INSIDE THE ISSUE

> Lawsuit Over 340B
> Another Threat to 340B
> Senate Supp Due This Week
> The $1.7-$2.3B Financial Hit
> Award for Workforce Violence Prevention Effort

MONDAY REPORT

MGB, UMass Hospitals, and Missouri AG Sue Eli Lilly

Calling a recent mandate from the pharmaceutical giant Eli Lilly relating to the 340B drug discount program “unconscionable, immoral, unfair, and deceptive,” Massachusetts hospitals from the Mass General Brigham and UMass Memorial systems have sued the drug maker in U.S. District Court for the District of Massachusetts.

In Missouri, citing the same mandate, the state’s Attorney General has issued a cease-and-desist letter to Eli Lilly, saying it is violating Missouri consumer protection law.

At issue is Lilly’s new policy that forces 340B covered entities, which include hospitals serving high volumes of low-income patients, to use a private-equity-owned third-party platform to submit in-house pharmacy and medical claims data for all patients that receive 340B drugs. Although the platform de-identifies the data, the hospitals say nothing prevents the pharmaceutical company from re-identifying the data and using it for whatever “broad purposes” it wishes. Under the Lilly agreement, the hospitals bear all liability for misuse of the data and bear the full burden of privacy, cybersecurity, and regulatory compliance, MGB and UMass wrote.

The plaintiff hospitals refused to comply and Lilly retaliated by terminating their access to the lower 340B drug prices. The plaintiffs are Massachusetts General Hospital, Brigham and Women’s Hospital, Salem Hospital, UMass Memorial Medical Center, and UMass Memorial Health – Harrington Hospital.

“Lilly has thus intentionally abused its substantial market power to create an untenable ‘Sophie’s choice’: Plaintiffs must capitulate to Lilly’s demands, incur higher operational costs, and surrender valuable privacy-protected Claims Data on non-negotiable Terms, or forgo their 340B savings, absorb substantially higher upfront drug costs, and jeopardize services for vulnerable patients,” the hospitals wrote.

Calling Lilly’s action “a data dragnet” that vacuums up valuable claims data for its own use, MGB and UMass wrote that the mandate costs hospitals that refuse to turn over the protected data tens of millions of dollars in annual losses “that would otherwise fund uncompensated care, medication access programs, behavioral health services, oncology programs, and community health initiatives for Massachusetts residents.”

They continue: “It is unconscionable, immoral, unfair, and deceptive to use monopoly power and leverage the 340B Program to extort claims data from nonprofit hospitals under the guise of a routine corporate compliance policy, impose non-negotiable terms that strip hospitals of control and shift all risk to them, and then punish them with crippling penalties when they refuse to comply.”

In Missouri, Republican Attorney General Catherine Hanaway issued a cease-and-desist letter to Eli Lilly last Monday, calling on it to stop imposing what she called unlawful demands to surrender extensive and sensitive claims data in order for hospitals to access discounted 340B medications. She wrote that if Lilly bills itself as offering 340B drug discounts to all covered entities as is legally required, then it must do so and not impose “extra-legal data demands.” Those demands result in many covered entities not receiving the discounts contrary to the drug makers claims, which means Lilly is engaging in “unfair, deceptive, or dishonest business practices” contrary to Missouri law, Hanaway wrote.

“Big Pharma does not get to bully Missouri hospitals or hold prescription drug prices hostage,” Hanaway said.

HPC’s 340B Analysis: An Incomplete Assessment

Last week, the Health Policy Commission (HPC) issued a report on major program changes now being considered by MassHealth that would alter how prescription drugs are covered in the state’s Medicaid program, which in turn will negatively affect financing to safety net hospitals that prescribe drugs purchased under the federal 340B Drug Pricing Discount Program.

The report, entitled “Assessing the Impact of MassHealth Managed Care Pharmacy Benefit Reforms” was developed by HPC’s new Office of Pharmaceutical Policy and Analysis, established by the legislature as part of a 2024 healthcare reform law to increase reporting and oversight of pharmaceutical spending in the commonwealth.

