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Welcome to the 340 Banter podcast. Today, we're joined by Mark Ogunshusi,

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as well as Jason Reddish from Powers Law.

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We'll be discussing recent legal arguments pharmaceutical manufacturers have

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been using inside the courts, as well as what we see coming down the road in litigation.

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Even though Mark and Jason are lawyers, you should not use this as legal advice

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and should consult general counsel.

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All right. So 340B has been really rampant in the courtrooms lately,

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both at the state and the federal level.

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So I was wondering if we could kind of go through today and get your insights

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from the legal perspective, both of us being pharmacists, and maybe go through

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some of the arguments that have come up in those court cases lately.

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Yeah, I mean, that sounds like a good idea, but we're going to keep it,

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you know, related to pharmacists.

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We're not talking to lawyers, we're talking to pharmacists. It was a lot easier

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when there were only like two 340B cases for the first 30 years to keep track of.

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Oh, yeah. Well, we talked about, you know, going through case by case,

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but we would be here for weeks. So we're going to go back.

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And we would need a lot of paper in front of us, which would not be helpful.

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We'll go by arguments instead at this point.

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So let's kick us off. I think preemption is one of the first ones that had come up.

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You want to talk us kind of through what that is and how that's played out in the court cases so far.

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Yeah. So my pharmacists out there, we're dealing with these state laws that

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require drugs to be shipped to your pharmacies.

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And, you know, the drug makers, manufacturers don't like these state laws because

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they require that these discounted medications that safety net providers provide

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are shipped to your pharmacies.

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And they're saying, no, federal law is the absolute, because 340 is a federal

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pricing statute, right? That's where the price occurs.

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Say it's absolute, leaves no room for state law. So therefore,

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it preempts the state law.

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So any state law relating to delivery, and we all know there's all sorts of

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state laws relating to delivery, wholesaler laws and things of that nature,

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controlled substance laws related to distribution.

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Somehow, spontaneously, a federal pricing statute allegedly preempts or supplants

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or should take the place of or cancels out the state law. And that's preemption.

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So that's the argument. I don't know if you wanted to get into the disposition

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of these cases. So I think we've seen a lot of success at the state level.

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And so obviously that argument is not working.

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Is that what we're seeing? Yeah, at the federal court level,

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but looking at state laws, they've found that the 340B statute doesn't address delivery.

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It addresses pricing and addresses some other aspects of acquiring the drugs,

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but it doesn't speak to whether drugs have to be shipped to a certain place

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or whether manufacturers have to ship to where the covered entity wants them to be shipped.

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So the preemption arguments have largely fallen flat.

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They were also hurt a little bit because on the cases that challenged whether

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manufacturers could impose restrictions on contract pharmacy restrictions,

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their whole argument is, well, there's a huge gap in the statute. It just says offer.

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So we can fill that gap. If there's a huge gap in the statute,

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it obviously doesn't occupy all of the 340B field.

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And there was room for state regulation in areas that states typically regulate shipments.

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I want to add to what Jason's name is. we're talking to pharmacists, right?

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I mean, how complex is the practice of pharmacy? How many variations do we see?

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We see institutional pharmacy at hospitals. We see retail pharmacies.

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We see long-term care pharmacies. We see infusion pharmacies.

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And state laws govern the practice of pharmacy. In fact, Jason,

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does the 340 statute even mention the term pharmacy?

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No, the word pharmacy is not used anywhere. Not once.

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So why are the drug makers saying that the federal law preempts the state law?

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I don't know. I don't know. All right. Well, then we'll move on from preemption.

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Next one we've seen is the Dormant Commerce Clause. I mean, that's a mouthful.

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The Dormant Commerce Clause.

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Long story short, for my pharmacists out there, they believe these state delivery

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laws regulate Honda transactions occurring completely out of the state.

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It's an old constitutional law concept that interstate commerce,

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the federal government can regulate.

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And they're saying that a state law that requires the drug maker to not block

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or limit delivery of these discounted drugs to the pharmacies,

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to your pharmacy, regulates out-of-state conduct.

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You know, the drug makers just spontaneously, after years of delivering drugs into states,

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now states can't regulate these deliveries because some drug makers are located

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in that state, some drug makers are located in that state, but at the end of

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the day, they know their drugs are getting to your state.

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And again, that's another argument that I think is a bit spurious, spurious, spurious,

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You know, I haven't seen a new word for me. Well, it's unreasonable.

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It's well, it's unreasonable. I mean, it's like these are old constitutional

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contentions that have never gone anywhere.

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And there's plenty of case law establishing that states can regulate delivery

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of drugs within their borders. Yeah.

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And so, you know, what we've seen is failure by the drug makers on that.

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In fact, they're dropping those claims, that claim. They're not really even

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included in their litigation.

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And there are plenty of state laws that have impacts on activities outside of the state.

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I mean, one thing I use, I think of often when you're talking about this,

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it's called the Dormant Commerce Clause because the idea is if the federal government

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can regulate commerce between the states, then states can't do anything that

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hinders commerce between states.

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Yeah, that makes sense. But you think about, we watched game shows growing up.

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You've got the California emission standards.

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Like every car was up to the California emission standards.

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They're the biggest market. If they set an emission standard and they're allowed

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to under state law, that's going to affect everybody out of state because they're

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probably going to go down to that standard to be able to ship drugs to,

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I mean, ship cars to California.

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So it's not unusual for a state to have a minimum standard for their own state

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that is going to affect people who want to ship into the state.

