A judge rules that HHS Secretary Alex Azar overstepped his authority when he slashed 340B payments.

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Jan. 11, 2019


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Out of Bounds: Court Rules Against 340B Hospital Cuts


In a ruling issued in late December, a federal judge for the US District Court for the District of Columbia granted a permanent injunction striking down reimbursement cuts for drugs purchased under the 340B Drug Discount Program. The plaintiffs, including the American Hospital Association, America’s Essential Hospitals, and the Association of American Medical Colleges, filed a lawsuit in 2017 challenging the approximately 30% reduction in 340B payments finalized by the Centers for Medicare & Medicaid Services (CMS) in the 2018 Outpatient Prospective Payment System (OPPS) final rule. In addition to the permanent injunction, Judge Rudolph Contreras ordered supplemental briefings on the issue to determine the appropriate remedy.

In his ruling, Judge Contreras determined Health and Human Services (HHS) Secretary Alex Azar exceeded his statutory authority in issuing a policy that altered the hospital reimbursement formula. Starting on January 1, 2018, outpatient 340B drugs were reimbursed at the average sales price (ASP) minus 22.5%, a reduction from the previous year’s formula of ASP plus 6%. Although the Secretary can make adjustments to the rate, the Judge ruled the reimbursement cut fundamentally reworked the statutory scheme and applied a different payment methodology to 340B drugs. The plaintiffs also argued the cuts were unlawful because the new payments were calculated based on 340B hospital drug acquisition costs rather than the ASP.

Although the court granted a permanent injunction on the payment reduction, the Judge did not grant the plaintiffs’ request to receive retroactive payments to compensate for the difference between reimbursement received in 2018 and the higher rate that applied in 2017 as relief. The court found the requested retroactive payments would be “highly disruptive” to Medicare Part B budget neutrality under the Social Security Act.

Instead, to determine the appropriate remedy, Judge Contreras ordered the plaintiffs and HHS to respond with supplemental briefings to address proposed remedies within 30 days. Both parties will have 14 days after the supplemental briefs are filed to submit responses. It is unclear how HHS intends to respond to the opinion regarding 2018 claims, or Medicare reimbursement for 340B drugs and biologicals moving forward. The ruling does not extend to calendar year 2019 reimbursement cuts, and the fate of 340B reimbursement will likely depend on the supplemental briefs and further litigation.


Navigating Medicare Part D: Approaches to Addressing Beneficiary Affordability and Access Challenges


Xcenda reimbursement and health policy experts collaborated with MAPRx on a new report on Medicare Part D. The program is as popular and robust as ever but poses significant challenges that result in increased out-of-pocket costs and limited access for millions of beneficiaries.

MAPRx is calling on Congress and the Administration to address the challenges facing Part D by enacting solutions proposed in this paper.

Download report >



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Bills Introduced on Pricing-Related Issues


Sen. Bernie Sanders (S-VT), along with House Oversight and Reform Chairman Elijah Cummings (D-MD) and Rep. Ro Khanna (D-CA), held a joint press conference today to announce introduction of legislation related to prescription drug pricing. For detailed information on the bills, including a list of co-sponsors for each, please see the joint press statement.

The plan includes 3 bills:

  1. The Prescription Drug Price Relief Act (summary), which would set the price of prescription drugs in the US to the median price in 5 major countries: Canada, the United Kingdom, France, Germany, and Japan
  2. The Medicare Drug Price Negotiation Act (summary), which would direct the HHS Secretary to negotiate lower prices for prescription drugs under Medicare Part D
  3. The Affordable and Safe Prescription Drug Importation Act (summary), which would allow patients, pharmacists, and wholesalers to import safe, affordable medicine from Canada and other major countries

The bills are not expected to gain traction in the Republican-controlled Senate.


Legislative Bytes

  • House Oversight and Reform Committee Chairman Elijah Cummings (D-MD) released a schedule for upcoming committee hearings which includes a hearing scheduled for January 29 on the issue of prescription drug price increases. He did not indicate the scope of the hearing, nor any information on potential witnesses.
  • Rep. Peter Welch (D-VT), Rep. Francis Rooney (R-FL), and 9 House colleagues introduced bipartisan legislation that would require the federal government to negotiate lower drug prices for seniors enrolled in the Medicare Part D program.
  • Senate Finance Committee Chairman Chuck Grassley (R-IA) and Sen. Amy Klobuchar (D-MN) introduced a bill to allow for personal importation of safe and affordable drugs from approved pharmacies in Canada.
  • Sen. Ben Cardin (D-MD) introduced S. 3, a bill “to bring stability to the individual market, make coverage more affordable, lower drug prices, and improve Medicaid.” See the bill text and summary.