Rather than focusing on pharmaceutical manufacturers as anticipated by many when the new oversight law was created, one of the first major reports from the HPC’s new pharmaceutical office delves into a controversial policy now being considered that would carve-out management of prescription drugs from MassHealth managed care organizations (MCOs). Today, more than 800,000 MassHealth members are covered in MassHealth MCO-related entities, including entities that collaborate with Accountable Care Organizations (ACOs). These managed care entities are responsible for managing and coordinating the care for all MassHealth members enrolled in their plans, including benefits related to prescription drugs. MassHealth is now contemplating changes to its managed care program, including the potential drug carve-out, meaning MassHealth would take away from the MCOs the management of prescription drugs.

In its report, the HPC says the carve-out of prescription drugs could save $193 million with most of the savings ($158.3 million) attributable to the disallowance of 340B purchased drugs. However, rebates received by the Medicaid program from drug manufacturers are shared jointly between the state and federal government. While the HPC report acknowledges that any MassHealth savings would need to be shared with the federal government at current federal financial participation rates that exceed 50%, the HPC topline savings findings do not account for this fact. Hospitals have raised this important point in similar carve-out proposals. Without MassHealth’s carve-out, 340B savings are retained by 340B providers and therefore drug cost savings remain in the commonwealth to support care delivered to Massachusetts patients.

The report also references a separate proposal that MassHealth is considering where it would provide 340B-eligible hospitals with funding to offset the large financial losses providers will incur as a result of the prescription drug carve-out from MassHealth managed care. This funding is contemplated in the state’s upcoming 1115 Medicaid waiver proposal and would be contingent on approval from the Centers for Medicare and Medicaid Services (CMS). If hospitals were to be made whole, the net state savings from the proposed carve-out would be less than $17 million based on the HPC’s estimated MCO administrative and risk payment savings. Health plans have also questioned these estimates and have raised concerns with the proposed carve-out’s potential negative effect on member care coordination.

MHA is on record opposing the controversial MassHealth prescription drug carve-out proposal, including the state’s pursuit of alternative hospital supplemental funding in lieu of 340B financing.

“The federal 340B program is critical to hospitals, particularly safety net providers,” said MHA’s Senior Vice President of Healthcare Finance & Policy Dan McHale. “Given constraints in other revenues, including those from public and commercial payers, 340B savings provide a necessary financing source for hospitals to support the growing expenses of serving their patients. MHA remains fundamentally opposed to proposals that would require hospitals to exchange existing 340B resources for Medicaid supplemental payments. We encourage the Health Policy Commission to focus on the root causes of pharmaceutical spending growth, including a closer examination of drug manufacturer pricing, as the legislature had intended in drafting the law that created the HPC’s pharmacy oversight authority.”

Senate to Take Up Supp Budget This Week

Last Thursday, the State Senate released its version of the supplemental budget that the House had passed the previous week. The Senate’s $2.61 billion spending bill mirrors the House proposal in some respects, such as $1.8 billion to MassHealth, including $52 million to support MassHealth nursing home rates.

Amendments to the Senate bill are due today at 2:30 p.m. and debate is scheduled for Thursday, November 5. MHA expects an amendment will be filed that mirrors one that the House passed – namely, restrictions on changes to pharmacy reimbursement and coverage in the MassHealth program that would reduce the benefits that safety net hospitals rely on through the federal 340B Drug Pricing Program. The House directive prohibits material changes until an alternative 340B hospital access stabilization payment program is achieved in the next iteration of the state’s 1115 waiver. MHA has opposed the controversial MassHealth pharmacy carve-out proposal and the alternative 340B supplemental financing arrangement included in the draft waiver proposal.

Billions at Risk: The Worst is Yet to Come

Recent well-publicized service closures, workforce layoffs, and access delays are the symptoms of a healthcare system that is at the breaking point and that is now the subject of various efforts to find legislative, regulatory, administrative, and innovation fixes.