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As long as it applies equally to a drug manufacturer in Arkansas as it does

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to one in New York, then there's not really an impact. Yeah,

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that's a great explanation.

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All right. So the next one we've got is due process takings.

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So this is what they're really kind of focusing on lately, which is that,

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you know, the government,

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state or federal government can't take private property from private individuals

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or entities without just compensation.

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And so I mentioned we have this is all about the 340B federal pricing statute.

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That's nothing about delivery or distribution.

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But they're alleging that because the statute sets a price that these coverings

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can pay and the state law says you must deliver it to where the coverings say

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you should deliver it, that that's taking their property.

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They have patents and they should be able to set their prices unreasonably high.

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I'm not going to get crazy, but we know drug makers are 300 to 1,000 percent

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in the United States and the other developed country in the world.

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We know we're being screwed here in the United States, but they're saying that

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that's a taking and that they weren't justly compensated.

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But, you know, the counterargument to that, similar to with the inflation reduction

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for my pharmacist, Medicare negotiated prices,

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discounted Medicare drugs, is that the drug makers voluntarily participate in

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the 340B program so that their drugs are covered under Medicare and Medicaid.

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The business decision at the end of the day. Well, it's a really good business decision.

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How much taxpayer, I mean, how much money do you think these companies are making

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off of Medicare and Medicaid in exchange for giving some safety net providers

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critical discounts to keep our country moving?

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Billions and billions of dollars. Have we seen that actually go through any

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court cases yet? Has it been successful? Actually, on the Inflation Reduction

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Act side, it's been rejected repeatedly.

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The taking cost. And it actually makes a lot more sense on that side,

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where they say, I've got this patent window, and now you're telling me that

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I have to submit to your price, basically, or pay an incredibly high tax.

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And if I don't, my only other option is drop out of Medicare.

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And so they're saying we're being hijacked to do it.

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And the counter argument is Medicare is the biggest drug market in the world.

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It's one of the best payers in the world. If you want access to that market,

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you have to play by that market's rules.

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And for the most part, that is that is largely succeeded and knocked down the

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manufacturer arguments.

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You know, whether the IRA survives a change in in the House or presidency is

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probably a bigger conversation or whether it survives with changes is probably a bigger conversation.

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But the due process arguments have not gotten them over the finish line.

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You can't take what you're voluntarily participating in.

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Yeah, there's an option that the manufacturers could choose to not be part of

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the pharmacy pricing agreement, which would remove them from Medicaid and Medicare,

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but would also remove them from the 340B program. PBM contracts are terrible.

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You could choose not to contract with the major PBMs. You won't be able to run

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a pharmacy, but you could choose that.

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Well, yeah, of course. I think one thing to add on to the PBM situation,

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if I'm a pharmacy, is that I'm not, by signing this PBM contract,

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making billions and billions of taxpayer dollars.

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I mean, these drug companies are making massive amounts by, you know,

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participating in the 340B program because their drugs are covered under a separate

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program, Medicare, Medicaid, and other programs. I mean, they're killing it.

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I mean, I mean, anyways, I'm not going to get into it. They make a lot of money.

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Let's just put it that way.

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Really? I didn't get that message. They're doing okay. Stop punching down.

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Okay. All right. So we'll move on to the contracts clause. The next one we're seeing.

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Yeah, this one's pretty simple. The drug makers are saying, you know,

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by requiring us to deliver drugs to where the patients can actually pick them

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up, you're modifying our contracts with, let's say, wholesalers or other contracts that they have.

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And, you know, again, none of these claims have won in any federal court. You know, they're.

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Untenable propositions that, you know, really would upset decades-long practice.

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You know, there's plenty of regulations

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on it. Let's talk about state-controlled substance laws, right?

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That modifies a wholesaler contract. You know, there's plenty of state laws

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that have impacts on your contracts.

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The bottom line is states are free to protect public health and safety within their borders.

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And, you know, I hope the drug makers get with the public health program and

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stop these spurious arguments.

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Yeah, I mean, contracts clause is a tough thing to argue. Basically,

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there's a line in the Constitution that says no state shall impair the obligation of contracts.

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But that could be like, I'm going to pass a law that says Logan Yoho doesn't

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owe his mortgage to that bank in Ohio anymore. You're lucky that. Yeah.

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It's not, there are a lot of exceptions in balancing tests when you're imposing

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regulations that help health and safety that happen to have an impact on existing contracts.

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So one of the things I like about talking through these arguments and explaining

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them to somebody that's not a lawyer is that what we're seeing is that in some

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states they're considering this, but there's fears of this litigation.

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So it's really good that we're discussing this and showing that these arguments

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haven't been successful.

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I think there's value there. And we went from Louisiana, I mean,

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Arkansas to Arkansas and Louisiana to Arkansas, Louisiana, Maryland,

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Mississippi, Missouri, Minnesota, Kansas, West Virginia in like three and a half, four years.

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And there were probably another five or six states that there was fear.

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Well, we don't want to get sued or we're afraid that we'll get pulled into this litigation.

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Every time one of these states wins, it makes it easier and easier to pass a law in another state.

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So maybe we go from eight now to 15 next year. Yeah.

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Especially if there's fear about what's going to happen at the federal level.

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Yeah, I think that could play in as a positive at the state level.

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Yeah, when you read the opinions, the judges aren't even...

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I mean, they're duly considering the drug maker's arguments,

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but they're, you know, they're slapping them down back and forth.