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What If You Build It and They Don’t Come: IPI May Be Vendor-Less


While the initial reaction was somewhat muted, opposition to the Administration’s framework for the International Pricing Index (IPI) model has grown and spans nearly all stakeholder groups, including patients, providers, payers, pharmaceutical manufacturers, and wholesalers. With the comment period now over—and resources limited under the government shutdown—CMS is having quite the job of going through close to 4,000 submitted public comments.

The IPI model seeks to index reimbursement on an international benchmark, cutting payment for a significant number of Medicare Part B drugs by 30%, and would be phased in over a 5-year period with mandatory participation in 50% of Part B drug markets.

One group that unabashedly supports the model is the Patients for Affordable Drugs (P4AD). P4AD argued that full implementation could be achieved in 3 years (rather than the proposed 5 years), which “should be adequate for the players to adjust to the new system.” However, the group is unsure about how the federal government could create a sustainable business model for vendors “that [would be] both viable and responsive to customers,” or how many potential vendors would need to participate to make the model profitable and sustainable.

Many other patient groups, including the American Cancer Society Cancer Action Network, are concerned about access and want oncology drugs excluded from any Part B model; several groups want Oncology Care Model (OCM) participants to be excluded from participation. The initial advance notice of proposed rulemaking was uncertain how models like the OCM would be incorporated.

Lack of interest from potential vendors was a chief factor that led to the downfall of the Competitive Acquisition Program in 2008. The same may be true for this model—no group is jumping at the chance to be a vendor; there is only mild interest by a few potential candidates, but only if CMS makes many changes to the model. Provider groups, including the American College of Rheumatology and the American Academy of Ophthalmology, support the provider-vendor design for the model if the program is made voluntary and does not require vendors to work nationally. Both CVS Health and Express Scripts believe CMS may have a very tough time finding organizations to participate as vendors because the price setting does not allow for negotiation. America’s Health Insurance Plans (AHIP) believes that pharmaceutical manufacturers or organizations with conflicts of interest should not be vendors.

Congress is also concerned that changes to Medicare policy could unintentionally harm beneficiaries. On January 9, House Ways and Means Committee leaders sent a bipartisan letter to HHS with concerns about proposals such as the IPI model that have not received input from Congress, urging the Administration to be more transparent about upcoming Innovation Center projects. This letter comes on the heels of a letter signed by 339 patient and provider groups and sent to Senate and House leadership in December voicing concern about the mandatory pricing “experiment affecting Medicare beneficiaries who take Part B-covered drugs.” (See the December 14 issue of Health Policy Weekly for further details.)

It seems that HHS has its work cut out for it if the Administration wants this pricing model, or a variant thereof, to have a chance at implementation. Rumors abound about a proposed rule as early as next month, but—given the staunch opposition to the advance notice—a proposal in the next few weeks seems unlikely.


Implementation of the Nation’s First Drug Importation Program Faces Hurdles


Recently, Vermont’s Agency of Human Services (VAHS) submitted a report titled “Canadian Rx Drug Import Supply Program” to the state legislature in accordance with Vermont’s Wholesale Importation Act signed into law last May. The report outlines the state’s plan to address administrative and cost issues, in addition to compliance with federal requirements.
Key components of the newly enacted law would:

  • Authorize a state agency or wholesaler to implement the program using Canadian suppliers regulated under the laws of Canada
  • Ensure that only prescriptions meeting the Food and Drug Administration’s (FDA) safety, effectiveness, and other standards are imported
  • Import only those prescriptions expected to generate substantial savings for Vermont’s consumers
  • Ensure that the program complies with the federal tracking and tracing requirements
  • Prohibit the distribution, dispensing, or sale of imported products outside of Vermont

While HHS has never certified an importation program, a legal pathway under current law does not exclude it. Under the US Code, a program of importation of drugs from foreign countries may become effective only if HHS certifies to Congress that the program will pose no additional risk to public health and safety and will result in a significant reduction in the cost of covered products to the consumer.
Prior to submission of Vermont’s drug importation program to HHS for certification by July 2019, the state must resolve a number of key issues, including:

  • Estimate if the program will cost more to operate than it produces in savings for consumers
  • Establish mechanisms to ensure that savings are passed along to consumers
  • Establish a framework to ensure that the program is funded

