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Clinics push back as drug companies want changes to program helping low-income Kansans

Andrew Bahl
Topeka Capital-Journal
Matthew Schmidt, CEO of Health Ministries Clinic in Newton, meets with staffers for U.S. Rep. Ron Estes to talk about changes to the 340B program last month.

It is not uncommon for patients to come into the pharmacy at one of the branches of Community Health Center of Southeast Kansas, fully expecting that they will have to pass on much-needed prescriptions because they can’t afford the cost.

The network of federally qualified health centers, which has over a dozen locations, covers a swath of territory throughout southeast Kansas and northern Oklahoma that is the size of some small states.

Of the patients served at the clinic, 20% are uninsured and another third are underinsured, meaning they cannot afford their co-pays.

But thanks to a little-known federal program, those patients will often leave the clinic, prescription drugs in hand, often filled with emotion that they did not have to go without their insulin or blood pressure medication.

“They cry at our window because they didn’t think they were going to be able to pick up their medications that day,” said Lisa Wells, director of pharmacy for CHCSEK.

This is thanks to the 340B program, an initiative started in the early 1990s for federally qualified health centers to offer cut-rate drug prices to low-income patients.

Insulin, for example, can cost hundreds of dollars without insurance, depending on the type. Under the 340B program, that price may be under $50.

And the clinics themselves are able to pocket the difference between the market price and the discount rate they are allowed to offer and are legally mandated to re-invest those funds in their own operations.

Clinics say that means the program helps underwrite preventative health services that benefit communities but are otherwise tough to run profitably.

But prescription drug manufacturers are slowing starting to make changes to the program that the facilities say will hurt their ability to help their most vulnerable patients – and strain their budgets during the COVID-19 pandemic.

“I wish the pharmaceutical executives could see the faces of patients when they are told the medication they normally pay $10 for is now $450,” said Bryant Anderson, CEO of PrairieStar Health Center in Hutchinson.

Outside pharmacies under fire

The 340B program’s origins date back three decades, when drug companies agreed with the Department of Health and Human Services to offer up-front discounts on drugs to providers serving low-income residents in exchange for their medications being covered under Medicaid and Medicare.

It has grown markedly in the years since. Facilities are now able to partner with outside pharmacies in their region so that customers do not have to drive to the clinic in order to get the discounted medications.

The contract pharmacy, which could be a chain or grocery store in a community, gets a slice of the savings, with the remainder of the money passed on to the clinic.

For Health Partnership Clinic, which runs facilities in both urban Johnson County and rural parts of eastern Kansas, those are vital, as they lack an in-house pharmacy at any of their sites.

“Having an avenue to providing medication to [residents] is exceedingly important,” said Amy Falk, CEO of Health Partnership Clinic.

But these contract pharmacies are exactly what have come under fire from drug manufacturers, who are starting to refuse to send drugs to the outside pharmacies.

The pharmaceutical industry maintains that the intent of the program was never to involve so many contract pharmacies.

A trade group for the industry has alleged, for instance, that roughly half of the pharmacies in the country are involved in the 340B program.

“It is clear that contract pharmacies have leveraged market power to drive unprecedented program growth and siphon money out of the program and away from vulnerable patients,” said Stephen J. Ubl, president of the Pharmaceutical Research and Manufacturers of America in a statement last month.

They argue, moreover, that there is nothing legally binding a drug company from adhering to the contract pharmacy model.

Other changes eyed, as well

But those restrictions could be a big hit for facilities. Community Health Center of Southeast Kansas, for instance, is able to use $500,000 in savings from the 340B program stemming from contract pharmacies alone.

And they say it could make it harder for patients to get access to needed medications.

Wells said that there are almost 40 so-called contract pharmacies that work with the southeast Kansas clinics, something she said is vital in a region where some patients have a 90-minute drive to one of their in-house pharmacies.

“We use those contract pharmacies as a way to give those patients access to medications,” she said.

Drug companies have eyed other changes, as well. If a clinic wants to use a contract pharmacy, for instance, they would be required to submit data about those patients electronically.

The fear is that data could be compiled and eventually used as leverage against clinics.

And the clinics say they are under other sorts of pressures, specifically related to their working relationships with the agents who negotiate drug prices, known as pharmacy benefit managers.