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So really, we're just talking about multinational, highly profitable companies

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that have the money to sue,

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to slow down enforcement against them so that they continue to drive up shareholder

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value and make more money, money, money, money on the backs of our community

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pharmacies, on the backs of our patients who are in underserved communities,

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on the backs of our safety net providers and public health providers throughout the country. Yeah.

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I'm going to take us to an argument that's not a constitutional argument,

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but one we're seeing come up, I think, a lot more recently is the kind of questioning

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the replenishment system and maintaining the title of the drug.

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Yeah, so that fits within a constitutional argument. It fits within,

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you know, AstraZeneca is alleging that in Arkansas, for example.

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But it fits within the due process takings, like taking property without just

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compensation, like patented property.

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And it fits within the preemption. They're saying that the 340 statute says

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a covered entity, the safety net provider who's entitled to purchase the drug,

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shall not transfer the drug to anyone other than a person, a patient,

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a patient of the covered entity.

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Yes. Right. Which has been around since the beginning of time.

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So the drug makers are saying replenishment, you know, where the drug is dispensed,

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a drug is dispensed, and a drug replenishes the drug, that's all I'm going to say about it,

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violates the transfer prohibition, and it's a taking of their property,

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their discounted drugs. Now, let's just think about it.

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Replenishment it's just an inventory accounting system first in

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first out yada yada has been around since before

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establishment of the united states it's well established

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that when a party is

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has some inventory especially fungible goods you know you don't have to account

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with detailed particularity one product versus another product they're fungible

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00:13:48.522 --> 00:13:51.602

they're inter place they're interchangeable for example when i put money into

‍

00:13:51.602 --> 00:13:55.642

the bank and the bank mixes that money up with all the other money in the bank.

‍

00:13:55.782 --> 00:13:57.862

That doesn't mean the bank automatically owns your money.

‍

00:13:58.302 --> 00:14:01.442

The bank is just holding that money on your behalf. You're also not getting

‍

00:14:01.442 --> 00:14:04.162

the exact same, you know, dollar bill back.

‍

00:14:04.622 --> 00:14:07.442

Yeah, you're not getting the serial number. Yeah. Well, yeah.

‍

00:14:07.602 --> 00:14:09.822

And look, I'm not going to get into the legal arguments, but at the end of the

‍

00:14:09.822 --> 00:14:14.902

day, and Jason probably wants to talk more about this, after decades-long practice,

‍

00:14:15.022 --> 00:14:17.342

replenishment systems were used before 340B was enacted.

‍

00:14:17.642 --> 00:14:22.942

Under Nonprofit Institution Act, for example, for, you know, own-use hospitals.

‍

00:14:23.542 --> 00:14:28.082

You know, the thing is, is that after 30 years of practice or more,

‍

00:14:28.342 --> 00:14:32.142

these drug companies are now all of a sudden saying, you know,

‍

00:14:32.262 --> 00:14:34.642

we've been dealing with this, this has been going on.

‍

00:14:34.942 --> 00:14:38.622

It's even more accurate than physically separating the product because you trace

‍

00:14:38.622 --> 00:14:40.622

each drug on an 11-digit.

‍

00:14:40.722 --> 00:14:44.122

Every pill that goes out, you make sure that went to a patient, right?

‍

00:14:44.362 --> 00:14:47.982

They're saying that now it's illegal. Just so you can understand how we feel

‍

00:14:47.982 --> 00:14:51.142

in the covered in the community after 30 years, all of a sudden,

‍

00:14:51.222 --> 00:14:53.642

oh, no, that's illegal. No, you guys are taking my property.

‍

00:14:54.282 --> 00:14:58.922

And actually, it's a good segue into everything that manufacturers are looking

‍

00:14:58.922 --> 00:15:00.902

at that maybe they haven't challenged before.

‍

00:15:01.182 --> 00:15:05.362

A lot of people don't know that pharma filed suit against HRSA in 1996 when

‍

00:15:05.362 --> 00:15:08.782

the first contract pharmacy guidance came out and they actually pulled it back

‍

00:15:08.782 --> 00:15:10.782

because of pushback from Ryan White Clinics.

‍

00:15:11.500 --> 00:15:16.340

So, you know, they were they had an opportunity when this was announced in 1996

‍

00:15:16.340 --> 00:15:20.660

to litigate it and fight over whether the program allowed contract pharmacies.

‍

00:15:20.860 --> 00:15:26.000

They didn't. Now they come back literally 24 years later and they start self-imposing

‍

00:15:26.000 --> 00:15:27.500

some restrictions on the program.

‍

00:15:27.700 --> 00:15:33.260

Does that impact their, I don't know, have a leg to stand on when you're making

‍

00:15:33.260 --> 00:15:36.440

that argument when you've not challenged it for 25 years?

‍

00:15:36.440 --> 00:15:40.420

There is a legal concept. It's called latches, which literally means you delayed

‍

00:15:40.420 --> 00:15:43.900

so long that it's unfair to the person that you're trying to enforce it against.

‍

00:15:44.100 --> 00:15:47.880

It doesn't apply as often when you're dealing with challenging a government

‍

00:15:47.880 --> 00:15:49.800

aspect, but it is a factor.

‍

00:15:49.980 --> 00:15:53.220

I mean, that you voluntarily participated in this model.

‍

00:15:53.480 --> 00:15:58.880

You knew who you were shipping the drugs to for 20 years and you didn't balk at it then.

‍

00:15:59.500 --> 00:16:02.680

But manufacturers are trying to challenge the replenishment model.

