What’s New in the States in 340B and Medicaid

Overall state trends in the 340B drug pricing program and recent changes in Ohio and California Medicaid programs were highlighted in a Tuesday session at the 2022 American Society of Health-System Pharmacists (ASHP) Midyear Clinical Meeting & Exhibition.

Over the past few years, states have been taking a closer look at pharmacy benefit managers (PBMs) and how they operate, after finding that PBMs were implementing contracts to reduce payments to covered entities, which serve low-income populations, or charging additional fees.

This ate into the savings that covered entities were supposed to gain in exchange for being safety-net providers. At least 21 states have enacted 340B antidiscriminatory reimbursement policies on PBMs to halt these practices; similar actions are under consideration by another 15 states. Five states are requiring PBMs to be licensed.

Two speakers highlighted changes in Ohio and California.

Katie Clark McKinney, PharmD, MS, BCPS, FACHE, FASHP, director of pharmacy services at the University of Cincinnati Medical Center (UCMC), described the process that UCMC went through as it expanded its pharmacy services, including a retail operation and an in-house specialty pharmacy. Due to the timing of the hospital’s changes during the time the state was transitioning its programs, the academic medical center needed to determine what its reimbursement rate should be with very limited data.

Even though Ohio has an antidiscriminatory law in place, this issue, from a business and operational perspective, was that the reimbursement language in a contract is between providers and PBMs, and not with the Health Resources Services Administration (HRSA), which oversees the 340B program.

In reviewing contract language, it was found that the reimbursement rates for the retail pharmacy were not in compliance with state law, as they were less than the minimum reimbursement rates; the contract also added administrative costs that were more than those paid by non-340B entities.

UCMC refused to sign the contract with the unnamed payer/PBM and proposed its own revisions, which were rejected. UCMC filed a complaint with the state department of insurance, and eventually, the payer/PBM capitulated to some degree, agreeing that the their original terms were not in line with state code, but were not discriminatory. It agreed to issue a new contract with revised language, not only to UCMC, but to all pharmacies in covered entities in Ohio.

“It was a very proud moment in the organization,” Clark McKinney said, as the audience applauded.

Another speaker, Jahred Washington, PharmD, the pharmacy finance director at the University of California, San Francisco Medical Center (UCSF), described the experience in California, which switched its pharmacy benefits covered under Medicaid managed care to fee-for-service (FFS) payment.

It is a mandatory carve-in, and covered entities must use 340B programs for all eligible FFS patients.

California opted to do this, he said, to allow statewide utilization management protocols for all outpatient medications, strengthen its ability to negotiate supplemental drug rebates, standardize the Medi-Cal pharmacy benefit statewide, and improve access to pharmacy services.

Making a change like this has significant financial and operational considerations, he explained, using a case study, which he said was not based on UCSF, to illustrate some points.

As Medicaid patient volume increased, margins decreased.

After the transition, there was a higher volume of calls to the pharmacy and increased wait time for calls to the state agency. As patients were condensed from multiple plans and multiple formularies, he said, “prior authorizations were kind of a mess.”

Because of the increase in wait times, the state temporarily stopped requiring prior authorizations for a few months.

To maintain patient adherence, prescriptions need to be filled early before any changes are made to ensure that individuals do not run out of medication, he said.