Visante’s Top 10 Issues in Pharmacy in 2022 for Hospitals & Health Systems

To say that 2021 was turbulent would be a significant understatement! With the pandemic, economy, election and social justice issues driving national concerns, including pharmacy, coupled with the more pharmacy-specific elements it was an extremely challenging year for pharmacy and healthcare in general. However, despite the magnitude of the challenges we observed pharmacy programs all over the country stepping up and meeting these challenges head-on. Pharmacy programs demonstrated innovation, creativity, commitment to purpose, and a tremendous work ethic in supporting their patients and their organizations and should be justifiably proud of their work in 2021.

It was an honor and privilege to be able to work alongside so many great colleagues to help with the advancement of their pharmacy programs and to address the many challenges and we sincerely thank you all for the opportunity. We are looking forward to again supporting the advancement of high-performance pharmacy for 2022 and hope you enjoy our thoughts on these Top 10 issues in pharmacy for 2022.

Jim Jorgenson

(1) Pandemic dominates list of 2022 issues

Written by Jim Jorgenson

For 2022, at least in the first quarter, the pandemic again dominates our list. The country currently has experienced over 44M cases with 800K deaths. There are signs that the delta wave has run its course and cases are declining but if we have learned anything from the past year it is that the virus is resilient and unpredictable! With a second pandemic winter to deal with, many of the country’s hospitals will need help. Overall, 80+% of hospitals are still struggling with being short-staffed and backlogged from the last wave of COVID-19 as well as challenged financially with increased expenses and decreased revenue. Hospitals are now looking at colder months with a potentially bad influenza season creating a possible “twindemic” situation, an influx of patients trying to catch up on delayed care and a depleted workforce that has had little time — if any — to regroup from the last wave of coronavirus infections. Hospitals are looking at a possible “perfect storm” of high demand, high acuity, and low staffing for the beginning of 2022.

The national vaccination rate remains below 70% and in many states below 50% despite the effectiveness of the Covid vaccines, creating significant regional variance in the pandemic impact. As a result, the country is now experiencing a pandemic of the unvaccinated with 95+% of Covid admissions due to unvaccinated individuals and 99% of deaths occurring in unvaccinated individuals. The need for continued education around vaccines and the de-escalation of political rhetoric associated with “anti-vaccination” should be a continued 2022 priority.

Financially, the hospital market segment remains in need of help with expense and revenue challenges driven by the continued impact of the pandemic. Overall, 80+% of hospitals are still struggling. Key market elements include:

• Hospitals showed improvement over this time last year (~ 25% before the delta wave), but the majorities are still not back to 2019 pre-pandemic levels.
• Non-COVID admissions, ED visits, Clinic visits and Elective surgeries are variable across the country with nationwide volumes down compared to pre-pandemic numbers. In some systems electives were up and being booked out 2-3 months; generally ED visits have not returned. However, before the delta variant wave ~ 50% were back to pre-pandemic levels, which surprised many in the industry.
• The average operating margin for hospitals nationally is unfavorable at 1-3%.
• Last year many health systems achieved or nearly achieved their budget due to CARES funding. Another $75 billion has been released to fund the hardest hit hospitals – safety net and rural. Applications for these funds must be made.
• Additionally, CMS made advance Medicare payments to hospitals to cushion the balances sheets. Those funds will be paid back over 12 months beginning this past April.

While all of this creates major challenges for the nation’s hospitals, with big challenges also come big opportunities and the pandemic continues to create opportunities for pharmacy to step up and provide material relief to the financial and clinical challenges created by the pandemic. Pharmacy can and should be a major component of the strategic and tactical hospital response plans for 2022.

(2) Five factors driving workforce challenges

Written by Jim Jorgenson

To provide high quality and safe care, healthcare organizations have to be able to recruit and retain the necessary personnel but current market conditions are making it increasingly difficult to both attract and retain top talent. With escalating pressure to reduce cost, improve patient access, improve clinical outcomes, improve safety and meet expanding regulatory compliance requirements the healthcare industry faces some unique challenges when it comes to workforce management. For 2022 pharmacy workforce issues will be a major challenge-driven largely by these 5 key factors:

1.Burnout

Work-related stress and burnout are always a concern for all workers, but healthcare workers are facing elevated challenges in this area. The pandemic on top of normal work-related challenges has significantly increased work-related stress and accelerated burnout rates for healthcare workers and pharmacists are no exception to these issues. Mounting evidence supports the realization that pharmacists are experiencing substantial work-related burnout and stress. Recent survey results demonstrate that 61.2% of pharmacists report experiencing a high level of burnout in practice, and this is one of the highest rates among healthcare professionals. This rate is higher than that found in surgeons, oncologists, and emergency-medicine practitioners. But the reality is that burnout doesn’t only affect pharmacists, it also affects technicians and leads to increases in turnover rates, which can hurt overall patient care. Recent studies showed that the average turnover rate in hospitals across the country was 18.2 percent and we are seeing some pharmacy rates (particularly with techs) in the 20-30% range.

2. Increased demand

The pandemic has fueled increased demand for pharmacists and has contributed to numerous regional shortage situations. With the publicly accepted recognition that the pharmacy profession is receiving nationally as “frontline essential workers” during the current pandemic, plus expansion of a pharmacist’s responsibilities and job duties, the current demand for pharmacists is significant. Couple that with an aging population requiring more prescriptions and with new telehealth roles for pharmacists and the need for pharmacists in many areas of the country becomes critical in 2022. Additionally, this demand also extends to pharmacy technicians and in many areas of the country, the demand for techs is even greater than pharmacists.

3. Candidate-driven job market

Thanks to increasing demand and workforce shortages, in many areas of the country the pharmacy job market has transitioned into a candidate-driven market. This means higher competition to identify, attract, and onboard top talent for 2022. For many pharmacy jobs, there is no longer a talent pool out there to select from. The pool has shrunk to a talent puddle. Organizations would be well advised to increase retention efforts for staff in 2022 and to work on creating a solid reputation as a strong employer to enhance their ability to attract and retain the high-quality, skilled pharmacy staff needed.