Although drug importation was not incorporated in the Administration’s Blueprint proposals, President Trump was originally supportive of the idea. Until recently, few imagined that HHS would ever consider such approval; however, the FDA’s recent launch of a drug importation work group suggests otherwise. In remarks delivered at the Brookings Institution last July, FDA Commissioner Scott Gottlieb suggested importation could be used to address inappropriate pricing and price increases in the generic market.
Citing previous assessments from the Congressional Budget Office (CBO), HHS Secretary Azar called drug importation a “gimmick” that would fail to address the key issues of choice, competition, and price transparency. In 2004, the CBO analyzed the effects of importing drugs from other countries and concluded that importation would save $40 billion over a period of 10 years, or 1% of drug spending.
Importation critics, such as PhRMA, have voiced concerns over how safety and efficiency are not easily replicated under any importation scheme. “Lawmakers cannot guarantee the authenticity and safety of prescription medicines when they bypass the FDA-approval process, and the Canadian government does not inspect or take responsibility for the legitimacy of prescription medicines shipped to the US,” PhRMA said in a statement. The Council for Affordable Health Coverage has also criticized drug importation and called for the FDA to instead hold “conversations on value-based solutions that do not threaten patient safety.”

Apart from Vermont, bills have been introduced in 8 states to establish a state-administered, wholesale operation to import prescription drugs from Canada. While widespread drug importation programs may ultimately be shown to be economically ineffective, states may seek to use targeted importation programs as tools to address costly drugs with limited competition. Supporters will contend importation is feasible and may expect their collective pressure on HHS to push the agency to change its stance. We will continue to monitor and report on this trend, as we expect it will come up in more states this year.


Record Number of Drugs Get Through the Posts


On Monday, the FDA’s Center for Drug Evaluation and Research (CDER) released its annual report showing a record number of novel drug approvals; the agency nearly doubled its 10-year average of 33 approvals per year by approving 59 novel drugs in 2018. CDER noted that 32% (19) were first-in-class, which often have different mechanisms of action from existing therapies and, thus, have great potential to impact quality of care and patient treatment.

The following graph shows how 2018 compared to previous years.

The CDER report also noted that 58% (34) of the 59 novel drugs approved in 2018 have an orphan-drug designation. Additionally, CDER expedited the development of novel drugs by designating 24 as Fast Track and 14 as breakthrough therapies. Furthermore, in 2018 the FDA approved 7 biosimilar drugs, bringing the total number of approved biosimilars to 16.

FDA Commissioner Gottlieb has made streamlining and accelerating the development and approval of new drugs a main goal during his appointment.


FDA Is Modernizing Cancer Drug Development


The FDA recently published a new framework for oncology drug manufacturers to follow when developing new treatments: Clinical Trial Endpoints for the Approval of Cancer Drugs and Biologics. These recommendations revise and replace guidance of the same title from 2007. In a December 2018 news release, FDA Commissioner Gottlieb stated that, over the past several decades, the FDA has seen an evolution in how oncologic drug efficacy is measured and which clinical trial endpoints are the most accurate in ascertaining disease activity and clinical benefits to patients. The FDA is now providing new recommendations for cancer drug developers in light of this gained insight and knowledge.

The FDA consulted with patient and healthcare professional communities to gather information before making these regulation changes to keep pace with science and support the development of drugs that offer meaningful results to cancer patients. Gottlieb also highlighted that modernizing clinical trial development programs will frame research and development to be more productive and potentially reduce the cost burdens of providing safe and effective cancer medications to the public.

The new guidelines base the oncology clinical endpoint updates on their specific context of use; new factors, resources, references, and examples are provided regarding how different endpoints can serve various purposes. The guidance also clarifies important factors and appropriate clinical endpoint usage for traditional vs accelerated drug approval. Emerging oncology endpoints are discussed and intermediate clinical endpoints are now also included in the area for accelerated drug approval. Specific symptom endpoints are advised to include symptom time to progression, improvement, and a composite symptom scale.

The FDA has been encouraging oncologic drug manufacturers to consult with them early in the development process, before submitting clinical trial protocols for New Drug Applications (NDAs) or Biologic License Applications (BLAs) for approval. The regulatory agency promises that these engagements will include a multidisciplinary team of FDA oncologists, clinical pharmacologists, statisticians, and external expert consultants as needed. The goal is to apply the modern updates for efficient clinical trial design and exploration of novel endpoints. With this new guidance already in place, the primary endpoint—pun intended—looks to make oncologic drug development more streamlined and less expensive whilst bringing safe and effective cancer treatments to patients.


Sweep the Leg on the Entire System: California’s “GPO” Dreaming


On Monday, newly elected California Governor Gavin Newsom signed an executive order directing all state agencies, including Medi-Cal, to engage in bulk drug purchasing by January 2021. Medi-Cal is composed of both public and private companies that provide managed Medicaid services, which results in fragmented purchasing power for the 13 million beneficiaries in the state.

