Children’s Hospitals to Regain 340B Orphan Drug Discounts
December 19, 2010
Posted by chcablogadmin in : Cost Reduction, Group Purchasing, Healthcare Reform
John VanEeckhout, VP, Clinical Services, CHCA
On Weds., Dec. 15 President Obama signed important legislation restoring children’s hospitals’ access to 340B orphan drugs discounts retroactive to January 1, 2010. Although Safety Net Hospitals for Pharmaceutical Access (SNHPA) advocated for extension of the 340B orphan drug discounts to rural hospitals and free-standing oncology hospitals, this was not part of the legislation. (See message below sent from SNHPA 12/9.)
Through the efforts of CHCA, NACHRI, HIGPA, and the Owner Hospitals’ lobbyists and government affairs personnel, we have successfully changed the unfortunate errors from the HCR reconciliation legislation which restricted our access to orphan drugs to full and unrestricted access to all categories of 340B drugs by children’s hospitals.
Thanks for all of your support and hard work on this effort over the past year.
SNHPA Update Special Edition December 9, 2010
SNHPA Applauds Restoration of 340B Orphan Drug Discounts for Children’s Hospitals
Safety Net Hospitals for Pharmaceutical Access (SNHPA) is pleased that Congress today clarified the provision in health care reform that inadvertently denied children’s hospitals access to significant discounts on so-called “orphan drugs” for their patients, many of whom require expensive, long-term or complicated care. The U.S. House passed the legislation this afternoon after the Senate approved it last night. President Obama has indicated that he will sign the bill, H.R. 4994, that includes this technical correction. DONE 12/15.
We thank the members of Congress from both sides of the aisle who advocated for this crucial clarification.
We are also pleased that Pharmaceutical Research and Manufacturers of America (PhRMA), in a statement yesterday, said it did not oppose restoring children’s hospitals’ access to reduced prices on these drugs.
In addition to ending the ban for children’s hospitals, the law that Congress passed today makes clear that such hospitals are entitled to retroactive relief if they were denied discounts.
“While we welcome this development, SNHPA urges Congress to extend these discounts to rural and free-standing cancer hospitals that gained eligibility for 340B under health care reform,” said SNHPA Executive Director Ted Slafsky. “These institutions also spend a significant portion of their drug budget on these therapies. It is imperative that they be able to access affordable medications for their patients.”
Several manufacturers recently began denying 340B pricing on orphan drugs to these institutions and children’s hospitals as well. SNHPA has asked these companies to resume the discounts pending guidance from federal health officials, which we have been told is forthcoming.
We will continue to work with rural and cancer hospitals and our congressional allies to lift the orphan drug ban for these institutions.
add a commentReports on the GPO Industry Spur Discussion
October 10, 2010
Posted by chcablogadmin in : Group Purchasing
As you know, HIGPA and HGPII have been working closely with others in the GPO industry to provide transparency and information to those in Washington, D.C. Last week, the U.S. Government Accountability Office released its official report on GPOs titled “Group Purchasing Organizations: Services Provided to Customers and Initiatives Regarding Their Business Practices.”
The report detailed the comprehensive, industry-leading steps taken by GPOs to ensure transparency, fair contracting and discount product pricing for American hospitals. HIGPA applauded the report and President Curtis Rooney stated in HIPGA’s response, “The GAO… confirmed what the 8th Circuit Court of Appeals, U.S. Department of Justice, Government Accountability Office, the Federal Trade Commission, and virtually all of the 5,000+ American hospitals have already found – GPOs reduce costs for hospitals.” The report contained no surprises and HIGPA immediately provided an overview and talking points as well as speaking to National Journal and Modern Healthcare to correct some misinterpretations.
Ranking member of the Senate Finance Committee Sen. Chuck Grassley (R-Iowa) released his own minority staff report, “Empirical Data Lacking to Support Claims of Savings with Group Purchasing Organizations,” based on the GAO’s findings. Grassley’s report contains expected talking points: that it is difficult to determine the amount of savings brought about by GPOs, and that administrative fees far exceed operating costs and are used for more than negotiation of contracts. The report may serve as a basis for Grassley to attack Safe Harbor at some point in the future. Many expect he will push for more hearings.