4. Workforce mobility

In years past, it was not uncommon for workers to remain with the same employer for extended periods but this is no longer the norm. Workers today are much more open to changing jobs if a better opportunity is available. People are looking for ways to build/enhance skills and move up the career ladder, and they’re willing to switch employers if necessary. Employees are also looking for better work-life balance and the pandemic has created numerous new opportunities for “work at home” or remote options. As hospitals work to attract and retain talent employee mobility and flexibility must be considered.

5. The growing skills and compensation gap for techs

It is well past time that the vital role that Pharmacy Technicians play in the medication use process is recognized and compensated appropriately. No matter the practice site (retail pharmacy, hospital pharmacy, infusion pharmacy, mail order pharmacy, etc.) the technician workforce is the backbone of any successful pharmacy operation. Yet, despite the importance of the work, invariably we see pharmacy technicians as the lowest-paid healthcare tech workforce across the country. If $15/hour is the new goal for a “minimum wage” nationally, having highly skilled pharmacy technicians essentially close to or below minimum wage is not a viable long-term strategy. We are now seeing pharmacy technician turnover rates and vacancies at unsustainable rates around the country with many organizations experiencing 20-30% turnover and associated technician vacancies with little hope of filling the vacancies. As a result, much higher cost pharmacist labor is being diverted into technician duties and away from a higher return on investment elements, as the work still has to be done.

High-performance pharmacy operations can and should be a significant contributor to addressing hospital challenges but to be effective pharmacy operations need to have the right skill mixes and numbers of personnel available to deliver needed services. A focus on recruitment and retention of pharmacy personnel for 2022 is a sound strategy.

(3) Specialty Pharmacy trends and tips for expanding services

Written by Joe Cesarz

The theme of specialty pharmacy this year was best described by Jean-Baptiste Alphonse Karr in 1849 when he said “plus ça change, plus c’est la même chose.” Sorry, what’s that? Tu ne parles pas francais?

Translated to English, you have likely heard this many times before: “the more things change, the more they stay the same.” So, what has changed, and what has remained the same over the past year in the specialty pharmacy marketplace?

According to resources*, the number of accredited specialty pharmacies continues to grow, with the number of sites quadrupling since 2015 (378 to 1,207!). The rate of growth has slowed, with 145 new accredited entrants to the marketplace between 2019 and 2020. As you might suspect, this growth has largely been driven by health systems, which now make up 39% of the accredited specialty pharmacies. Most health systems have one accreditation (67%), some have two or three accreditations (12%), and a select few have four or more accreditations (4%).

However, a major challenge for health systems continues to be leveraging volumes to obtain a stronger marketplace presence. Despite the growing number of locations, the majority of health systems dispense less than 15,000 prescriptions and have annual gross revenue of less than $50M (53% and 55%, respectively).

On the other hand, Pharmacy Benefit Managers (PBMs) and health plan-owned pharmacies make up only 9% of the marketplace based on the number of accredited locations but account for approximately 75% of the overall specialty pharmacy revenues. Two trends are worth watching to see how this changes in the coming 12-24 months: one is state-driven PBM legislation aimed at broadening specialty pharmacy network access, and the second is manufacturer-driven limitations on the ability to achieve 340B discounted products through contract pharmacy networks. Both of these have the potential to drive business to internal health system specialty pharmacy programs.

These trends are similar to what we have seen in past years and continue to highlight the value that health systems can realize in developing internal specialty pharmacy programs. There are benefits to collaborative care of patients within the health system, improvements to clinic and provider efficiency, and financial benefits to patients and the organization through internal management of patients.

What will 2022 hold in store for your health system specialty pharmacy? Here are some New Year’s resolutions to consider:

• Fill for your employees! This is a great way to grow your program and raise awareness across your organization about your services.
• Shift white-bagging to your internal pharmacy. As you grow your program and achieve accreditation, collaborate with payers to identify opportunities to internalize white-bagged medications (even if it is for a select few to start).
• Increase those capture rates! Have difficulty reaching specific patient groups? This is the year to target efforts based on data and schedule routine meetings with providers and clinics to improve collaboration and take your program to the next level!
• Advocate. Many states and state professional organizations have ongoing efforts related to specialty pharmacy or white-bagging legislation. Get engaged in those efforts, share your perspectives with legislators and be a part of the change.
• Get started! Don’t have a program yet? We can help you understand the opportunity, put together a strategy, and execute!

* drugchannels.net and the ASHP National Survey on Health -system Specialty Pharmacies

(4) Three major trends in pharmacy supply chain

Written by Jerame Hill

Although last year we stated that the pharmaceutical supply chain was stressed and overshadowed by the pandemic, in 2021, the global supply chain, including pharmaceuticals, has been in the limelight. And while drug shortages did not earn a separate spot on our top 10 list, shortages have continued to be problematic. As we look to 2022, what do we expect to see?

1. Health systems will continue to invest in Consolidated Service Centers (CSCs)

We have seen increasing interest amongst pharmacy and health system executives to invest in CSCs. These centers enable pharmacy departments to relocate many core services that are provided redundantly across multi-hospital systems to one centralized area to improve efficiency and service. Furthermore, the centers allow for expanded space and logistical support to better leverage the pharmacy supply chain to find opportunities to reduce costs and mitigate shortages.

2. Home infusion therapy will continue to grow as a site of care.

This was a trend we’ve observed since 2020, and we anticipate it will continue to accelerate in 2022. With payer site of care restrictions increasing, home infusion therapy with infusion suites will continue to grow as an alternative site of care to lower the total cost of care and improve patient convenience. Health systems should aggressively pursue this strategy to diversify their infusion portfolio.

3. Focus on cost savings

In 2022, we expect health systems to place a heightened emphasis on reducing supply costs. This is a result of mounting financial pressures, including an increase in labor expense as health systems try to recruit nurses and other workers to keep their doors open. Additionally, many systems are dealing with unanticipated margin reductions due to changes in the 340B program. Pharmacy departments will be asked to reduce cost and cost savings in the pharmacy supply chain will be vital to this effort. Last year, we discussed the uptake of biosimilars, and the biosimilar market has again expanded with price pressure decreasing acquisition cost. Continuing to adopt biosimilars, along with developing robust strategic sourcing programs, can lead to achieving great value from the pharmacy supply chain.

(5) Increasing Symbiosis Between a Health System’s Pharmacy and its Employee PBM Plan

Written by Dan Valvassori

Health systems are in a unique position within the employee pharmacy benefit marketplace compared to most other employer groups. They have the power to maximize total plan savings simply by taking advantage of internal pharmacy resources that are not found within typical employee plans.

