Legal Matters

Oncology Research

340B, Drug Pricing and Reimbursement Five Things to Watch In 2021

Kyle Vasquez, J.D. Shuchi Parikh, J.D. Polsinelli, PC

The final months of 2020 saw a lot of new activity in the 340B and pharmacy space, with stakeholders, HHS, and courts alike taking action that could have lasting impacts on the industry. Drug pricing remains a top priority, although recent successes with a COVID-19 vaccine could thwart meaningful attempts to regulate manufacturers. Below are five recent legal and policy developments that will continue to impact industry participants well into 2021. 1. Manufacturer Activity Impacting 340B Contract Pharmacies – A growing list of manufacturers have launched attacks on the 340B contract pharmacy program. Eli Lilly was the first manufacturer to restrict access to 340B pricing for all products in the contract pharmacy setting, with a number of manufacturers quickly following suit. Covered entity groups have challenged the actions in federal court as unlawful under a plain reading of the 340B statute. Other manufacturers, such as Sanofi and Novartis, have initiated other 340B restrictions.

If left unchecked, these manufacturer actions could establish a dangerous precedent under the 340B program. In a positive development for 340B entities, the US Department of Health and Human Services issued an advisory opinion which concludes that manufacturers are obligated to provide access to 340B pricing to contract pharmacies. Despite the advisory opinion, manufacturers have continued to enforce their contract pharmacy restrictions and several have filed suit challenging the legality of the HHS advisory opinion. 2. Final 340B Alternative Dispute Resolution (ADR) Rule – Ten years after the statutorily mandated deadline, HRSA released on December 10, 2020 its long-awaited 340B ADR Final Rule. The rule establishes a binding ADR process to resolve disputes between 340B covered entities and manufacturers, such as disputes related to manufacturer overcharges. Manufacturers may also initiate disputes against covered entities related to allegations of diversion or duplicate discounts after conducting an audit of the covered entity. The rule sets forth a three-year lookback period for claims and damages sought must exceed $25,000. Although the final ADR rule will allow covered entities to dispute the recent manufacturer actions detailed above through a formal dispute process, covered entity groups have appealed to HRSA for stronger action against the manufacturers. 3. Medicare Part B Most Favored Nation Rule –CMS recently published its Most Favored Nation (MFN) Model Interim Final Rule (IFR) that seeks to lower the amount paid for 50 high-cost Medicare Part B drugs to the lowest price that drug manufacturers receive in similar countries. CMS will phase in the MFN model over four years by setting the drug’s price based on a blend of the MFN price and the average sales price. Although the rule was schedule to take effect on January 1, 2021, a lawsuit was filed challenging the validity of the IFR and a court has issued a temporary injunction suspending the rule. The incoming Biden administration may also further scrutinize the rule. 4. State Regulation of Pharmacy Benefit Managers (PBMs) – Pharmacies obtained a significant victory in the Supreme Court in December in a case upholding a state law regulating PBM reimbursement rates. The Arkansas law at issue requires plans to reimburse pharmacies at or above their acquisition costs and adjust

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St. Luke’s Health TX Division Reaches Agreement with Blue Cross Blue Shield

St. Luke’s Health has reached an agreement with Blue Cross Blue Shield of Texas (BCBSTX) on a new contract that will ensure coverage for 65,000 BCBSTX patients who choose to receive their health care at the hospitals in the St. Luke’s Health network.

The new agreement was effective January 8, 2021. The following is a statement about the agreement from T. Douglas Lawson, CEO of St. Luke’s Health:

“This new contract is an affirmation of how important the choice to receive the accessible, value-driven medical care that we provide at St. Luke’s Health is to the health of our community. The support St. Luke’s Health received from patients, providers, employers and other leaders was tremendous. Termination of the contract last month was a difficult decision, especially in the face of COVID-19, but we knew it was a necessary decision as we could only continue to provide the value-driven care our community relies upon by addressing St. Luke’s financial health. This agreement does that.

“As this new agreement goes into effect, our focus remains where it has always been--on patients. We’re eager to continue working with those BCBSTX customers who have remained under our care, and to working with those who find themselves in need of hospital-based care in the future.”

St. Luke’s Health is a trusted and highly regarded resource in the greater Houston medical community, with an integrated health network dedicated to delivering advanced medical care and research, compassionate care and a Christian ministry of healing. In addition to its unique academic and community partnerships with Baylor College of Medicine, Texas A&M University, and the Texas Heart Institute, St. Luke’s Health is nationally recognized as having some of the best physicians and hospitals in the country.

US News & World Report ranks Baylor St. Luke’s Medical Center as the number two hospital in Houston and the third best hospital in the state, with their programs in oncology, cardiology, orthopedics, neurology, gastroenterology and geriatrics rated among the best in the country.

The new agreement with BCBSTX will help St. Luke’s Health preserve the type of value-driven, high quality, and innovative care our patients and the community have come to expect. Choice is important and consumers rely on St. Luke’s Health for services ranging from life-saving care at our regional facilities in communities like Lake Jackson, Lufkin, and Bryan-College Station to pioneering treatments such as double lung transplant care for COVID patients at our flagship academic medical center at Baylor St. Luke’s. For more information, visit stlukescaringforyou.com.