‍

00:16:02.680 --> 00:16:07.440

If you think about risk-reward for them, if they were somehow able to get rid

‍

00:16:07.440 --> 00:16:11.140

of replenishment, you would cut the contract pharmacy market in half.

‍

00:16:11.320 --> 00:16:13.700

You would have problems with hospitals and split billing.

‍

00:16:13.980 --> 00:16:17.820

Yeah, hospitals wouldn't be able to manage their clinic-administered or physician-administered

‍

00:16:17.820 --> 00:16:20.460

drugs. They would have to severely limit where they can use 340B.

‍

00:16:20.580 --> 00:16:23.160

And a lot of health centers, even their entity-owned pharmacies,

‍

00:16:23.160 --> 00:16:26.640

are virtual in nature. Depending on Medicaid carve-out and things like that,

‍

00:16:26.700 --> 00:16:29.900

you may have single neutral inventory there.

‍

00:16:30.100 --> 00:16:36.320

Yeah. So you're talking about maybe cutting the volume of 340B purchasing nationwide by $30 billion.

‍

00:16:36.940 --> 00:16:41.660

And they're going to spend some money to try that. And it's not for the purpose. Let's just be clear.

‍

00:16:42.100 --> 00:16:47.040

It's not for the purpose of greater, you know, we don't want this because it'll

‍

00:16:47.040 --> 00:16:51.300

be more accurate if you maintain a separate inventory. Because the second you

‍

00:16:51.300 --> 00:16:55.080

dispense a drug out of a physically separate inventory to a non-patient,

‍

00:16:55.300 --> 00:16:56.700

that's diversion, right?

‍

00:16:56.820 --> 00:17:01.500

There's no opportunity to true up. There's no opportunity to account for the

‍

00:17:01.500 --> 00:17:03.440

pills that are fungible, that are mixable.

‍

00:17:03.800 --> 00:17:07.420

So it really is just an opportunity to do what Jason is saying,

‍

00:17:07.980 --> 00:17:08.780

challenging replenishment.

‍

00:17:09.000 --> 00:17:14.140

It's just to save money. It's just to make money. It's just a multinational profit.

‍

00:17:14.440 --> 00:17:18.060

Or to make things more complicated to the point that you can no longer comply.

‍

00:17:18.300 --> 00:17:24.240

And therefore, you can charge your extremely 300 to 1,000% high list price drugs. Yeah. Anyways.

‍

00:17:24.620 --> 00:17:27.740

All right. Right. So I've got one more constitutional argument for us to hit

‍

00:17:27.740 --> 00:17:32.860

on that's been seen in some of the cases we've seen so far, but seems to be less frequent now.

‍

00:17:33.700 --> 00:17:37.320

Unconstitutional vagueness, which sounds to me just pretty, pretty vague.

‍

00:17:37.520 --> 00:17:40.760

Like it seems like it's pretty self-explanatory. story yeah yeah

‍

00:17:40.760 --> 00:17:43.420

the bottom line is if you're going to

‍

00:17:43.420 --> 00:17:46.340

punish somebody for violating a law they have to know what they're

‍

00:17:46.340 --> 00:17:50.820

prohibited from doing so you know if you have a law in the books that says anybody

‍

00:17:50.820 --> 00:17:56.060

who is is performing vagrancy will be charged with a misdemeanor and you ask

‍

00:17:56.060 --> 00:17:59.200

somebody what is vagrancy and they come up with whatever decision they whatever

‍

00:17:59.200 --> 00:18:02.320

definition they want that's going to be unconstitutionally vague can't create

‍

00:18:02.320 --> 00:18:03.740

a criminal record for someone because.

‍

00:18:06.126 --> 00:18:11.826

Manufacturers have tried to argue that some of the language in these state statutes

‍

00:18:11.826 --> 00:18:14.246

is unconstitutionally vague.

‍

00:18:14.466 --> 00:18:17.426

And I think they've been shut out. I know they've been shut out on those.

‍

00:18:17.546 --> 00:18:20.046

And I think they've stopped really raising that argument.

‍

00:18:20.386 --> 00:18:23.626

Yeah, I think they've stopped raising the argument. If you want an opinion,

‍

00:18:23.766 --> 00:18:28.806

you can look at the Louisiana lawsuits, plural with Pharma and AstraZeneca,

‍

00:18:29.166 --> 00:18:32.486

that they lost with flying colors because the law is pretty clear.

‍

00:18:33.026 --> 00:18:36.426

But unconstitutional vagueness, I mean, a law that says you must not limit delivery

‍

00:18:36.426 --> 00:18:38.046

of a product is pretty concrete.

‍

00:18:38.226 --> 00:18:41.966

I mean, what they want you to do, what they want to do is obfuscate very clear

‍

00:18:41.966 --> 00:18:47.326

laws such that they can create grounds to invalidate them and make more money.

‍

00:18:47.486 --> 00:18:49.506

But at the end of the day, don't limit delivery.

‍

00:18:49.706 --> 00:18:54.406

Your policy specifically references distribution and limiting distribution and

‍

00:18:54.406 --> 00:18:55.426

or prohibiting distribution.

‍

00:18:55.926 --> 00:19:00.066

And that's pretty concrete. And that's why the unconstitutional vagueness argument

‍

00:19:00.066 --> 00:19:03.626

has not, you know, it doesn't have legs. It hasn't had any legs.