Health system plans can escape their PBM’s retail network demands by negotiating with its internal pharmacy to dispense drugs on a custom at-cost financial arrangement that provides savings to the plan and ensures the pharmacy is kept whole.

Likewise, pharmacy employees can be significant assets to a health system’s PBM negotiations, as well as with overall management strategy and ongoing decision-making processes. Greater coordination between a health system’s plan and pharmacy will almost always result in greater health and financial outcomes, as well as employee convenience. The triple aim outcome will always be: “better care – better service – better financial performance.”

The biggest hurdle to a health system achieving these benefits is a PBM contract that seeks to retain as much revenue within the PBM ecosystem as possible. As a result, typical PBM contracts are built without consideration of the health system’s advantages.

For example, when negotiating a custom pharmacy financial arrangement or revising formulary placement, PBM contracts may attempt to take contractual credit for the newly reduced costs or replace lost revenue with excessive fees elsewhere. 340B utilization further complicates these negotiations that require knowledgeable industry nuance to settle.

Visante offers the insights of its PBM consultants specialized in health system employer plans to assess plan performance and ensure that each of our clients receives maximum value for the organization and its employees.

(6) An update on U.S. drug market: costs, pipeline, economic impact and approaches to curbing costs

Written by David Kvancz

Drug acquisition costs and expenditures in the US continue to be a major concern for health policymakers, providers, payers, and patients as we head into 2022. Based on 2020 or the latest available data for 40 industrialized countries, the US ranks highest in health spending as % GDP and health spending per capita. As a portion of these costs, US pharmaceuticals account for 12.6% of US health spending. Total nominal spending on medicines in the U.S. rose from $195B in 2002 to $539B in 2020. The US has the highest pharmaceutical spend per capita and the next highest pharmaceutical spending as % of GDP (except for Bulgaria.)

Overall, US pharmaceuticals cost 2.56x higher than in 32 other countries. Brand name drugs are 3.44x higher. Unbranded (generic) drugs account for 84% of drugs sold in the US by volume but account for only 12% of US expenditures for drugs. Generic drugs have only a slightly lower cost in the US compared to most other countries.

As noted in the most recent US House of Representatives Oversight Committee Report, the issue of drug expense was described as “unsustainable, unjustified and unfair.” While the committee’s Democrats and Republicans disagreed on the primary causes of this categorization (manufacturers vs. ”middlemen” e.g., Prescription Benefit Managers), the report highlights once again the overriding concern regarding drug prices in the US.

Sources:

Statistica 2021

https://data.oecd.org/healthres/pharmaceutical-spending.htm

https://www.washingtonpost.com/health/2021/12/10/house-democrats-find-three-year-investigation-that-drug-prices-are-unsustainable-unjustifiable-unfair/

https://data.oecd.org/healthres/health-spending.htm#indicator-chart

https://data.oecd.org/healthres/pharmaceutical-spending.htm

https://www.rand.org/news/press/2021/01/28.html

What does the global pharmaceutical pipeline look like?

The number of drugs in the pharma R&D pipeline has more than tripled from 5,995 molecules in 2001 to 18,582 molecules in 2021. The most recent average growth rate has been about 4.76% which is half of the previous 12 months’ rate of 9.62%. The molecules within the pipeline stages consist of 55% Preclinical; 30% Phase 1 & 2; 5% Phase 3 Clinical Trials. Early-stage development saw the majority of growth in the pipeline from 2020 to 2021 at +6.0%, +6.4%, and +2.0% respectively while Phase III rose +0.9%. The total number of oncology clinical trials is greater than the next three therapeutic categories combined.

The largest therapeutic category increase during the past year (2020-21) was 22.4% for Anti-Infectives, largely due to the COVID19 pandemic. Still, despite the development of over 550

molecules to address the novel coronavirus, oncology, biotech and neurology molecules still make up the top pipeline volumes, followed by anti-infectives, GI/Metabolic molecules and product reformulations. Oncology drugs account for almost 40% of the global drug pipeline, with breast, colorectal and pancreatic cancers targeted the most.

Targeted rare diseases more than doubled in seven years from 2013-2020. Expedited reviews are up 576% in the same timeframe 50 to 338. There has been an explosion of gene therapy (biotech) molecules in the pipeline since 2015 rising from 300 agents in 2001 to 1,700 agents in 2021, a 467% increase. Gene therapy molecules now account for almost 10% of the R&D pipeline. However, non-biotech molecules still account for the majority (58%) of the R&D pipeline. Injectable drug formulations increased to 60% of the R&D pipeline, while oral formulations decreased to 28%, roughly a 2% swing from 2020-21.

Novartis, Roche and Takeda led the 2020 R&D pipeline development with 200 or more molecules in the pipeline each, followed closely by BMS, Merck Pfizer, Johnson & Johnson Abbvie, Astra Zeneca and Sanofi, each with more than 140 molecules each. However, the top 10 & 25 pharma companies comprise a decreasing percent of the R&D pipeline with only approximately 5% and 10% respectively of the global pipeline. A total of more than 5,000 companies are represented in the pipeline with 20% of the companies having only one or two drugs each.

US companies account for 55% of the R&D pipeline; China is second only to the US nationally; the rest of the Asia Pacific countries combined is slightly larger than China. The UK, Germany and the rest of Europe, followed by Canada, France, Japan and Central & South America / Africa round out the top 10 countries. But, approximately 46 % of Active Pharmaceutical Ingredient (API) for US medications is manufactured outside of the US. The European Union, India, and China provide almost all of the non-US API utilized for US manufacturing and/or imported US finished pharmaceutical products produced overseas.

Overall, the US accounts for the largest funding for global life sciences innovation. Although the US produces about 22% of the global GDP and accounts for 4% of the world’s population, it accounts for 44% of global biomedical R&D expenditures and its domestic pharmaceutical market about 40% of the global market. Of the top 10 national pharmaceutical markets worldwide in 2020, the US revenue market share was 46%.

