Introduction
On November 29, 2012, Rep. Bill Cassidy (R-LA) and several other congressmen introduced HR 6611, the Patient Access to Drugs in Shortage Act (“Drug Shortage Act” or the “Act”), a new bill aimed at curbing drug shortages of generic sterile injectable drugs (“Sterile Injectables”). If enacted, the Drug Shortage Act could have a significant impact on 340B drug discount program (“340B Program”) participating covered entities (“Covered Entities”) who utilize 340B Program discounts when obtaining high-cost Sterile Injectables, including those used in the medical oncology setting. Specifically, the Drug Shortage Act proposes (among other statutory changes) to exclude Sterile Injectables from 340B Program discounts if the drugs are manufactured by three or fewer manufacturers.
Discussion
The provisions of the Drug Shortage Act are designed to incentivize manufacturers to make and sell Sterile Injectables susceptible to shortages. Notably, two primary incentives (among others) would be implemented under the Act. First, the Medicare reimbursement rate for Sterile Injectables with three or fewer manufacturers would be increased from “Average Sales Price + 6%” to the higher “Wholesale Acquisition Cost.” Second, Sterile Injectables with three or fewer manufacturers would be excluded from the definition of “covered outpatient drugs” used in the 340B Program and Medicaid rebate setting.
Excluding Sterile Injectables from the definition of “covered outpatient drugs” would have the effect of blocking 340B Program discounted pricing for these drugs and would remove the alternative requirement that drug manufacturers pay a rebate to state Medicaid agencies for such Sterile Injectables. Both effects would simultaneously increase payments to drug manufacturers while decreasing discounts available to Covered Entities and rebates available to state Medicaid agencies.
Conclusion/Practical Takeaway
Since the definition of Sterile Injectables in the Drug Shortage Act is very broad, Covered Entities will want to carefully monitor the status of this bill since it could serve to eliminate 340B Program discounts for many drugs used heavily by Covered Entities. The loss of these discounts could serve to invalidate budgeting assumptions established by Covered Entities and may cause them to reassess pending strategic planning initiatives.
A copy of the Drug Shortage Act can be found here.
If you have any questions about the 340B Program or the proposed Drug Shortage Act, please contact Todd A. Nova at 414-721-0464 or tnova@wp.hallrender.com, Leia C. Olsen at 414-721-0466 or lolsen@wp.hallrender.com or your regular Hall Render attorney.