The executive order goes a step further by instructing the state government to develop a framework to allow employers and other private purchasers to participate in the savings the bulk purchasing group will generate from collective bargaining. If this sounds like a group purchasing organization (GPO), that’s because, in essence, it is—generating savings by leveraging bulk purchasing power with manufacturers.
Newsom also made waves by proposing to extend Medi-Cal benefits to illegal immigrants between the ages of 19 and 26 and to reinstate mandatory insurance requirements (as in Massachusetts, New Jersey, and Vermont). He also proposed providing subsidies to middle-class families, making them available to a family of 4 earning up to $150,000 per year. Lastly, the busy Governor sent a letter to Congress and the White House asking for waivers from federal law so California can be empowered to “develop a single-payer health system to achieve universal coverage, contain costs, and promote quality and affordability.”

The November state and federal elections brought in progressive officials who are making their voices heard across the country; California is not an isolated state seeking its own solutions to healthcare costs.


Information Buffet (AKA, Other Stuff That Caught Our Attention)


We kept running into stories we wanted to bring to your attention, so here’s a quick hit list of other news we thought you should know:

  • An opinion piece by the editorial staff at The Wall Street Journal warns of President Trump, Sen. Bernie Sanders (S-VT), and Sen. Elizabeth Warren (D-MA) collaborating to lower drug prices via price controls.
  • Two drug companies are suing California state agencies and have already secured temporary restraining orders to prevent the public release of impending price increases, which could jeopardize parts of the state’s drug transparency law.
  • The death rate from cancer in the US has declined steadily over the past 25 years, according to annual statistics reporting from the American Cancer Society. As of 2016, the cancer death rate for men and women combined had fallen 27% from its peak in 1991.
  • Coherus Biosciences announced that UDENYCA (pegfilgrastim-cbqv), biosimilar to Amgen’s Neulasta® (pegfilgrastim), launched in the US on January 3. UDENYCA is the seventh biosimilar (of the 16 FDA approved) to be on the market.


As we have done each year during open enrollment, we compared weekly enrollment in the current and previous years for the 39 exchanges that use the HealthCare.gov platform for the 2019 benefit year, including the federally facilitated exchanges, state partnership exchanges, and some state-based exchanges. Below are the final statistics.


“President Trump has done more than any president in history to tackle the issue of drug costs. He has approved historic levels of generic drugs—these are low-cost alternatives to brand drugs. That saves $26 billion in the first 2 years of his term alone; he is ending foreign free-riding off of American investment in R&D—that’s 17 and a half billion dollars in savings for the first 5 years of that program that we’ll be doing; he has freed up pharmacists to tell patients about lower-cost alternatives for their drugs, and brought new negotiating tools to Medicare programs. So across the board, historic action to blow up the status quo here.

“The President has been really clear; prices of drugs need to be coming down, not going up. The price increases that just happened, these are lower than have happened in past years and that’s real savings to the American people. It’s fewer drugs and it’s lower increases, but they are still not acceptable…. We are making progress there, but the President has been clear this has to stop. Drug prices must start coming down, not going up. And we will work with Democrats and we will work with Republicans to make that happen.”

– HHS Secretary Alex Azar

Source: “White House: Prescription drug prices must start coming down and we will work with Democrats to make it happen,” America’s Newsroom, January 8



$9.1 Billion


Medicare Part D providers have consistently overestimated their potential product costs by at least 5%, leading them to upcharge CMS by roughly $9.1 billion over a decade.

Source: “The $9 Billion Upcharge: How Insurers Kept Extra Cash From Medicare,” The Wall Street Journal, January 4


Count on Health Policy Weekly for an at-a-glance view of legislative and regulatory developments and news that impacts the healthcare industry.


Jennifer Snow
Vice President,
Reimbursement and
Policy Insights,

Scott Shields
Associate Director,
Health Policy



Amy Grogg, PharmD
Senior Vice President | Commercialization Solutions | AmerisourceBergen Corporation

Kristine Flemister, PharmD
President | Xcenda

Tommy Bramley, PhD, RPh
President | Lash Group

Stacie Heller
Vice President | Government Policy | AmerisourceBergen Corporation

Rita Norton
Senior Vice President | Government and Public Policy | AmerisourceBergen Corporation

Ana Stojanovska
Vice President | Commercial Consulting | Xcenda


Susan Daniels | Jenna Kappel | Reeya Patel | Scott Shields | Diane Smith | Tammy Washington


Laurie Kozbelt | Ellen Olson | Tia O’Brien


Jan. 11, 2019


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