From Inside CMS

April 6, 2006

Groups Ask CMS To Clarify That Part D Plans Can't Exclude 340B Facilities

Community pharmacies and health centers are pushing CMS to clarify existing Medicare Part D guidelines to ensure plans do not exclude so-called 340B facilities, part of a drug discount program targeting low-income patients, from the new prescription drug benefit. 340B representatives say that several plans are, by referring to contradictory CMS guidance, excluding 340B facilities from their networks.

CMS is currently drafting a response to a letter sent Feb. 17 by the Public Hospital Pharmacy Coalition (PHPC) and the National Association of Community Health Centers (NACHC), in which the groups urged CMS to remove barriers and help facilitate plan contracts with 340B facilities, a 340B source said.

The two industry groups, meanwhile, plan to present in the coming weeks findings from member surveys on the effects of Part D on the 340B program. So far, the groups' concerns are based on "compelling anecdotal evidence," according to the letter.

At a Feb. 27--March 1 conference in Phoenix, AZ, 340B stakeholders expressed disappointment that in the run-up to Part D, CMS failed to consult with 340Bs on how the program would best function under the drug benefit, a conference participant said.

"No one from the government asked us how to do this, even though we would have had many ideas on how to reach out, educate and attract the support of this hard-to-reach population," the source said.

Medicare regulations prohibit plans from categorically excluding 340B pharmacies because plans must "agree to have a standard contract with reasonable and relevant terms and conditions of participation whereby any willing pharmacy may access the standard contract and participate as a network pharmacy," the source said.

But at the conference, a CMS official said the agency had not yet defined "any willing pharmacy," the source said. "So in effect," the source added, "it's not being enforced."

Many plans are effectively excluding 340B facilities from their networks by basing their contracts on a CMS model contract, which is only for "open pharmacies." 340B pharmacies are considered "closed" because they tend to only serve low-income patients treated at 340B hospitals. 340B stakeholders contend that the "open pharmacy" provision is "unreasonable" because it penalizes retailers for participating in a federal health care program.

CMS and the Health Resources and Services Administration, which oversees the 340B program, recently drafted a "Model Safety Net Pharmacy Addendum to Pharmacy Contracts," which enables plans to contract with 340B retailers, but many plans appear not to be using the addendum, PHPC and NACHC say.

The two groups have found that at least one plan's standard contract requires pharmacies to certify they do not receive 340B drug prices, which are at or below the Medicaid best price. Another plan appears to be intentionally excluding 340B providers from its network in order to discourage the enrollment of low-income beneficiaries with high medical costs, the groups say. Such practice, PHPC and NACHC contend, violates CMS regulations banning from the Part D program plans that are "likely to substantially discourage enrollment by certain Part D eligible individuals." CMS should issue prompt warnings to plans using such "discriminatory" practices and, if the plans do not change policies, exclude them from the Part D program, according to the groups.

Also, many plans appear to be slow in responding to requests from 340B stakeholders. "While this problem is not specific to 340B pharmacies, it is especially problematic for the many safety net providers that do not have existing relations with [plans] and do not have the resources to devote the arduous communications with unresponsive [plans]," the letter states. Most pharmacy chains, in contrast, have longstanding relations with insurers and pharmacy benefit managers.

PHPC and NACHC want CMS to install a toll-free hotline for 340B facilities with contracting problems, and force plans that resist contracting with 340Bs to use the "Model Addendum."

"We believe that such actions are necessary in order to ensure that low-income Medicare beneficiaries have access to the Part D program," PHPC and NACHC write, "and that 340B pharmacies are not unfairly excluded from this program."