‍

00:19:03.926 --> 00:19:08.226

Courts basically have said, you know, under basic case law, we can read the

‍

00:19:08.226 --> 00:19:10.646

statute in a way that's concrete. Right.

‍

00:19:10.846 --> 00:19:13.766

I mean, if you're writing statutes for a state, if you're helping work on a

‍

00:19:13.766 --> 00:19:16.286

bill for your state, you can have it in the back of your mind.

‍

00:19:16.306 --> 00:19:20.406

But the Legislative Council, one of their jobs when they prepare a bill for

‍

00:19:20.406 --> 00:19:23.766

the state is to look for constitutional issues. And that's always going to be

‍

00:19:23.766 --> 00:19:24.606

something they look for.

‍

00:19:24.806 --> 00:19:28.506

So it's already gone through a layer before it gets passed of somebody deciding

‍

00:19:28.506 --> 00:19:30.066

it's not vague. All right.

‍

00:19:30.226 --> 00:19:33.906

So now I kind of want to pivot. And we've talked about the arguments that we've

‍

00:19:33.906 --> 00:19:38.566

seen that are going on in the courtroom right now or have been and say,

‍

00:19:38.726 --> 00:19:41.006

looking forward, what what can we expect?

‍

00:19:41.146 --> 00:19:43.866

Are we going to see some, you know, a lot of the same arguments,

‍

00:19:44.026 --> 00:19:48.206

a lot of the same issues? Are we going to see some new issues coming up? I think new issues.

‍

00:19:48.466 --> 00:19:52.366

So two things that we've been dealing with, and really one of them is now a

‍

00:19:52.366 --> 00:19:57.346

year old, is manufacturers, at least one manufacturer, seeking and obtaining

‍

00:19:57.346 --> 00:20:03.106

permission from HRSA to audit a health center for Medicaid managed care duplicate discounts. Yeah.

‍

00:20:05.559 --> 00:20:09.999

More than a decade, Hearst has said, we don't have any jurisdiction over managed care.

‍

00:20:10.319 --> 00:20:12.759

We're not going to issue. At one point, they said, we're going to issue policy

‍

00:20:12.759 --> 00:20:15.959

in conjunction with CMS on managed care. Then they came back and said, no, we're not.

‍

00:20:16.339 --> 00:20:20.059

Just kidding. Yeah. And the statute itself is written in a way that treats fee-for-service

‍

00:20:20.059 --> 00:20:21.219

differently than managed care.

‍

00:20:21.539 --> 00:20:25.659

When they expanded the rebate program to include managed care in 2010,

‍

00:20:25.979 --> 00:20:29.579

they included a provision that said if the drug's purchased on a 340B account

‍

00:20:29.579 --> 00:20:32.899

and billed to a managed care plan, it's not eligible for a rebate.

‍

00:20:33.099 --> 00:20:37.019

We're only prohibited from billing Medicaid for drugs that are eligible for a rebate.

‍

00:20:37.279 --> 00:20:40.159

So they kind of took it all away from 340B and HRSA.

‍

00:20:40.559 --> 00:20:43.579

It was a big shock. We fought pretty hard.

‍

00:20:43.879 --> 00:20:48.619

HRSA did not relent. They allowed this manufacturer to audit the covered entity.

‍

00:20:48.799 --> 00:20:53.019

The audit actually took place about seven months ago. We still don't have a response.

‍

00:20:53.219 --> 00:20:57.679

They rode this health center hard to make them submit documents and move along.

‍

00:20:57.819 --> 00:21:03.059

And we're not really sure why suddenly HRSA, which has never issued any position

‍

00:21:03.059 --> 00:21:07.739

of its own on managed care, is now letting a drug manufacturer essentially make up the rules.

‍

00:21:08.079 --> 00:21:12.059

Because if there's no rule from HRSA to look at, what rule is the manufacturer?

‍

00:21:12.199 --> 00:21:19.679

And a lot of states have very vague language on how to prevent a rebate in the MCO space.

‍

00:21:19.679 --> 00:21:24.119

Yeah. In this particular case, during the time period, there was no rule for

‍

00:21:24.119 --> 00:21:27.759

managed care claims at the state level and none at the payer level either.

‍

00:21:27.759 --> 00:21:29.719

So I have two follow-ups with that, right?

‍

00:21:29.819 --> 00:21:34.519

So you're saying that's a potential dispute in the future, maybe against HRSA

‍

00:21:34.519 --> 00:21:38.619

for permitting the audit by the drugmaker in the first instance,

‍

00:21:38.699 --> 00:21:41.979

or even obligating the covered entity in any way to be involved in something

‍

00:21:41.979 --> 00:21:42.799

that's not responsible for.

‍

00:21:42.799 --> 00:21:45.639

So my question is, who is responsible?

‍

00:21:45.859 --> 00:21:48.779

So firstly, what you just said made it seem to me, and correct me if I'm wrong.

‍

00:21:49.299 --> 00:21:54.979

That once a covered entity chooses to purchase a 340B drug, the rebateability

‍

00:21:54.979 --> 00:21:57.219

of the drug is extinguished.

‍

00:21:57.339 --> 00:22:01.899

So therefore, the state can't request a rebate once the covered entity chooses to purchase the drug.

‍

00:22:01.959 --> 00:22:06.879

Is that right? Well, the state can write laws and impose rules on when a 340B

‍

00:22:06.879 --> 00:22:09.419

entity can use 340B drugs to bill MCOs.

