03.15.18

VIDEO: Cassidy Confronts Hospital, Pharmacy Representatives Over 340B Abuse

WASHINGTON— U.S. Senator Bill Cassidy, M.D. (R-LA), a member of the Senate Health, Education, Labor and Pensions (HELP) Committee, today questioned hospital and pharmacy representatives during a hearing regarding the U.S. Department of Health and Human Services’ (HHS) 340B drug pricing program. Citing established evidence and numerous studies finding the 340B program is being abused by providers pocketing 340B money, Cassidy repeatedly pressed America’s Essential Hospitals President and CEO Dr. Bruce Siegel and American Society of Health-System Pharmacists Director Joseph Hill on their refusal to support requiring hospitals to pass 340B discounts on to uninsured patients.

“I think this is more about the hospitals than it is about the patients,” said Dr. Cassidy. “That’s the crazy thing here.”

In January, Cassidy introduced the Helping Ensure Low-income Patients have Access to Care and Treatment, which would close loopholes in the 340B program and help hold participating hospitals accountable for passing on discounts on prescription drugs to patients.

A partial transcript of Cassidy’s questioning in today’s committee hearing is below.

CASSIDY: Everybody recognizes there are patients and community health clinics and safety net hospitals who appropriately benefit from 340B. I don’t think that is the issue. But it’s important to move beyond, if you will, rhetoric and anecdote, and look at objective facts. So if I may, Mr. Chair, I ask unanimous consent to issue a few of the following studies, which are rigorous analysis, nonpartisan, third-party researchers regarding the problems with 340B.

First, an NYU, Harvard research, published in the New England Journal of Medicine of February this year, found no evidence that 340B revenue went to help lower-income patients in ways that reduce mortality, and that 340B eligibility prompted hospitals to treat fewer Medicaid patients, without increasing quality. New England Journal of Medicine, Harvard and NYU.

Secondly, a 2017 Journal of Oncology article showing that physician practices being consolidated due to 340B hospitals using the revenue to buy up their practices drives up the cost of commercial insurance.

Next, New England Journal of Medicine article from University of Chicago and Harvard from 2016 suggesting, quote, lawmakers could lower the price of prescription drugs by reforming the federal 340B Drug Pricing Program.

Next, 2014 from Memorial Sloan Kettering Health Affairs article, researchers from University of Chicago also, quote, support the criticism that 340B program is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics.”

2014, Office of Inspector General found that some covered entities that dispense 340B-purchased drugs to Medicaid beneficiaries through contract pharmacies did not report methods to avoid duplicate discounts.

Next, GAO: our work suggests 340B hospitals may be responding to financial incentive associated with the program to maximize Medicare revenue.

2011, GAO concluded, quote, program integrity issues may take on greater significance unless effective mechanisms to monitor and address program violations are put into place.

And finally, 2017 [GAO] testimony noting that a continued lack of transparency that prevents accurate payments by 340B providers, state Medicaid programs, and manufacturers; and two, a lack of clarity regarding program rules.

I will note that some of these 340B hospitals are actually extending the program benefit to cosmetic clinics, and into clinics and hospitals that serve wealthy clientele using the primary site, which may be 340B, buying hospitals in wealthy suburbs and then taking a program ostensibly for the poor and making it for a cash cow for the system.

Now, Dr. Siegel, I admire the work your hospitals do. Obviously, we have hospitals in Louisiana part of your coalition, but when you say there should be no restrictions or changes to the 340B program, can you really defend a cosmetic clinic benefiting from 340B?

SIEGEL: Thank you senator, and thank you for your leadership and also for the work you did at our member systems and hospitals in Louisiana. Greatly appreciate that. I can't speak to the cosmetic clinic, although if a cosmetic clinic were dealing with burn patients, many of whom—

CASSIDY: Usually those would be in a burn unit, it would not be a place doing blepharoplasty.

SIEGEL: But it might be also be, sir, a place which has post-discharge patients.

CASSIDY: So let's just take the theoretical. Let's take the theoretical. It's a cosmetic clinic that does blepharoplasty. It’s all cash, it’s 340B. Should they benefit from the 340B program?

SIEGEL: They should benefit from the 340B program if they fall under the rules of the program.

CASSIDY: So you want no change in the rule even though I have this stack tumbling out of my hands of [research] showing that there are abuses that are driving up the cost of drugs for others and the cost of commercial insurance for all? There should be no change in the 340B?

SIEGEL: Those studies are deeply flawed studies. Let me speak to a couple of them.

CASSIDY: Now hang on, just so I may say, I think I did 10 studies: NYU, Harvard, Memorial Sloan Kettering, University of Chicago, OIG, GAO—and each of these is deeply flawed?

SIEGEL: Yes. The GAO study for instance talks about increased part B spending for 340B hospitals. Does it account for the difference in health status of the patients who go to 340B hospitals rather than others? It does not.

CASSIDY: It did a regression analysis looking at the difference in patient populations.

SIEGEL: And actually HHS actually critiqued that study on those same grounds, the ones I just noted.

CASSIDY: And the one recently in the New England Journal of Medicine?