Those efforts have taken on a new urgency given the fact that all parties, while differing in their proposed solutions to the problem, agree that Massachusetts healthcare is facing even more destructive challenges in the coming year.

According to recent MHA estimates, more than $1.7 billion is at risk for Massachusetts hospitals and health systems in the next year due to new and proposed policies driven by federal dynamics. And that financial hit grows to $2.3 billion by 2030.

As provisions in the One Big Beautiful Bill Act (OB3) and other policies cause 300,000 people in Massachusetts to lose coverage, the Health Safety Net’s record deficits are expected to grow by $500 million or more in the years ahead. Hospitals bear the sole responsibility of covering those shortfalls.

Also through OB3, Massachusetts hospitals are slated to lose $200 million annually, or $600 million by 2030, through restrictions on “State Directed Payments,” which for a decade have allowed states to direct how Medicaid managed care organizations reimburse providers under certain conditions.

The federal 340B Drug Pricing Program has existed for 34 years and allows hospitals and community health centers to buy discounted outpatient medications directly from drug companies, while putting the savings (drawn solely from pharmaceutical profits) towards essential care services. New attacks on the program by pharmaceutical companies – as well as erosive policies from state and federal government – are of grave concern to providers and could reduce their revenues by hundreds of million per year.

And continuing shortfalls in payments from public payers continue to stress hospital finances. Numerous changes in the MassHealth Acute Hospital Request for Applications (RFA) that are influenced by federal policy restrictions, will further challenge care and increase administrative burdens and costs. Each of these factors – on top of the unsustainable cost pressures that provider organizations already have been absorbing for years – translate to real detrimental effects on care services, workforce, and patient access.

Next week, Monday Report will feature some ongoing hospital efforts to stabilize the system and offer suggestions on where critical supports are needed.

As Groups Wait for Anti-Violence Bill, They Receive Praise for Effort

MassCOSH – the Massachusetts Coalition for Occupational Safety and Health – has presented MHA, the Massachusetts Nurses Association (MNA), and 1199SEIU with the coalition’s “Perseverance in Legislation Award.”

The presentation was made during MassCOSH’s 50th anniversary celebration at the Edward M. Kennedy Institute in Dorchester in October.

The award recognizes the MHA-MNA-SEIU efforts to pass legislation that will help prevent workplace violence in healthcare settings. “This award demonstrates the ability of three different organizations to come together after many years with a different viewpoint, and collectively present one bill for passage,” MassCOSH wrote.

Currently, a conference committee at the State House has the House and Senate versions of the bill and has until the end of the calendar year to work out a compromise to send to the governor’s desk. Among other directives, the bills require hospitals to complete facility-specific risk assessments and implement comprehensive violence prevention programs tailored to those findings, and also to create workforce-informed training, and make written plans available to all employees and labor organizations. The bills also strengthen enforcement through DPH licensing requirements, regular reporting, and enhanced job protections for workers, including additional paid leave for employees who are assaulted.

Where the House and Senate versions diverge involves the penalties for those who commit violence. The Senate bill does not include the felony language the House had passed, but makes the misdemeanor charge that it included an arrestable offense regardless of whether it was witnessed by law enforcement. This would allow for immediate removal of the offending party from a healthcare facility.

In a letter sent to the conference committee in September, MHA, MNA, and SEIU wrote, “Whichever legal reforms that the Conference Committee adopts, the final bill must allow for the removal of anyone who assaults a healthcare employee. Frontline healthcare workers have identified this as a top concern for many years, and these provisions are critical to meaningfully improving safety in healthcare facilities. Our intention is not to exact excessively punitive measures, but simply to mitigate violence by patients and visitors that are able to fathom intent, hold those who willfully and knowingly assault a healthcare worker accountable, treat the violence seriously, and allow for the removal of assailants from the healthcare facility.”

John LoDico, Editor