‍

00:22:09.559 --> 00:22:13.259

They can do that through their contracts with the MCOs and tell the MCOs,

‍

00:22:13.339 --> 00:22:16.779

you're going to tell pharmacies they cannot use 340B drugs.

‍

00:22:16.799 --> 00:22:21.819

Or they can issue a statewide regulation or even pass a law that says you can't

‍

00:22:21.819 --> 00:22:25.359

use 340B drugs when you bill managed care. A lot of states haven't done anything.

‍

00:22:26.238 --> 00:22:31.038

There's nothing on the books about how to do it. And you look at each MCO contract

‍

00:22:31.038 --> 00:22:32.918

or manual and there's nothing there.

‍

00:22:33.078 --> 00:22:37.218

It's so hard to find information. I know we work with health centers all over

‍

00:22:37.218 --> 00:22:43.098

the country to find information about even what MCOs, what PBM they're using.

‍

00:22:43.598 --> 00:22:48.278

And sometimes you find a bulletin and it's just posted on a website somewhere.

‍

00:22:48.518 --> 00:22:53.378

And the lawyer will say, this tears up all of my managed care contracts,

‍

00:22:53.378 --> 00:22:56.378

this bulletin that they just posted. There's no notice and comment.

‍

00:22:56.638 --> 00:23:01.058

There was no official process. They just put a notice on the website and now

‍

00:23:01.058 --> 00:23:04.478

I'm supposed to give up $5 million in managed care bill.

‍

00:23:04.618 --> 00:23:08.078

I mean, it hasn't been handled well in many states.

‍

00:23:08.318 --> 00:23:12.118

Some states have, but in many states it was pretty much ignored.

‍

00:23:12.378 --> 00:23:14.938

And then it got to be a bigger problem for manufacturers.

‍

00:23:15.258 --> 00:23:18.278

And I think HRSA doesn't really know what to do at this point.

‍

00:23:18.278 --> 00:23:22.698

Well, so my question is around the manufacturer audit in HRSA,

‍

00:23:22.878 --> 00:23:26.038

I guess it could be looked at one of two ways.

‍

00:23:26.158 --> 00:23:31.518

Either, you know, condoned it or didn't present a strong front to it.

‍

00:23:31.878 --> 00:23:38.338

Is the timing of kind of Chevron deference in HRSA having less of a say,

‍

00:23:38.798 --> 00:23:41.338

potentially, you know, playing into that?

‍

00:23:41.338 --> 00:23:45.678

I mean, this is actually an area where they have some statutory cover,

‍

00:23:45.838 --> 00:23:50.338

where the statute says that they can, manufacturers can audit under the basically

‍

00:23:50.338 --> 00:23:53.538

conditions that the secretary, which is HRSA, allows.

‍

00:23:53.798 --> 00:23:58.178

So they actually had a little bit of strength here where they put out a policy

‍

00:23:58.178 --> 00:24:01.338

in accordance with notice and comment that may actually have some...

‍

00:24:02.283 --> 00:24:07.163

Some legal effect. Now, somebody else could look at it now, post-Chevron means

‍

00:24:07.163 --> 00:24:10.263

a judge could look at it and reach their own interpretation of what that means.

‍

00:24:10.763 --> 00:24:15.763

But I think this, it could have been a political call that, you know,

‍

00:24:15.903 --> 00:24:21.103

this manufacturer has been beat up pretty bad by HHS on the IRA and some other

‍

00:24:21.103 --> 00:24:22.603

things, so let's let them have this.

‍

00:24:22.843 --> 00:24:24.963

It could have just been a poor decision.

‍

00:24:25.303 --> 00:24:28.563

Or it could be a strategic, we're going to move in this direction,

‍

00:24:28.563 --> 00:24:31.943

we're going to start here, maybe they'll sue us, maybe they won't,

‍

00:24:32.023 --> 00:24:33.143

and we'll see what happens.

‍

00:24:33.583 --> 00:24:40.003

I kind of wonder if when it happened, I kind of wondered if HRSA was afraid of lawsuits.

‍

00:24:40.203 --> 00:24:43.923

So that's why they just kind of went with the manufacturers.

‍

00:24:44.163 --> 00:24:49.803

Which is really unfair because the health center had an argument that this manufacturer

‍

00:24:49.803 --> 00:24:53.363

audit should have never been permitted, should have never been allowed to move forward.

‍

00:24:53.363 --> 00:24:58.723

But to spend six figures to be right, you don't get anything back on that.

‍

00:24:58.723 --> 00:25:01.563

It isn't there's no there's no award at the end of that case.

‍

00:25:01.763 --> 00:25:05.963

You just get her to change what it did. They're not going to do that.

‍

00:25:06.443 --> 00:25:10.103

The manufacturer might. But the health center is probably not going to invest.

‍

00:25:11.183 --> 00:25:14.363

Even if they do, that six figures would be patient care money.

‍

00:25:14.523 --> 00:25:17.623

Yeah. Yeah. It's not sitting in a litigation pool somewhere. Yeah.

‍

00:25:18.243 --> 00:25:24.183

Yeah. So what other lawsuits potentially could we be seeing in the next few months?

‍

00:25:24.343 --> 00:25:29.863

We've seen some startling patient definition audit reports from HRSA.

‍

00:25:30.083 --> 00:25:35.283

And just to set the table, last November, the Genesis case comes out of a federal

‍

00:25:35.283 --> 00:25:36.343

court in South Carolina.