Sources: Pharmaprojects® January 2021; Citeline Informa Pharma Intelligence; Avalere Health, LLC; Center for Drug Evaluation and Research, US Food & Drug Administration;

https://www.statista.com/statistics/245473/market-share-of-the-leading-10-global-pharmaceutical-markets/

https://www.policymed.com/2020/05/cms-releases-latest-outlook-for-future-drug-spending.html

https://www.pwc.com/us/en/industries/health-industries/library/6-drug-pricing-models.html

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4193451/

https://www.pharmaceutical-technology.com/features/cost-control-drug-pricing-policies-around-world/

https://www.healthaffairs.org/do/10.1377/hblog20200917.35750/full/

https://www.nashp.org/rx-laws/

https://heatinformatics.com/sites/default/files/images-videosFileContent/ey-in-vivo-a-road-map-to-strategic-drug-prices-subheader.pdf

What is the projected economic impact on the US healthcare industry?

Looking ahead to 2024, CMS expects total US spending on healthcare to grow $1.4 trillion, from $3.6 trillion in 2018 (the most recent available data) to $5 trillion in 2024. Hospital care, professional services (physicians, dentists, and other healthcare professionals), outpatient prescription drugs, and healthcare administration costs comprised over 75% of total healthcare costs in the United States in 2018 and projected for 2024. Specifically, hospital care is expected to grow $461.3 billion, professional services by $337.3 billion, outpatient prescription drugs by $110.1 billion, and government administration/healthcare administration costs by $109.7 billion.

Approximately 50-55 new drug molecules are forecast to be introduced to the marketplace per year and are estimated to contribute about $133 billion to drug cost growth through 2025. Specialty medicines now account for 53% of spending, up from 27% in 2010 and primarily driven by growth in autoimmune and oncology therapies.

Source: Statistica 2021

Net prices for currently marketed brand name products are expected to decline between 0 and 3% per year through 2025, primarily due to increased competition between manufacturers and aggressive contracting strategies by payers.

Sources: IQVIA;

https://www.policymed.com/2020/05/cms-releases-latest-outlook-for-future-drug-spending.html

What cost reduction or other financial approaches to lowering drug costs are being utilized?

Several developed countries in the world have focused their strategies on reducing or mitigating pharmaceutical pricing through requiring the submission of cost-effectiveness analysis for drug approvals, price controls on innovator product introductions, capping annual price increases, mandating the use of generics, and implementation and enforcement of anti-monopoly laws. The ongoing and most recent discourse in Washington, DC during the past few years on controlling pharmaceutical pricing would strongly suggest that these types of measures will continue to face significant adoption challenges in the US.

Instead, the US efforts over the past few decades have been focused on reducing drug costs through bundling of payment services for both acute and outpatient treatment costs, including drug therapy, implementation and expanded use of the 340B program and reducing restrictions on drug importation. More recently, discussions have focused on increasing US-based API production, reversing the ACA Medicare negotiation prohibition and restricting drug price setting/increases to various international price indexes. Further, approximately half of the states, frustrated by the lack of national action on this issue have enacted laws focused on reducing drug prices. Unfortunately, these laws have a little direct effect on the actual acquisition price of a drug, but rather focus on volume purchasing, PBM transparency, coupons, importation, etc.

As a result, the focus on reducing drug expenditures for payors and providers in the US has been reliant on optimizing generic utilization, implementing restricted drug use criteria, step therapy and prior authorization processes, and volume-based contracting strategies. While these strategies will continue to be important in the future, they must be augmented by additional cost reduction and reimbursement realization strategies for hospitals, health systems and IDNs to improve an organization’s financial results concerning pharmaceutical expenditure performance.

Increased utilization of biosimilars can be a significant source of drug cost savings for the acute care setting but must be carefully assessed for use in the outpatient setting to minimize any net margin reductions due to differing reimbursement methodologies and rates from the originator / branded drug. A significant focus on enhanced pharmacy supply chain contracting and operational strategies are also essential for optimal financial performance. These include:

1. Financial Risk-Based Models
2. Health Outcomes-Based Models
3. Mortgage Models
4. Subscription / Netflix Models
5. Indication Specific Pricing Strategies

In addition, pharmacy supply chain and operational initiatives such as Consolidated Services Centers can be designed and leveraged to support optimizing a healthcare organization’s cost reduction strategies.

As noted previously, strategies that not only impact the acquisition cost of the drug but as well the reimbursement side of the equation, particularly in the outpatient setting, are a critical element of a successful pharmaceutical expense management strategy. These include critical analysis, design and implementation of Specialty Rx programs, Alternative Outpatient Infusion Sites of Care, Home Infusion programs and robust Revenue Cycle Management programs.

Sources:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4193451/

https://www.pharmaceutical-technology.com/features/cost-control-drug-pricing-policies-around-world/

https://www.healthaffairs.org/do/10.1377/hblog20200917.35750/full/

All HTTPS sources were re-accessed and re-validated on 12/15/21.

(7) The 340B Program Battle with Manufacturers Continues in 2022

An overview of the events of 2021 by Kristin Fox-Smith, Senior V.P. and William Wood, Senior Director

Our predictions for the 340B program for 2021 began with this statement: Without question, the greatest issue facing 340B Covered Entities (CEs) in the coming year is the threat faced by the actions of several manufacturers who plan to restrict shipment of 340B purchased drugs to contract pharmacies.

(Readers may wish to review our August 21, 2020, blog for greater detail. “Manufacturers Create Chaos For the 340B Program,” written by Kristin Fox-Smith (Senior Vice President), Douglas E. Miller (PharmD, Senior Director) and William Wood (RPh, Senior Director).

Unfortunately, this issue also looks to be the most significant in 2022.

The first manufacturers to announce the restrictions were Astra Zeneca and Eli Lilly.

Lilly took the first step when it said it would only allow contract pharmacies to get discounted units of Cialis if a 340B provider did not have an in-house pharmacy. On September 1, 2020, Lilly followed this policy by announcing further restrictions to contract pharmacy purchases. In its letter of September 1, Lilly made the following statement: Effective September 1, 2020, Lilly is limiting distribution of all 340B ceiling priced products directly to covered entities and their child sites only. Covered entities will not be able to purchase Eli Lilly and Company products at the 340B ceiling price for shipment to a contract pharmacy.

In the same document, Lilly announced a “Special Exception for Insulins: Contract Pharmacies that Pass on 340B Discounts.” Lilly claimed that “Consistent with the spirit of Executive Order 13,937, “Access to Affordable Life-saving Medications” (July 24, 2020), Lilly will grant an exception to the limited distribution program described above for Lilly insulin products subject to a 340B covered entity and their contract pharmacies.” Lilly then stated, “Lilly shares the goal of ensuring that 340B patients directly benefit from the significant 340B discounts on Lilly insulins.”