SIEGEL: Excluded many 340B hospitals from consideration, and also—

CASSIDY: No, I know. So I accept that there are—and I'm sorry I'm out of time, and I'll yield back after this point. That is the, that is the trick—I don't want to offend you, but there's a certain lack of forthrightness. Your good work is presented as typical of all 340Bs. Clinics, safety net hospitals. This is the face of 340B, when there's a whole stack of evidence that non-340B hospitals may provide more charity care than many 340B hospitals. So although you were the face, and you're a very good face. Nice face, Dr. Siegel.

SIEGEL: Thank you. I appreciate that.

CASSIDY: But we have to concede, or maybe you don't have to concede, but the evidence concedes, that there are hospitals which are not taking care of charity patients which come upon your coattails, if you will, to justify that which is an income stream but not serving the original purpose. I may stay around for a second round, and I apologize to my colleagues for going over.

CASSIDY: Glad for a second shot at this, Mr. Chair. And let’s just, again, as a physician, let me just start over. The emphasis shouldn't be upon a hospital. The emphasis should be upon a patient. … What does it mean to a patient paying $16,000 a year?

So, Dr. Siegel, would you, and by the way, and just to emphasize, if we're speaking about patients, this is some of the data I quoted: 340B eligibility prompted hospitals to treat fewer Medicaid patients. The consolidation of practices associated with this has increased prices without ostensibly improving quality consolidation driven by 340B. That is data. It's not antidote. It's not rhetoric.

New England Journal Medicine article from University of Chicago and Harvard: law makers could lower the price of prescription drugs by reforming federal 340B drug pricing program. And lastly, from University of Chicago, Memorial Sloan Kettering: it supports the criticism that the 340B program is converted from one that serves vulnerable patient populations that one that enriches hospitals and their affiliated clinics.

And as regards hospitals, oh my gosh, are they, you know, unable to survive without this program? There's an Axios analysis of the 84 largest not-for-profit hospitals, which I'm suspecting maybe 100 percent of those are 340B hospitals. And they found that cumulatively they had $535.5 billion in annual revenue, and taking all things into account, 6.7 percent total profit margin. It's not like these hospitals can't make it work. They're making it work very nicely.

So if you focus upon the patient, this is driving up the cost. So Mr. Hill, would you support a law that said that the discount associated with 340B pricing had to be passed on to the patient? So that Senator Smith’s patient paying $16,000 a year would get the 340B­—whatever per month—would get the 340B price which may be $2,000 instead of the $16,000? Would you support such a law?

HILL: Senator, I think our potential concern with that approach is that, although we completely understand passing along the discount to the patient, I think our concern is that what has to be sacrificed on the care side in order to do that. In other words—

CASSIDY: So going back to it, ostensibly, 340B is about lowering costs and making medicines more available, and we’ve heard data that indeed 340B hospitals may be less likely to treat Medicaid patients. And by the way, here's an article from the Office of the Inspector General, that some 340B entities do not even offer the discounted 340B price to uninsured patients and any of their contract pharmacies. They make them pay the full list price. Now, if you're the patient, and as we heard, you’re the sick person supporting the system, you wouldn’t support them being forced to pass that discount onto the patient, the uninsured patient?

HILL: I think we'd have to look at it closely to make sure that—

CASSIDY: Dr. Siegel, would you support the—would you support just allowing the uninsured patient to get the discount that the hospital is currently reaping?

SIEGEL: Our hospitals often go beyond that discount.

CASSIDY: No, but would you support a law that would require those hospitals to pass that discount on to the uninsured patient who’s paying thousands of dollars for a drug the hospital is acquiring for a fraction of that cost?

SIEGEL: I am much more worried about drug prices. I'm much more worried—

CASSIDY: No. Yes or no? Yes or—somehow I’m not—just a yes or no? Would you support a law that would require the hospitals to pass their 340B discount to the uninsured patient?

SIEGEL: Can’t support or oppose it without knowing more.

CASSIDY: That settles that.

SIEGEL: Can't support or oppose it either way without knowing more.

CASSIDY: … I think this is more about the hospitals than it is about the patients. That’s the crazy thing here. And everybody speaks about, believe me, since the Affordable Care Act passed­—and for all of you who love the Affordable Care Act, I'm not taking shots­. But the market cap value of PhRMA, hospitals and insurance companies has skyrocketed. Just look it up. Now that said, again, even not-for-profits are doing so well that the Wall Street Journal says they’re behaving like Fortune 500 companies—this is the Wall Street Journal based on an Axios report—not like nonprofit hospitals.

Lastly, Mr. Hill, Chuck Grassley asked, I think, the Carolina Medical Center in Charlotte to report how they used their 340B, transparency and how they use their 340B revenue. Do you think your members would report how they use 340B? What percentage of their profit is related to 340B? How much goes back to direct patient care and how much goes to just profit margin of a contract pharmacy?

HILL: You know, we’re open to having this discussion. Again, it goes back to being able to tell the story and to demonstrate what you do with the discounts. You know, we don’t have a formal position yet, but we’re having, at least, some internal discussions on how something like that might work. So we’re open to discussing it.

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