‍

00:25:36.643 --> 00:25:40.743

A judge is finally looking at the way HRSA applies the patient definition and

‍

00:25:40.743 --> 00:25:46.023

basically says, I'm okay with this 1996 guidance, but these other location timing

‍

00:25:46.023 --> 00:25:48.883

requirements that you've added on, they're not obvious from the statute.

‍

00:25:49.563 --> 00:25:54.403

And the hope is, great, now we get to just focus on, do we have a patient relationship?

‍

00:25:54.603 --> 00:25:57.543

And if we do, we can use 340B, and if we don't, we can't.

‍

00:25:57.663 --> 00:26:02.463

But we knew HRSA may or may not adopt that entire mindset, but they were probably

‍

00:26:02.463 --> 00:26:05.203

going to have to go back and change something about the way they were applying

‍

00:26:05.203 --> 00:26:08.203

location tests and referral tests and things like that.

‍

00:26:08.203 --> 00:26:14.643

So we knew we wouldn't really get audit reports for a while because the decision comes out in November.

‍

00:26:15.003 --> 00:26:18.163

If people make changes, it's going to be in December, January,

‍

00:26:18.383 --> 00:26:20.623

February, then they have to get picked for an audit.

‍

00:26:20.803 --> 00:26:23.343

And then the audit has to look at that window from that window.

‍

00:26:23.343 --> 00:26:29.143

March 4th. So we finally started getting some of those come shake out of HRSA in September.

‍

00:26:29.503 --> 00:26:34.143

And we have at least a couple, we've seen probably four, but at least two that

‍

00:26:34.143 --> 00:26:39.963

we've worked on firsthand where there is a clear hospital or health center encounter

‍

00:26:39.963 --> 00:26:41.683

for a specific condition.

‍

00:26:41.843 --> 00:26:47.623

They are referred to a specific provider for a care exactly following up that

‍

00:26:47.623 --> 00:26:51.163

prior condition, full record sharing, HRSA says no.

‍

00:26:51.603 --> 00:26:55.743

If that's not a valid referral prescription, I don't know what is because that's

‍

00:26:55.743 --> 00:26:58.583

been a valid prescription since day one in the 340B program.

‍

00:26:58.823 --> 00:27:03.123

I guess my question in those scenarios is covered entity type taken into effect,

‍

00:27:03.363 --> 00:27:09.123

into account, because I mean, I think an argument could be made that certain

‍

00:27:09.123 --> 00:27:15.003

covered entity types have more of a long-standing relationship with the patient,

‍

00:27:15.143 --> 00:27:16.823

and some are more episodic in nature.

‍

00:27:16.983 --> 00:27:22.323

I would say for these cases, it does not appear that they took into account covered entity type.

‍

00:27:22.723 --> 00:27:26.943

For example, the hospital case, you have someone with hypertensive emergency,

‍

00:27:27.103 --> 00:27:30.143

high blood pressure emergency. They treat them in the emergency room.

‍

00:27:30.203 --> 00:27:31.343

They get admitted for a week.

‍

00:27:31.703 --> 00:27:35.103

The doctor comes and rounds on them, and then they refer the patient to that

‍

00:27:35.103 --> 00:27:39.103

same doctor at their private practice that shares records back with the hospital.

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00:27:39.323 --> 00:27:43.403

It's hard to get a tighter length than that between the entire episode of care.

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00:27:44.123 --> 00:27:49.223

And then we had a health center that was also part of this batch that had the

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00:27:49.223 --> 00:27:54.003

usual many, many, many encounters with the patient, but this one prescription

‍

00:27:54.003 --> 00:27:56.423

was an outside provider that they disallowed.

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00:27:56.883 --> 00:28:02.383

And I think if they don't change those audit reports after, for those of you

‍

00:28:02.383 --> 00:28:05.503

who don't know, you get a 340B audit report, you get to challenge it,

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00:28:05.583 --> 00:28:06.543

then you'll get a final report.

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00:28:06.763 --> 00:28:09.963

If they don't change it before the final report, some of these entities are

‍

00:28:09.963 --> 00:28:14.783

going to sue, and they're going to basically just cite Genesis as the basis for their suit.

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00:28:14.983 --> 00:28:19.183

And even though Genesis had that footnote that it only applied to Genesis.

‍

00:28:19.743 --> 00:28:23.083

That's relatively common for. Yeah, that's normal, isn't it?

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00:28:23.323 --> 00:28:24.523

Well, it's the same federal law.

‍

00:28:24.883 --> 00:28:28.983

Yeah, well, the language is the same for everybody, right?

‍

00:28:29.343 --> 00:28:33.043

Like, OK, that opinion might have applied to Genesis, but it interpreted the term patient.

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00:28:33.557 --> 00:28:37.097

Which is only mentioned once in the 340B statute. And, you know,

‍

00:28:37.177 --> 00:28:40.937

the plain meaning of the term. Miriam does not change based upon the entity type.

‍

00:28:41.297 --> 00:28:47.397

Miriam is Miriam is Miriam. So I don't know why HRSA, other than seeking to

‍

00:28:47.397 --> 00:28:51.277

get another bite at the apple, just for my pharmacist, I'm going to back up, all right?

‍

00:28:51.437 --> 00:28:55.237

So 340B is a pricing and purchasing statute, you know, significant discounts.

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00:28:55.577 --> 00:28:59.897

And the term patient's mentioned once, and that's what sets the limitation on what you can purchase.

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00:29:00.217 --> 00:29:02.457

If it's your patient, you can purchase. If it's not your patient,

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00:29:02.457 --> 00:29:05.837

We're talking about a physician-patient relationship, a provider-patient relationship, right?

