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S.B. 263 Protects 340B Covered Entities from Predatory Practices in Ohio

Just before the end of calendar year 2020 and at the end of its two-year legislative session, the Ohio General Assembly passed Senate Bill 263, which prohibits insurance companies and pharmacy benefit managers (“PBMs”) from imposing on 340B Covered Entities discriminatory pricing and other contract terms. This is a win for safety net providers and the people they serve, as 340B savings are crucial to their ability to provide high quality, affordable programs and services to patients.

What is the 340B program?

The 340B program provides discounts on outpatient prescription and over-the-counter drugs to certain safety net health providers, called Covered Entities (“CEs”). The program's intent is to stretch scarce federal resources by allowing CEs to increase patient services with the savings realized from participation in the 340B program. Federally Qualified Health Centers (“FQHCs”), FQHC Look-Alikes, Ryan White Clinics, and Disproportionate Share Hospitals are CEs. CEs typically save 18-50% on outpatient drug costs through participation in the program. CEs use 340B savings to provide needed services – such as behavioral health, dental, case management and enhanced pharmacy management – to the most underserved Ohioans such as those who literally cannot afford to pay for health care services.

How does the 340B program work?

Section 340B(a)(1) of the Public Health Service Act requires that the U.S. Secretary of Health and Human Services enter into a pharmaceutical pricing agreement (“PPA”) with each manufacturer of covered outpatient drugs. Through the PPA manufacturers agree to charge a price for covered outpatient drugs that will not exceed an amount determined under the statute. This is known as the 340B ceiling price. The PPA “shall require that the manufacturer offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price.”[1] 

What does this mean in the context of SB 263?

SB 263 stops a practice negatively affecting 340B Covered Entities – insurance companies and PBMs diverting funding intended to care for underserved patients and communities to increase their profit margins. This happens when insurance companies and PBMs target 340B providers with discriminatory contracts – contracts that absorb all or part of the savings earned by 340B providers. They do this by reducing reimbursement and/or adding fees not applicable to non-340B providers, and then forcing CEs to either sign the contract or not be able serve patients in their network. Despite insurance companies and PBMs being aware that CEs depend on 340B savings to serve every patient who walks in its doors, regardless of ability to pay, they continue to offer discriminatory contracts to CEs. This practice isn’t just theoretical. One real-life example of a Payor/CE contract includes language that explicitly reimburses the CE more than 30 times less for a 340B brand name drug than for a retail brand name drug. In this same real-life example, not only does the Payor reimburse the CE significantly less for 340B drugs, it entirely wipes out the 340B savings intended for the Covered Entity, as provided in federal law.

The passage of SB 263 will help to end the predatory contracting practices of PBMs and insurance companies and was vital for CEs that rely on 340B savings. For questions about the 340B program or SB 263 please reach out to healthcare attorney Daphne Kackloudis at dlkackloudis@bmdllc.com.

For an update on federal actions being taken to reduce predatory practices of PBMs, see BMD Healthcare and Hospital Law Member Jeana Singleton's article HHS Issues Opinion Regarding Illegal Attempts by Drug Manufacturers to Deny 340B Discounts under Contract Pharmacy Arrangements.

[1] https://www.hrsa.gov/opa/manufacturers/index.html

Explosive Growth in Pot of Gold Opportunity for Bank (and Other) Cannabis Lenders Driving Erosion of the Barriers

Our original article on bank lending to the cannabis industry anticipated that the convergence of interest between banks and the cannabis industry would draw more and larger banks to the industry. Banks were awash in liquidity with limited deployment options, while bankable cannabis businesses had rapidly growing needs for more and lower cost credit. Since then, the pot of gold opportunity for banks to lend into the cannabis industry has grown exponentially due to a combination of market constraints on equity causing a dramatic shift to debt and the ever-increasing capital needs of one of the country’s fastest growing industries. At the same time, hurdles to entry of new banks are being systematically cleared as the yellow brick road to the cannabis industry’s access to the financial markets is being paved, brick by brick, by the progressively increasing number and size of banks that are now entering the market.

2021 EEOC Charge Statistics: Retaliation & Impact of Remote Work

The U.S. Equal Employment Opportunity Commission (EEOC) released its detailed information on workplace discrimination charges it received in 2021. Unsurprisingly, for the second year in a row, the total number of charges decreased as COVID-19 either shut down workplaces or disconnected employees from each other. In 2021, the agency received a total of approximately 61,000 workplace discrimination charges - the fewest in 25 years by a wide margin. For reference, the agency received over 67,000 charges in 2020, and averaged almost 90,000 charges per year over the previous 10 years.

Ohio’s Managed Care Overhaul Delayed – New Implementation Timeline

At the direction of Governor Mike DeWine, the Ohio Department of Medicaid (ODM) launched the Medicaid Managed Care Procurement process in 2019. ODM’s stated vision for the procurement was to focus on people and not just the business of managed care. This is the first structural change to Ohio’s managed care system since the Centers for Medicare & Medicaid Services' (CMS) approval of Ohio’s Medicaid program in 2005. Initially, all of the new managed care programs were supposed to be implemented starting on July 1, 2022. However, ODM Director Maureen Corcoran recently confirmed that this date will be pushed back for several managed care-related programs.

Laboratory Specimen Collection Arrangements with Contract Hospitals - OIG Advisory Opinion 22-09

On April 28, 2022, the Department of Health and Human Services, Office of Inspector General (“OIG”) published an Advisory Opinion[1] in which it evaluated a proposed arrangement where a network of clinical laboratories (the “Requestor”) would compensate hospitals (each a “Contract Hospital”) for specimen collection, processing, and handling services (“Collection Services”) for laboratory tests furnished by the Requestor (the “Proposed Arrangement”). The OIG concluded that the Proposed Arrangement would generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”) if the requisite intent were present. This is due to both the possibility that the proposed per-patient-encounter fee would be used to induce or reward referrals to Requestor and the associated risk of improperly steering patients to Requestor.

Property Owner Protection from Tax Valuation Challenges

New legislation provides significant new protections for commercial property owners against challenges to valuation primarily by local school boards and prohibiting side agreements to avoid tax valuation changes. The Ohio Legislature has approved House Bill 126 which will go into effect July 2022 but will effectively apply to the 2023 tax valuation year.