Astra Zeneca soon followed Lilly with a letter to covered entities stating:

Dear Valued Partner, AstraZeneca to date has processed chargebacks associated with Contract Pharmacy arrangements consistent with the approach proposed in the Health Resources and Services Administration’s (“HRSA”) April 2010 guidance. Beginning on October 1, 2020, AstraZeneca plans to adjust this approach such that AstraZeneca only will process 340B pricing through a single Contract Pharmacy site for those Covered Entities that do not maintain their on-site dispensing pharmacy. To implement this new approach, AstraZeneca will stop processing 340B chargebacks for all 340B Contract Pharmacy arrangements effective October 1, 2020. Any 340B Covered Entity that does not have an outpatient, the on-site dispensing pharmacy should contact AstraZeneca to arrange for a contract pharmacy of its choice to be eligible to receive 340B pricing on behalf of the Covered Entity. To initiate this process, please contact Membership@AstraZeneca.com. 340B Pricing for Contract Pharmacies will be honored on all invoices, consistent with AstraZeneca’s historic approach, through September 30, 2020. For additional information or questions, please contact your AstraZeneca Account Director.

Following the actions of Astra Zeneca and Eli Lilly several other manufacturers announced similar restrictions. These manufacturers include:

Boehringer Ingelheim (BI) Pharmaceuticals

Novartis

Novo Nordisk

Sanofi

United Therapeutics

And just this week UCB, Inc. (UCB), a Belgium-based drug company

These manufacturer actions took place shortly after HRSA stated, “The 2010 contract pharmacy guidance is not legally enforceable and its authority to enforce certain 340B policies contained in guidance is limited unless there is a clear violation of the 340B statute.” Without question, this statement emboldened the manufacturers to take their actions. It appears that the manufacturers are relying on this statement by PhRMA: “We agree with this Administration’s recent statements regarding the rule of law and status of agency guidance. Unlike laws and regulations, agency guidance cannot impose any binding requirements on the public and lack the force and effect of law.”

As we see, the manufacturers are basing their actions on the fact that the 340B statute makes no statements about contract pharmacies. Although they are technically correct, there is no mention anywhere in the statute about contract pharmacies. There is no mention about how 340B purchased drugs are to be distributed.

Yet the government, through HRSA, states that the statute requires manufacturers to charge CEs a price that does not exceed the ceiling (340B) price. This is stated in Section 340B of the PHSA, entitled “Limitation on prices of drugs purchased by covered entities,” which states, in relevant part, that “[T]he Secretary shall enter into an agreement with each manufacturer of covered outpatient drugs under which the amount required to be paid . . . to the manufacturer for covered outpatient drugs . . . purchased by a covered entity does not exceed [the ceiling price].” 42 U.S.C. § 256b(a)

So far, the manufacturers have shown no sign of giving in. As they continue, what have the affected CEs done and more importantly what has the federal government done?

Advocacy efforts by numerous organizations include:

340B Health:

• An Overcharge Reporting Template
• A hospital template letter to HRSA reporting Lilly overcharges
• An e-mail template to Congress to report manufacturer actions
• An Apexus form to report manufacturer actions
• An Op-ed template for opinion piece submission to local newspapers
• Letters to manufacturers and their responses
• Numerous letters to members of Congress and several Attorneys General
• Many sessions devoted to the issue at the 2021 340B Coalition Conference

Community Voices for 340B has sponsored Opinion Leader Forums in multiple states

Ryan White Clinics for 340B (RWC-340B), among other efforts, issued the following press release: Ryan White Clinics Call on Congress, HHS, & HRSA to Stop Drug Manufacturers from Undermining Our Use of the 340B Program to Care for People with HIV

Other advocacy efforts include:

A bipartisan letter on February 26, 2021, from more than 100 members of the U.S. House of Representatives urging Acting HHS Secretary Cochran to:

1. Begin assessing civil monetary penalties on manufacturers that deny 340B pricing to covered entities in violation of their obligations under the 340B statute;
2. Require manufacturers to refund Covered Entities the discounts they have unlawfully withheld since 2020;
3. Halt, through guidance or other means, any attempt to unilaterally change 340B upfront discounts to post-sale rebates; and
4. Immediately seat the Administrative Dispute Resolution Panel to begin processing disputes within the program.

Government actions and efforts:

In December 2020, the HHS General Counsel issued an Advisory Opinion stating that drug manufacturers must provide 340B discounts for drugs dispensed through hospitals’ eligible contract pharmacies. However, while HHS indicated it plans to use a new administrative dispute resolution (ADR) process to adjudicate the claims, few CEs view this as a reasonable solution.

HHS withdrew this advisory opinion on June 21, 2021, in response to a lawsuit filed by AstraZeneca, Eli Lilly, Sanofi and Novo Nordisk arguing that the opinion didn’t adhere to federal law and that drugmakers “might not get a fair hearing if they were to file a complaint.” HHS stated that it withdrew the opinion “in the interest of avoiding confusion and unnecessary litigation.”

In April 2020, the leaders of six major organizations representing hospitals and pharmacists sent a letter to the U.S. Health and Human Services (HHS) Secretary Xavier Becerra urging him to halt the actions of the drug companies that are denying 340B discounts on prescription drugs sold to hospitals treating a large percentage of low-income urban and rural Americans.

The letter, signed by 340B Health, the American Hospital Association (AHA), the American Society for Health-System Pharmacists (ASHP), America’s Essential Hospitals (AEH), the Association of American Medical Colleges (AAMC), and the Children’s Hospital Association (CHA), asks the Secretary “to halt this detrimental and illegal conduct.”

Legal actions:

Last fall, a group of 340B health centers affiliated with Ryan White Clinics for 340B Access (RWC-340B), and the National Association of Community Health Centers (NACHC) on behalf of its members, separately sued HHS and HRSA to compel them to publish a 340B ADR final rule that Congress had instructed HHS to finalize by September 2010.

