A Rep. Alabas A. Farhat (D-Dearborn) bill prohibiting pharmaceutical manufacturers from denying access to drugs based on participation in a drug pricing program for low-income patients received a first day of testimony in a House committee.
Farhat said the legislation would address skyrocketing prescription drug prices, but pharmaceutical industry stakeholders said they feel the bill, and the “340B” program as a whole, gives an unfair advantage to hospital and chain pharmacies that don’t pass the savings onto their patients.
The 340B Drug Pricing Program is a 32-year-old, federal program to get pharmaceutical manufacturers to discount some of their most expensive prescription drugs, Farhat said, and requires these manufacturers to sell outpatient drugs to organizations that care for uninsured or low-income patients.
The program requires discounts be provided specifically to cancer hospitals, children’s hospitals, hospitals serving a high percentage of Medicaid patients, rural referral centers and sole community hospitals.
There are just under 90 340B hospitals in Michigan now, according to a handout from the Michigan Health and Hospital Association.
Farhat’s HB 5350 would prohibit manufacturers from denying or discriminating against 340B entities purchasing drugs, including those to be dispensed or administered under a contract pharmacy arrangement.
He said during testimony before the House Insurance and Financial Services Committee that the bill will expand accessibility for patients seeking treatment at faraway centers or rural community hospitals, so they can “get their prescription drugs from a contracted pharmacy that is accessible to them, instead of having to have issues getting transportation.”
He gave the example of a cancer center in southeast Michigan, where folks will drive greater distances to receive treatment there and go monthly to pick up medication.
“That’s a problem,” he said, “because you may not be seeing your provider every month. You may be seeing them every three months. You may have telehealth check-ins every month. You’re (still) going to have to drive there.”
Farhat said his legislation would codify the ability of hospitals to contract with local providers closer to a patient, still allowing patients to receive a discount, but at a shorter distance.
He said the savings for hospitals do take away from pharma’s profits, but “they’re still having record profits. No one’s going to go broke because of this.”
However, he said instead of those profits going to drug manufacturers, under this bill “they can stay in our hospital healthcare ecosystem.
“Hospitals can reinvest that money in patient services and community benefits,” he said.
But Peter Fotos, deputy vice president of state advocacy at PhRma, said the bill is not about expanding the charitable mission of 340B at all.
“Very plainly put, all this bill does is it requires drug manufacturers to deliver 340B products to every contract pharmacy that a Michigan hospital clinic has, whether they’re in the state or outside of the state,” he said.
“It does not expand. It doesn’t create more incentives,” he said. “There’s nothing in the 340B statute from 1992 all the way up until now that requires that patients benefit directly from those discounts. They receive nothing at the end of the day. It all goes through back into the hospital . . .”
PhRMA spokesperson Stami Williams said the 340B program is “rife with abuse and is in desperate need of systemic reform at the federal level.” Until then, it “is being taken advantage of by large hospitals, chain pharmacies and their pharmacy benefit middlemen.”
Kristin Parde, deputy vice president of state advocacy at PhRMA, expanded on this point during the committee hearing. She said while organizations like hers support the original intent of the 340B program, Farhat’s bill would codify one of 340B’s “major flaws – the lack of accountability to patients.”
She said the bill is being misrepresented as a prescription access bill, but scripts provided to a patient from a 340B covered agency have always been able to be billed to any pharmacy.
Farhat disagreed. He said the federal statute now surrounding contracting is considered “ambiguous” by pharma and manufacturers are self-imposing limitations on the amount of contract pharmacies that hospitals can have.
He said five other states have taken it upon themselves to legislate an alternative.
But Parde and others who testified said the real reason hospitals want 340B codified in this way is so they can continue using the program to purchase drugs at low prices and obtain generous reimbursement from commercial payers and Medicare.
Once hospitals figured out that was an option, the program exploded, she said, and growth has been non-stop, resulting in manufacturers cracking down.
“Since there is no requirement for 340B hospitals or the pharmacies they contract with to share the significant discounts they receive on prescription drugs directly with patients, they typically do not,” Parde said. “And these discounts average about 60%.”
She said 340B hospitals that are encouraged to contract more and more are resulting in an increased volume of drugs purchased at reduced prices, which has more than tripled in the past decade, without any corresponding growth in the patient population or improved affordability of medicines.
“Instead, expansion of covered entities and pharmacies is concentrated in less diverse, higher-income neighborhoods,” she said.
Members of PhRMA who testified requested that the bill not be passed, but that Michigan instead require hospitals to file and disclose how much revenue they secure from 340B.
Rep. Kelly Breen (D-Novi) pushed back on that point. She said that while her district might be considered a wealthier area of the state, “We have pockets of people who are very low-income.”
“So it seems by expanding that region, you’re still going to embrace those lower economic areas,” she added, “Thereby doing exactly what I think the program is intended to do.”
Marc Corriveau, vice president and chief government relations officer at Henry Ford Health System, said the description from PhRMA is an “effective way of keeping you off the reality that the resources from those savings go into the system, and then back out (as) the hundreds of millions of dollars that we give to our community.
“If they keep you just thinking about the transaction at that moment, then they can use their talking (points) to talk about how this program is expanding beyond the people that deserve it,” he said.
“Heaven forbid it’s passed on through our system,” he said of additional resources, which Farhat said can be reinvested into community benefits.
Farhat said, “I think what PhRMA is doing is they’re conflating the issue, and saying it’s not going directly towards patients, and they put the period there . . . Profits period. Revenue period. No. The money goes back into the ecosystem.”
Farhat said that can go back towards funding “lost leaders,” or less profitable programming that benefits patients.
Joseph Munroe, director of pharmacy at Memorial Healthcare, said his company uses its savings to service more neurological patients with multiple sclerosis (MS).
“For a rural hospital like us, we depend on the 340B savings just to buy the medication to administer to the patient,” he said, as treatments are very expensive.
Corriveau said the only people who are hurt by stopping the 340B program expansion are, ultimately, the patients, through reduced hospital resources.
He said maybe PhRMA should also submit their profit margins.
This story courtesy of MIRS, a Lansing-based news and information service.