This week, Navigant Economics (a subsidiary of Navigant Consulting; see description below) released their own study entitled “Do Group Purchasing Organizations Achieve the Best Prices for Member Hospitals? An Empirical Analysis of Aftermarket Transactions.” This study, funded by the Medical Device Manufacturers Association (MDMA), examined a database of medical device transactions conducted between 2001 and 2010 in which hospitals sought to improve GPO prices through competitive bidding processes. Findings indicate that when the hospital purchasing process is exposed to greater competition, hospitals were able to achieve savings of up to 18 percent off the GPO price achieved on average for 2010. This study suggested the need to reform the way GPOs are compensated to help ensure they deliver value to the health care system. Premier responded to Navigant’s report by stating that the $200 billion medical device industry and its largest manufacturers are the only parties that stand to benefit from changing a working, competitive GPO market. They added “the relationship between GPOs and manufacturers should be adversarial in this context, and the attacks tell us that we are effective in driving manufacturer prices down and providing significant cost savings to hospitals, patients and payers alike.”
As a result of these published studies, health care and political blogs as well as national magazines including Modern Healthcare are engaged in dialogue about the benefits, concerns, reach and oversight of GPOs. On the Action for Better Healthcare blog, Kester Freeman, former CEO, Palmetto Health, discusses the GAO study and states “GPOs are a major asset to health care. They are helping lead the way with important aspects of health care reform. They improve the way care is delivered, setting standards in safety and quality. The work they do helps make non-profit hospitals and health care systems stronger. In the end this is a win for patients and the health care system in this country.”
HIGPA and HGPII will continue to proactively follow and respond to developments and I will keep you informed as well. As HIGPA Board Chairman Rand Ballard concluded, “As we move toward implementation of federal health care reform, the cost savings that GPOs provide to American hospitals are more critical than ever. HIGPA is committed to further increasing price transparency in the health care sector and to promoting access, competition and choice so hospitals are able to identify and purchase the best products at the highest value.”
__________________________________________________________________________________________
Navigant Economics, a subsidiary of Navigant Consulting, provides economic and financial analysis of legal and business issues to law firms, corporations and government agencies. Their clients are engaged in litigation, regulatory proceedings, policy debates and strategic planning.
GPO Industry Shuffles the Deck
September 19, 2010
Posted by chcablogadmin in : Group Purchasing
Two interesting developments occurred this week in the GPO industry. They are perhaps leading indicators of the changes in the industry and how they may impact CHCA and our Owner Hospitals. The first involves the acquisition of The Broadlane Group by MedAssets Inc. (See highlights below or link to full article.) MedAssets Inc. has made a number of key acquisitions in the past two or three years to strengthen their portfolio of non-GPO services. Broadlane has some excellent programs in supply-chain solutions and workforce management as well as an extremely compliant GPO program. MedAssets Inc. also recently made an unsolicited attempt to buy the University HealthSystem Consortium in a similar fashion to their CHCA approach a few years back.
The second development is the decision to close down Consorta after having aligned with HealthTrust Purchasing Group. (See highlights below or link to full article.) Consorta was formed by many of the large Catholic systems to concentrate both on group purchasing and faith-based health care. The group was never able to amass enough purchasing volume and made a well-thought-out decision to align with HealthTrust which is composed primarily of HCA and other for-profit chains. Consorta had not developed alternative business lines or value propositions for its owner systems.
The industry is now very well positioned with the five or six major group purchasing organizations all having sufficient volume to maintain clout with the vendor community. Each GPO will develop additional value services for the members and owners as they try to differentiate their positions in the marketplace. Groups like CHCA, Greater New York Hospital Association and Yankee Alliance along with the 125 integrated delivery systems will seek a best-of-breed positioning with these GPOs while offering niche services to their constituents. The industry is very united around the key issues addressed by congressional oversight and working well on issues of transparency, bar coding, drug prices, vendor credentialing and effective supply-chain.