On December 11, 2020, a lawsuit was filed in the U.S. District Court for the Northern District of California by

• THE AMERICAN HOSPITAL ASSOCIATION
• 340B HEALTH
• AMERICA’S ESSENTIAL HOSPITALS
• THE ASSOCIATION OF AMERICAN MEDICAL COLLEGES
• THE CHILDREN’S HOSPITAL ASSOCIATION
• AMERICAN SOCIETY OF HEALTH-SYSTEM PHARMACISTS
• AVERA ST. MARY’S HOSPITAL
• RIVERSIDE REGIONAL MEDICAL CENTER
• MARY’S MEDICAL CENTER

Against:

THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, 200 Independence Avenue, SW Washington, DC 20201, ALEX M. AZAR II, in his official capacity as the Secretary of Health and Human Services, 200 Independence Avenue, SW Washington, DC 20201

The lawsuit seeks, among other points:

1. A declaratory judgment that Defendants’ decision that HRSA lacks the authority to require the Drug Companies to provide 340B Covered Entities with covered drugs at or below 340B ceiling prices when they dispense those drugs through contract pharmacies is arbitrary, capricious, an abuse of discretion, or otherwise not by law, in violation of 5 U.S.C. § 706(2)(A);
2. An order directing Defendants to require the Drug Companies to provide covered outpatient drugs at or below 340B ceiling prices to Covered Entities when they dispense those drugs through contract pharmacies; and
3. An order directing Defendants to require the Drug Companies to refund the Hospital Plaintiffs and the Association Plaintiffs’ members the difference between what each covered entity paid for covered outpatient drugs and the 340B ceiling price.

Several other legal actions taken by manufacturers are currently in progress:

HRSA’s statement on the Office of Pharmacy Affairs (OPA) home page is the federal government’s first about the five court rulings on 340B contract pharmacy.

The first court decision came on Oct. 29, 2021 in Lilly’s lawsuit against HRSA and the U.S. Health and Human Services Department (HHS). Two more came on November 5, the first in Novo Nordisk and Sanofi’s lawsuits, the second in Novartis and United Therapeutics’ lawsuits. Lilly, Sanofi, and Novo Nordisk have appealed the decisions in their cases. Novo Nordisk’s notice of appeal, like Sanofi’s, is one sentence long and does not say which parts of U.S. Chief District Judge for the District of New Jersey Freda Wolfson’s November 5 ruling is challenging. Wolfson’s joint ruling upheld the federal government’s finding that the two companies cannot unilaterally impose restrictions on offers of 340B pricing to Covered Entities and that their policies must cease. She also, however, vacated the government’s May 17 findings that the companies owe credits or refunds to Covered Entities and face civil monetary penalties “to the extent that such determinations may depend on the number of permissible contract pharmacy arrangements under the 340B statute.” Wolfson sent the May 17 letters back to HRSA for further consideration consistent with her ruling.

A fourth federal district judge heard arguments in AstraZeneca’s contract pharmacy lawsuit. Both sides have asked the judge to expedite his ruling.

In another recent court action, a federal court in Washington, D.C., rejected the government’s rationale for enforcement actions against Novartis and United Therapeutics. HRSA disputes the decision and is weighing its options.

From the actions taken by Covered Entities, Congress, HRSA, and the drug manufacturers it is obvious that this threat to Covered Entities is unlikely to be settled until next year.

Visante’s advice to our readers is to stay tuned and CONTINUE TO ADVOCATE.

While contract pharmacies are certainly the greatest issue faced by 340B Covered Entities in 2022, they are not the only ones.

In addition to the manufacturer actions against contract pharmacies, 340B hospitals face another year of deeply reduced Medicare drug reimbursement. The Trump administration announced that many hospitals’ Medicare Part B 2021 reimbursement for drugs bought through the 340B program will stay at the same deeply reduced rate it has been at since 2018—average sales price (ASP) minus 22.5 percent. The cuts will be made under the Medicare outpatient prospective payment (OPPS) rule.

The Supreme Court will hear arguments in a case seeking to reverse these cuts before the end of this year, and the outcome could have consequences for all providers, even those who don’t access the 340B discounted drugs. Plaintiffs, including the American Hospital Association and providers that participate in the program, are asking the high court to reverse a nearly 30 percent cut in 340B reimbursements the Centers for Medicare and Medicaid Services initiated during President Donald Trump’s administration and continued under President Joe Biden. Oral arguments were scheduled for November 30, 2021.

There have also been several state actions and proposals that affect the 340B Program:

Over the past several years, states have shown an increased interest in policies impacting Medicaid MCO reimbursement for 340B drugs, such as transferring the Medicaid pharmacy benefit from Medicaid MCOs to fee for service (FFS) or establishing a single Medicaid PBM that sets MCO reimbursement. Such policies could intentionally aim to transfer the 340B benefit to the states or could be pursued for reasons unrelated to 340B.

Pharmacy Benefit Transfers

• Entire pharmacy benefit moves from Medicaid managed care to FFS
• All 340B drugs billed to Medicaid pharmacy benefit become subject to federal AAC-based reimbursement requirement and can no longer be billed and paid based on negotiated rates with Medicaid MCOs
• Could affect CE’s ability to have contract pharmacy dispense 340B drugs to Medicaid patients, depending on the state’s willingness to allow it for FFS

Recent State Action (New York):

New York’s 2021 budget included a pharmacy benefit transfer with April 2021, the effective date. 340B advocates alerted state officials about the negative impacts the policy would have on 340B providers and successfully received a 2-year delay on implementation.

340B providers continue to advocate for a full reversal of the policy

ADVOCACY WORKS!

Recent State Action (Ohio):

• In 2019, the Ohio legislature directed the Ohio Department of Medicaid (ODM) to select and contract with a single pharmacy benefit manager (PBM) for Ohio Medicaid MCO plans
• ODM requested interested PBMs to submit proposals by September 4, 2020
• Request for proposals requires the contractor be able to provide “functionality to apply for different reimbursement logic or benefit coverage as specified by ODM including…ingredient cost and dispensing fee payments based on…340B drugs”
• CEs were concerned this could result in lower reimbursement for 340B drugs, though ODM has publicly indicated this is not their intention but, in January, Ohio enacted a law prohibiting discriminatory reimbursement of 340B drugs that apply to Medicaid MCOs

Single Medicaid PBMs

• Occurs when a state selects a single Medicaid Pharmacy Benefit Manager (PBM) that can set Medicaid MCO reimbursement
• 340B providers have expressed concerns that a single Medicaid PBM could set lower or discriminatory reimbursement rates for 340B claims

State-level Protection from Discriminatory Reimbursement

Over the last several years, some PBMs and health plans have attempted to reimburse 340B providers less than they pay non-340B providers and/or offer other discriminatory contractual terms that undermine the intent of the 340B program. No federal law protects 340B providers from discriminatory practices, but several states have passed legislation protecting CEs.

