The health care reform process is speeding along with various proposals that could have substantial impact on the market for pharmaceuticals, particularly those favored by hospitals. A subset of these proposals would expand the 340B Drug Program and increase manufacturer Medicaid Drug Rebate Program (MDRP) payment obligations.

Both the House Tri-Committee Bill (H.R. 3200) and the Senate HELP Committee Bill include provisions that would expand the categories of facilities that qualify as “covered entities” under the 340B Program. Children’s hospitals, certain DSH hospitals and critical access hospitals are among the six categories included in the proposed changes. Both bills would extend 340B pricing to drugs administered n connection with inpatient services.

H.R. 3200 would significantly affect the MDRP by expanding the scope of included classes of trade to Medicaid managed care organizations (Section 1743 of H.R. 3200) and Medicaid/Medicare dual eligibles (Section 1181 of H.R. 3200). Section 1181 would expand the scope of the program. Section 1742 would raise the minimum rebate percentage amount from 15.1 percent to 22.1 percent. Section 1742 also would impose a higher rebate percentage on new formulations of older single source or innovator multiple source drugs. Note that the Senate Finance Committee Chairman's Markup proposes an even larger increase in the minimum rebate percentage to 23.1 percent

What’s At Stake

While the 340B-related proposals in the House and Senate Bills would increase the market for discounted drugs, the MDRP proposals from both the House and Senate would also increase the cost to a manufacturer participating in the MDRP.

Steps to Consider

  • Work with your commercial account teams to assess the potential additional customer opportunities presented by an expansion of 340B eligibility.
  • Prepare to engage in strategic planning around the launch of enhanced versions of existing products subject to higher Medicaid Drug Rebate obligations.
  • Work with your finance and government price reporting teams to determine steps needed to keep your price reporting systems in compliance.