Three Pharmacy Regulations Health Execs Should Watch

Preparing for pharmacy policy changes can help your managed care organization stay ahead of the competition. Here, pharmacy experts highlight three areas to watch closely. 

• 340B

Through this federal program, which started in 1992, pharmaceutical companies participating in Medicaid agree to provide outpatient drugs to covered entities at significantly reduced prices. Hospitals and clinics that participate in the program must apply for eligibility and meet specific requirements, says John M. Lonie, RPh, EdD, associate professor of social and administrative sciences at Long Island University – College of Pharmacy in Brooklyn, NY. “The program enables covered entities to stretch federal resources and provide more comprehensive services.”

Over the past few years, the 340B program has grown because of policy changes that increased opportunities for purchasing drugs at discounted rates and because eligible entities became more aware of the program, says Emily Cook, MSPH, JD, partner, McDermott Will & Emery, an international law firm.

The program’s growth, however, has led to scrutiny from Congress, drug manufacturers, and other stakeholders. “Among the expressed concerns are that the program is not governed by clear rules, making it difficult to hold participating providers and drug manufacturers accountable for compliance with program requirements,” Cook says. For example, drugs purchased by providers through the 340B program cannot also be eligible for Medicaid discounts, and drug manufacturers must accurately calculate 340B prices. In addition, a lack of data reporting requirements makes it difficult to review and analyze purchases and use of drugs purchased at the discounted rates, she says.

Chris Hudson, managing director, Dacarba LLC, a professional services firm, points to recurring questions regarding the program’s eligibility rules and whether they are restrictive enough and concerns about the lack of transparency around how savings are used. 

Cook expects a lot of legislative activity in the 340B space this year. Though no new legislation has been passed at press time, five bills have been introduced since mid-2017 and additional bills are coming, she says. To date, the bills have primarily focused on additional oversight and data reporting requirements for participating hospitals. Future bills will likely address which patients can receive discounted 340B drugs from eligible entities, the arrangements for dispensing drugs, and the prices that hospitals can charge patients for these drugs, she says.

Next: Pharmacist provider status

• Pharmacist provider status

Pharmacists and the patient care services they provide are not included in certain sections of the Social Security Act, which determines eligibility for healthcare programs such as Medicare Part B, according to the American Pharmacist Association. The omission limits Medicare beneficiary  access to pharmacist services in the outpatient setting.

“If pharmacists were designated as providers under Medicare Part B, private health plans could no longer use this as a reason to exclude pharmacists as providers,” says Fernando Gonzalez, RPh, MS, assistant professor of pharmaceutical sciences at Long Island University – College of Pharmacy. “Pharmacists are now on the verge of obtaining provider status as a result of many states pushing for this status. The federal government will have the ultimate decision. Once the federal government grants provider status, states will follow suit.”

Pharmacist status would give them the ability to bill for services such as medication management, and receive payment from Medicare, Medicaid, and other private payers, Gonzalez says.

Provider status is closely linked to scope of practice. In some states, pharmacists could be given the same authority to provide services to Medicare patients as nurse practitioners and physician assistants. These services might include continuing therapy, which involves monitoring drug levels, side effects, adverse reactions, and compliance, as well as ordering diagnostic tests to evaluate patient disease parameters, such as blood levels of narrow therapeutic index drugs. “Pharmacists’ ability to bill for nontraditional pharmacy services such as ordering diagnostic tests for checking cholesterol or ordering tests to check blood levels of drugs like warfarin could positively impact healthcare executives’ bottom line, maximizing therapeutic outcomes that will reduce hospitalizations and changes in courses of therapy,” Gonzalez says. “Therefore, they should be aware of the impact that pharmacists as providers can bring to their organizations.”

Next: Orphan drug designations

• Orphan drug designations

The Orphan Drug Act of 1983 provides benefits and incentives to drug companies that address the more than 7,000 rare diseases that currently exist. To be granted orphan designation, the disease or condition that a drug treats must affect fewer than 200,000 people. If it affects more, the company must prove that it cannot reasonably recoup the costs associated with the drug’s research and development.

Drugs receiving orphan designation are rewarded with seven years of market exclusivity as well as sizable tax credits and other benefits, says Edward Buthusiem, managing director, Berkeley Research Group, a strategic advisory and consulting firm.

“Many drugs receiving orphan designation are older versions of drugs which, in several cases, have been on the market for many years and are often without patent protection,” Buthusiem says. “In other words, these drugs are repurposed for use to treat an orphan disease.”

Since the volume of orphan drugs tends to be small, reflecting the limited number of targeted patients, the price of these drugs tends to be much higher than drugs to treat nonorphan drugs, Buthusiem says. The costs of producing and selling these drugs tends to be higher since they are distributed through specialty wholesale channels. However, the price of such drugs also extends to the nonorphan indications of these drugs.

This lack of price differentiation between orphan and nonorphan indications has drawn the ire of Congress, which is seeking to limit the incentives granted to orphan drugs.

The Closing Loopholes for Orphan Drugs Act is one currently pending bill to watch. Currently, orphan drugs are excluded from the 340B program to avoid invalidating company incentives to develop such products. In other words, drug makers are not required under the 340B program to discount orphan drugs. If passed, the pending legislation would limit the 340B drug pricing program's orphan drug exclusion to apply only when a drug is used for the rare condition or disease it was developed to treat.

“That would allow orphan drugs, which are often very expensive, to be discounted under the federal program when they are used for nonorphan diseases or conditions,” Buthusiem says. The discounts would apply to rural, cancer, critical-access, and sole community hospitals.

Also of note when it comes to orphan drugs, in June 2017, the FDA unveiled a strategic plan to eliminate the agency’s existing orphan designation backlog and ensure continued timely responses to all new requests for designation, says John Pappan, MA, MS, program advisor/director of drug regulatory affairs at Long Island University – College of Pharmacy. “This new plan offers orphan drug prescribers a faster pathway to manage their patients’ healthcare and improve their outcomes.”  

Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.