‍

00:29:06.057 --> 00:29:09.697

We're not talking about provider-patient relationship for every healthcare service

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00:29:09.697 --> 00:29:11.557

that ever happened to this person everywhere in the world.

‍

00:29:11.757 --> 00:29:14.697

You just have to have a relationship with your patient. Simple.

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00:29:14.817 --> 00:29:15.637

Did you render a service?

‍

00:29:15.957 --> 00:29:20.497

Well, HRS has taken it, as Jason mentioned, and applying it across the world in every way.

‍

00:29:20.597 --> 00:29:24.417

You have to be responsible for everything that ever happens to this patient

‍

00:29:24.417 --> 00:29:25.917

in order to purchase Dr. 340B.

‍

00:29:26.077 --> 00:29:29.837

And that's just not what the term patient means. It doesn't mean,

‍

00:29:29.997 --> 00:29:32.777

you know, everything that ever happens, you have to be responsible for.

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00:29:32.857 --> 00:29:37.697

And I would recommend if you're working in this program that everyone go out and read Genesis.

‍

00:29:38.117 --> 00:29:42.517

Even as a non-lawyer, it's really easy to understand. It was written in a way

‍

00:29:42.517 --> 00:29:43.977

that's very approachable.

‍

00:29:44.177 --> 00:29:48.217

Yeah. And it's 33 pages. There are not dense legal concepts in that.

‍

00:29:48.437 --> 00:29:51.257

I didn't have to Google words like I would have had to today. Exactly.

‍

00:29:51.557 --> 00:29:54.137

Because it really all turns on what does the word patient mean?

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00:29:54.217 --> 00:29:57.897

Yeah. What did Congress mean when they used it, you know, 30 years ago?

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00:29:58.117 --> 00:30:01.577

Yeah. Well, I have a question. So if you go to your doctor, here's a simple question.

‍

00:30:01.877 --> 00:30:05.457

You got to make this fast, man. We are running out of time here. Well, simple.

‍

00:30:05.557 --> 00:30:08.437

When you go to your primary care doctor and then you've been going to your doctor

‍

00:30:08.437 --> 00:30:11.377

and then you go to another doctor, you decide to get a second opinion.

‍

00:30:11.537 --> 00:30:13.797

Does that mean that primary care doctor is no longer your doctor?

‍

00:30:14.590 --> 00:30:18.070

No, she doesn't say no. She's a patient. Pretty obvious.

‍

00:30:18.350 --> 00:30:21.290

But I think the problem is, because this was congressional intent,

‍

00:30:21.530 --> 00:30:25.350

companies are purchasing a lot of drugs and a person wants to reel that back.

‍

00:30:25.670 --> 00:30:27.330

She doesn't have the authority to do that.

‍

00:30:27.710 --> 00:30:30.990

All right. So knowing that we are running tight on time, I'm going to say final

‍

00:30:30.990 --> 00:30:35.870

thoughts on litigation. It could be existing or what we anticipate seeing.

‍

00:30:36.190 --> 00:30:40.110

I mean, from my side, I would say we're going to see a lot more litigation.

‍

00:30:40.230 --> 00:30:44.090

We're going to see some litigation flow through the administrative dispute resolution

‍

00:30:44.090 --> 00:30:47.770

process and be it brought through HRSA and then to federal court.

‍

00:30:48.010 --> 00:30:54.990

And then we will have to see how a new administration will change policy within

‍

00:30:54.990 --> 00:30:57.090

HHS or within HRSA if they do.

‍

00:30:57.270 --> 00:31:00.170

There may not be much change between one administration to the next,

‍

00:31:00.190 --> 00:31:02.110

or there could be significant change.

‍

00:31:02.310 --> 00:31:05.710

But things like the rebate model and other things, we have to see what happens.

‍

00:31:06.110 --> 00:31:08.650

Yeah, I definitely think we're going to see litigation. I think we're going

‍

00:31:08.650 --> 00:31:11.250

to get a lot of administrative dispute resolution. We're going to get a lot

‍

00:31:11.250 --> 00:31:13.730

of manufacturer audits of covered entities.

‍

00:31:14.110 --> 00:31:17.450

So covered entities, hunker down, get your legal counsel.

‍

00:31:17.910 --> 00:31:22.750

The drug makers will be auditing you. But I do think that all the courts agree

‍

00:31:22.750 --> 00:31:27.410

the plain language dictionary definition of terms in a statute is what prevails.

‍

00:31:27.630 --> 00:31:30.950

So we're getting attacked by the government overbroad.

‍

00:31:31.310 --> 00:31:34.570

We're getting attacked by the drug makers trying to insert language into the

‍

00:31:34.570 --> 00:31:36.830

statute where they want to limit 340B purchases.

‍

00:31:37.370 --> 00:31:41.090

A lot of allegation, but I'm confident that the Covenant needs will defend themselves properly.

‍

00:31:41.350 --> 00:31:46.550

I think it's been a great conversation, and I think we're going to see a lot

‍

00:31:46.550 --> 00:31:52.410

more coming down the road as we're especially changing executive administrations.

‍

00:31:52.730 --> 00:31:56.870

And as you said, Jason, so all of this could change tomorrow.

‍

00:31:57.130 --> 00:32:02.490

So it is a point in time, but it's good from a pharmacist's perspective to hear

‍

00:32:02.490 --> 00:32:08.190

an easy explanation of some of these things that are not in our daily vocabulary.

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