Clinics argue that PBMs are hacking away at reimbursements for pharmacies in the 340B program, meaning less money flows back to the clinics.

PBMs will get rebates from drug manufacturers based off a sale, but companies are cutting back on those payments if a 340B transaction is involved.

The managers then will offer reduced contracts or even not work with 340B pharmacies at all because of the lost income.

“They are trying to skirt the regulations so they can put more money in their corporate pockets and take money away from people who are really trying to help take care of others and people that are providing a much-needed service,” Wells said.

Savings from drug sales big boost to clinics

The savings from the 340B program power much-needed services, clinics say.

Those largely include initiatives that are designed to help keep patients healthy and prevent them from needing to go to the hospital, meaning they likely wind up saving the health care system money on the back end.

Pharmaceutical companies have argued that there is no mechanism in place to ensure 340B savings are reinvested in a clinic.

But Derek Pihl, executive director of pharmacy services at Salina Family Healthcare Center, said that was not the case.

He noted his clinic was required by the terms of its status as a federally qualified center to ensure that the 340B funds are used to help patients.

“If we lose the ability to have that continue, these services are going to suffer and all patients are going to suffer, whether they get a discount on their medication or not,” Pihl said.

In Salina, those services include clinical staff to help counsel patients on what medications are best for them and who are able to provide guidance on how best to take the drugs.

At PrairieStar in Hutchinson, Anderson said savings from the program funds a full-service vision and optical clinic. For Health Partnership Clinic, it underwrites a full-time primary care physician.

If those programs were cut, Pihl said, “we are going to see more patients going to the hospital” at a time when hopsitals across the state are already under strain due to the COVID-19 pandemic.

“It is just a terrible, terrible time for this to come to a head,” he said. “It is like two ships going towards a collision if we can’t support our patients like we have in the past.”

The pandemic has had a significant effect on clinics. Community Health Centers of Southeast Kansas says it is seeing more patients than ever due to the financial strain that the pandemic has wrought on families across the region.

Other patients come just because they have a friend or family member who endorses the facility’s quality of care.

Ironically, that means more patients who would be eligible to take advantage of the 340B program.

“You are taking away health care from a large number of people,” Wells said of the drug manufacturers. “What are your answers for that?”

Clinics aim for federal, state response

Despite appeals from community health advocates nationwide, intervention from Washington, D.C., has been slow.

The agency, which oversees the 340B program, has said it is investigating whether the changes pushed by drug companies are breaking the law to establish if sanctions could follow.

That has not been good enough for critics, however. The National Association of Community Health Centers has filed suit against HHS in an effort to prompt more decisive action.

Patrick Lowry, director of communications and government relations for Community Care Network of Kansas, which advocates on behalf of community health centers in Kansas, has said that a group of stakeholders have also met with five of the six members of the state’s Congressional delegation.

All of them, he said, have been supportive, with some even interested in taking a look at the issue via legislation.

And U.S. Sen. Jerry Moran was part of a bipartisan group of senators to petition HHS Secretary Alex Azar to take stiffer action to prevent the drug companies from “undermining” the program.

“As these threats to the Program progress, we fear the potential exacerbation of these shortfalls in resources for providers at a time when they are needed most,” the lawmakers wrote.

At the state level, officials are advocating for a legislative effort to curb any discriminatory practices from pharmacy benefit managers, barring them from treating 340B pharmacies any different than a local Walgreens or Dillon’s.

While the bill stalled in 2020 after a COVID-19 shortened session, Lowry said they will be pushing for it to be reintroduced next year.

But all the mobilization has put another pressure on clinic leaders at a time when the pandemic has continued to worsen.

Falk said she is being forced to spend less time thinking about how to roll out a potential COVID-19 vaccine or supporting her burned-out staff and instead devote that brainpower to resolving the 340B issues.

That means tough choices about where to spend her time – the same type of choices that the low-income Kansans who use her clinics must make on a daily basis, she says.

“There are individuals in the communities we serve that are in dire need of these life-saving drugs,” Falk said. “They are having to make choices in taking their medications or feeding their families. The pharmaceutical companies need to know that this is not the place to increase their profits.”

Elizabeth Diohep, senior legislative assistant for U.S. Rep. Ron Estes, meets with clinic officials at Health Ministries Clinic in Newton last month to talk about changes to the 340B program.