MedAssets to acquire Broadlane for $850M
MedAssets Supply Chain Systems (Alpharetta, GA) announced it will acquire The Broadlane Group (Dallas, TX) for approximately $850 million. Broadlane is mostly owned by private-equity firm TowerBrook Capital Partners LP. Terms of the acquisition call for MedAssets to initially pay $725 million at closing and an additional $125 million in January 2012. The combined company will offer supply-chain solutions, outsourcing and workforce-management services. MedAssets expects the deal to increase adjusted earnings per share by between $0.05 and $0.10 in 2011 and to increase cost savings by at least $20 million of cost savings. The acquisition is expected to close in 60 to 90 days. MedAssets will fund the deal through financial commitments from JP Morgan and Barclays Capital.
Consorta to Cease Operations
Consorta Inc (Schaumburg, IL) announced that its board recently reassessed the partnership between Consorta and HealthTrust Purchasing Group (Brentwood, TN) and now plans to transfer its remaining GPO operations to HealthTrust. Consorta will cease operations on December 31, 2010. Consorta and HealthTrust partnered in 2007 and over three years, most GPO operations have been transitioned to HealthTrust. Consorta anticipates that it will take several months for it to wind down operations, and the transition should be complete by the end of 2010. Consorta will remain as the corporate entity that binds shareholders together and brings their collective voice to HealthTrust, but it will not employ staff or provide any additional GPO services.
Denial of Orphan Drugs in 340B Program Could Cost Owner Hospitals $109 Million in Potential Savings
July 25, 2010
Posted by chcablogadmin in : Group Purchasing, Healthcare Reform
Please read and consider John’s important call-to-action regarding 340B and orphan drugs vital to our children’s hospitals. — Don
- John VanEeckhout, VP, Clinical Services, CHCA
As you will recall, a significant amount of potential savings for children’s hospitals in the 340B outpatient program is derived from a group of drugs known as orphan drugs. These drugs are developed for treatment of small populations of patients with diseases requiring very expensive therapeutic interventions. These drugs have patent protection, meaning that they are not offered under contracts with GPOs. For example, Nitric Oxide, used exclusively in inpatient treatment, is designated as an orphan drug and has the highest profile among CHCA hospitals. Current Health Care Reform (HCR) reconciliation legislation excludes orphan drugs from the 340B program for children’s hospitals. According to CHCA analyses, of the total $545 million pharmacy spend, orphan drugs represent $211 million (39%). If orphan drugs were to be included in the 340B program, the $211M spend would be approximately $102M; excluding them denies CHCA children’s hospitals the opportunity to save $109M.
CHCA and NACHRI continue to work cooperatively to overturn this unfavorable legislative action. Keep in mind that prior to March 30, 2010 when HCR reconciliation was passed by Congress, children’s hospitals were eligible to unrestricted access to orphan drugs through 340B. This very negative outcome from HCR legislation has resulted in children’s hospitals being denied access to this drug class. CHCA and NACHRI have been in discussions with the Office of Pharmacy Affairs (OPA) of the Health Resource and Service Administration (HRSA) that oversee the 340B program. To date, OPA and HRSA have offered no meaningful direction concerning children’s hospitals’ claims that we are being denied access now even though we were provided access to the orphan drugs with original legislation. As a result, drug manufacturers are beginning to deny access to 340B pricing on products based upon the new legislation. Several legislative initiatives to address this issue have failed to make it out of committee. If CHCA Owner Hospitals cannot make a meaningful lobbying effort to change current legislation, we will never realize these critical savings opportunities.
Call-to-Action of CHCA Owner Hospitals
- Mobilize your government affairs departments to solicit support for change in 340B legislation with your congressional representation from your states and districts.
- Implore NACHRI and other lobbying entities to redouble their efforts to contact key congressional Committee Chairs such as Representative Henry Waxman (D-CA), House Energy and Commerce Committee, and Senator Max Baucus (D-MT), Senate Committee on Finance, to remedy the change created by HCR reconciliation.
- Ask your congressional representatives to send letters to HHS Secretary Kathleen Sebelius to delay HRSA implementation of any action or promulgation of rules surrounding the 340B changes because of HCR reconciliation.
- Contact local and national advocates who work in promoting children’s health issues since this legislation may deny some children the therapy they need to maintain health and wellness.
Please keep me informed of your efforts in this area, or contact me directly with questions: john.vaneeckhout@chca.com.
add a comment