Several states have enacted laws to protect 340B providers from discriminatory reimbursement practices:

• Arkansas, Georgia, Indiana, Minnesota, Montana, North Dakota, Ohio, Oregon, South Dakota, Tennessee, Utah, West Virginia, Vermont
• Additional states have introduced similar bills
• This decision appears to make it less likely PBMs could successfully challenge 340B non-discriminatory reimbursement laws under ERISA

Other State Action on Contract Pharmacy

• Other state policymakers have taken action to support 340B providers against manufacturer’s illegal contract pharmacy policies, but Arkansas is the first (and currently only) state to attempt to protect 340B providers through legislation
• West Virginia governor sent Sept. 10, 2020, letter to then-HHS Sec. Azar asking him to use HHS’ authority to stop manufacturer attacks on 340B
• A group of 29 state attorneys general, including then-California Attorney General Xavier Becerra, sent a letter urging action by HHS against drug companies that cut off 340B pricing for drugs dispensed at contract pharmacies
• Connecticut Attorney General William Tong sent letters to Eli Lilly, AstraZeneca, Merck, Sanofi and Novartis demanding the companies not refuse 340B pricing for drugs dispensed at contract pharmacies

340B Reporting Requirements

2019: Legislatures in Ohio and Wisconsin considered including state-level 340B reporting requirements in their budgets

2020: The Vermont legislature considered a proposal to establish 340B reporting requirements

2021: The Minnesota legislature considered a bill that, if passed, would have implemented 340B reporting requirements

In summary, it appears that 2022 will be at least every bit as busy as 2021 was for 340B.

Contract pharmacy issues, Part B Reimbursement reductions, increased state activities. STAY TUNED

UPDATE! 12/17/2021

As of the time of this article publication (December 16, 2021), Lilly announced that it will permit 340B covered entities to buy drugs for shipment to an unlimited number of contract pharmacies. This is conditioned on a requirement that covered entities agree to provide claims-level data associated with such orders. Lilly said it will use manufacturer vendor Second Sight’s 340B ESP platform to implement its new policy, and “will voluntarily honor contract pharmacy purchases for prescriptions dispensed to eligible 340B patients on or after October 29, 2021,” provided that they are submitted through Second Sight “no later than March 15, 2022.”

Lilly was the first manufacturer to deny 340B pricing on covered outpatient drugs shipped to contract pharmacies. Lilly now becomes the first manufacturer to appear to reverse its position. Will 340B CEs accept Lilly’s new position? There are still pending lawsuits that could address a manufacturer’s ability to unilaterally impose restrictions on offers of 340B pricing to covered entities.

(8) Compounding in 2022 calls for increased focus on standards

During the pandemic, many hospitals shifted attention from USP renovations to dealing with COVID surges, staffing shortages and revenue shortfalls. We observed hospitals in three stages of USP preparedness: 1) Hospitals that had completed renovations based upon the proposed USP 797 and 795 updated guidance, 2) hospitals that were amid renovations, and 3) hospitals that were still in planning/budgeting for renovations. Most hospitals in the third category were stopped in their tracks as financial pressures forced organizations to implement rolling furloughs, stop elective surgeries and open pandemic crisis command centers.

Roll forward to 2021 and the country’s health care organizations started to reopen towards a new normal for operations. USP released the new draft guidance for chapters 795 (non-sterile compounding) and 797 (sterile compounding) for public comment. Visante strongly encourages organizations to submit comments now through the deadline of January 31, 2022. USP is also holding several open forums for both Chapter 795 and Chapter 797. Registration for these forums may be accessed through this link USP Virtual Open Forum Series: Proposed Revisions to Compounding General Chapters.

In early October 2021, the FDA released updated DRAFT guidance for hospitals and health systems. The comment period recently closed and hopefully, organizations took the opportunity to submit comments about the change from a “one-mile rule” to a “24-hour rule.” Visante believes the language proposed is still vague and needs further clarification from FDA regarding the intent and at what point in time the “clock starts ticking.” Depending on the final interpretation this language may have significant impact on IDNs with centralized service centers or those planning to centralize sterile compounding services.

Going forward in 2022, Visante encourages organizations to take action and move their cleanrooms into full compliance with USP chapters 797 and 800. Several states have already moved forward with enforcement of USP 800 which will be enforceable by all once USP 797 becomes final. That said, now is the time to get renovations started and completed.

Visante continues to see the 503A and 503B markets remain strong into and beyond 2022. Before the pandemic, the sterile compounding space was estimated at between $1.2 to $1.9 billion. Visante also noted the FDA DRAFT guidance strongly encouraged the outsourcing of sterile compounded products to 503Bs. The market continues to be an attractive target for private equity firms in the health care sector due to continued growth and EBIDTA trading multiples at acquisition. We also see more activity by hospitals and health systems investing in commercial 503B providers to create an equity stake and a larger voice in the compounding and supply decisions.

As compounding standards continue to evolve, documentation and standards compliance requirements also will become more rigorous and challenging for pharmacy in 2022 and beyond. Standards never get lower they only become more robust and we believe that 2022 signals another step closer to cGMP standards for sterile compounding. As healthcare continues to struggle with personnel issues the evolution of innovative documentation systems like Pharmacy Stars Compounding360 will become more critical to help pharmacy programs meet quality documentation requirements more efficiently.

The final story for 2022 compounding and compliance has yet to be written but pharmacy leaders are urged to continue vigilance in the regulatory updates from USP, FDA and State Boards.

(9) Drug diversion is costing hospitals

Written by Maureen Burger

Drug diversion didn’t disappear when COVID-19 hit. In fact, many changes associated with managing the COVID-19 pandemic in hospitals may in fact be creating new opportunities for drug diversion by increasing both access and opportunities for diversion. Consider that the U.S. Department of Justice is busy investigating violations of the Controlled Substance Act, and recently two large health systems negotiated significant financial penalties – one being $4.5 million for failure to “guard against the theft and diversion of controlled substances.”

