patients in the best way possible and advocate for the best care available, locally, statewide, and at the federal level.