However, proactive surveillance and a well-established diversion management plan can help organizations avoid significant patient safety, reputational and financial risks. Foundationally, the diversion program is no longer the responsibility of just the pharmacy department. Diversion is first and foremost a patient safety problem that may only be solved by an interdisciplinary approach.

For 2022, hospitals and health systems will need to focus on:

1. Diversion Program Structure – A governance committee chaired by leaders, including the DEA registrant, is a must. The governance committee supports the work of the diversion program, ensuring that there are adequate, dedicated resources for diversion surveillance, investigation, and event management. Additionally, the governance committee facilitates the intra-departmental efforts to prevent diversion by ensuring cooperation across any and all departments involved in the handling of controlled substances; from IT to Waste Stream every department has a role.
2. Dedicated Diversion Resources – diversion prevention, surveillance, detection and event management require specific skills, talent and subject matter expertise. Spreading the tasks of diversion detection across myriad managers and staff in multiple departments will not result in improved detection. Ask yourself how many diverters were caught in 2021? If the answer is none or only a few, then your program is ineffective or non-existent. Effective programs are led by a dedicated Diversion Specialist with a team of analysts who can efficiently and effectively manage your diversion analytics, coordinate the activities of the Diversion Response Team, and determine the root causes and solutions when diversion occurs. Diversion programs more and more are moving out of the pharmacy and into a “neutral” department to avoid the inherent biases caused by supervisory relationships.
3. Diversion Analytics – Diversion detection depends on surveillance analytics that enable you to see the red flags when diversion occurs. Several good software systems are commercially available, so make this a goal for 2022 to invest in a system that matches the goals of your diversion program.
4. Diversion Playbook – don’t wait for the next diversion to start to plan how to manage the event. Diversion will occur, so pull together your Diversion Response Team and make a plan that covers how to investigate, interview, and intercede on behalf of the individual. Define the role of Local Law Enforcement, the role of Human Relations, reporting to professional licensing boards, and how your organization will support an individual with substance use disorder who has also committed a crime.

Pharmacy leaders should not shoulder the full weight of the drug diversion program nor should the pharmacy budget absorb the full cost of the program. Leverage your relationships and guide the organization towards fully supporting a comprehensive, multidisciplinary diversion program that mitigates the risk of patient harm, reputational damage, and financial loss.

(10) Payer and Infusion Strategy

Site of Care Challenges for Health System Pharmacy: Risk and Opportunity

Written by Steve Rough

There is no doubt that white bagging and payer mandates that hospitals can only source drugs from a narrow selection of payer-affiliated specialty pharmacies was one of the most notable afflictions facing health system pharmacy leaders in 2021. White bagging practices have accelerated over the past few years, and pharmacy leaders and professional organizations are banding together at the state and national levels to shine a spotlight on the many negative implications that white bagging has on patient care and safety, total cost of care and overall hospital financial performance. Thus far eleven states have introduced bills on white bagging, and three states have even passed laws.

Despite the positive momentum in addressing these concerns, one can’t ignore the immediate and massive savings these practices bring to employers and health plans, thus efforts to expand white bagging and site of care restriction practices will likely continue to spread in 2022 as payers are quickly searching for ways to control rapidly rising specialty drug expense. Pharmacy leaders must respond quickly and aggressively, or risk continued erosion of patients and dollars out of their health systems!

In addition to white bagging, alternative site of care strategies will increasingly be pursued by payers to reduce payments. Such site of care optimization policies will encourage patients to move away from higher-cost settings (such as hospital infusion centers) towards lower-cost settings such as physician’s offices, ambulatory infusion centers/suites, and the patient’s home to receive specialty infusion medication. When clinically appropriate, receiving these infusions in the home setting not only lowers the cost of care, it also provides additional benefits such as improved patient satisfaction and convenience, fewer disruptions to patient work schedules, decreased risk of exposure to nosocomial infections, and faster patient hospital discharge.

What can health system pharmacy leaders do?

Payer mandates and benefit designs that financially incentivize the patient to receive high-cost infusion medications outside of the hospital in lower cost and more convenient settings are likely here to stay. Most payers have already implemented or are in the process of implementing various approaches to direct high-cost infusion care outside of the hospital outpatient setting. There are, however, great strategies health systems can employ to ensure a reasonable cost to the payer while maintaining patient access and positive margins within the health system. Visante recommends that pharmacy leaders take the following actions to maximize patient care, safety and convenience:

1. Move swiftly to create an internal home infusion therapy program with freestanding infusion suites within the organization’s pharmacy enterprise. This will provide two new sites of care within the system, enabling the organization to more effectively negotiate with payers to keep high-quality affordable care within the system.
2. Collaborate with senior leadership and Managed Care Contracting. Pharmacy leaders must partner with Managed Care Contracting teams to negotiate payer contracts that are inclusive of all internal sites of care. Pharmacists can help make their colleagues aware of the safety risks as well as the impact that white bagging practices have on the bottom line of the organization. Advocate that current care models be reassessed. Seek support to consider innovative shifts in care delivery, such as home infusion as described above and billing under the pharmacy benefit as described below.
3. Negotiate for the hospital’s specialty pharmacy to become in-network with payers for patients served by the health system to ensure optimal continuity of care. Hospitals need to be able and willing to process high-cost infusion drug claims through a PBM and bill the medical payer for the service under the pharmacy benefit.
4. Take a bold stance on white bagging in your organization. Pass a firm hospital policy prohibiting this practice and collaborate with managed care contracting, medical staff and others to ensure this policy is complied with in all sites of care.
5. Get engaged. Support local and national efforts to address the practice of white bagging.

Developing and implementing a home infusion strategy for your health system is similar to the level of importance that starting a specialty pharmacy program was ten years ago. Payers are starting to mandate home infusion as a preferred site of care for specialty infusions and requiring that these services be paid separately from the traditional hospital contract. Pharmacy leaders who are proactive in establishing a comprehensive internal home infusion therapy program will be well-positioned for success in tomorrow’s marketplace, as this strategy improves patient care and convenience, and presents a new source of revenue for the organization.

Visante consultants have deep contemporary expertise in site of care mitigation and all aspects of internal specialty pharmacy and home infusion therapy program business planning and implementation support.