If Half a Billion Dollars for HIV Services and Treatment Disappears, Who Pays the Price?

Advocates Say Proposed Changes to the 340B Program Could Mean Fewer Services and Longer Waiting Lists for Meds

Ursula Blanc has not been above walking into an emergency room with clients who have been discharged with a prescription they can't afford and asking for a generic replacement. So when Iris House, the small Harlem nonprofit she works for, qualified for steep drug discounts and opened its own pharmacy last April, it was a revelation.

Suddenly, Iris House could work directly with a contract pharmacy so that eligible clients, most of whom have HIV, pay nothing out of pocket for their medications. Iris House could then deliver medications pre-sorted into daily pillboxes or blister packs, eliminating the pill bottles that can disclose HIV status. It could deliver those pills to clients on-site during regular services -- or straight to a client's door.

Now all that is at risk.

"It's incredibly important to note that oftentimes the big hospitals and doctors who prescribe these medications/medical devices have no clue as to whether the prescriptions will be covered by insurance, if the client will be able to afford it or if they have even filled the prescription," said Blanc, Iris House's director of program evaluation and quality assurance. "The clients turn to us ... for help and, through this program, we have been able to really bridge the often-overlooked gaps between being linked to medical care, being retained in care and being treatment adherent."

"This program" is the 340B Drug Pricing Program, an obscure program within the U.S. Department of Health and Human Services (HHS). Under that program, Ryan White clinics and eligible AIDS service organizations (ASOs) like Iris House can purchase drugs at steeply discounted prices. That includes not just HIV meds: Anything that Medicaid covers is eligible for the discounts. The program likewise gives state AIDS Drug Assistance Programs (ADAPs) discounts or rebates on HIV drugs, as well as rebates for covered clients' copays, coinsurance or deductibles.

Much of that would change under a draft guidance issued in August by the Health Resources and Services Administration (HRSA), the HHS department that manages the 340B Program. ASOs like Iris House that don't hire or contract with doctors would no longer be able to participate in the program. Additionally, 340B rebates on ADAP clients' copays and deductibles would be prohibited if the ADAP doesn't also pay those clients' monthly insurance premium.

The Ryan White Working Group, a consortium of HIV advocacy organizations and state ADAPs, has called the proposed ADAP changes a "staggering blow" to the programs' financial health.

"We'd been anticipating some treatment of ADAP rebates in the proposed guidance, but we were surprised by how damaging this could be to the program," said Sean Dickson, health care access manager for the National Association of State and Territorial AIDS Directors (NASTAD), the national trade group for state ADAP programs. "Those of us who are in the know in the community, we were pretty shocked by it."

Public comment on the draft guidance closed on Tuesday, Oct. 27, and multiple HIV organizations have submitted letters flagging worrisome proposals. The new guidance may take more than a year to go into effect.

"Stretching Scarce Resources"

HIV programs have always had to cobble together resources to care for everyone who needs them. When the Ryan White CARE Act passed in 1990, it created federal funding for HIV clinics. It also created ADAPs, which could provide drugs free of charge to those who qualified. Two years later, the 340B Program became law. The law itself was clear: Drug companies that wanted their medications covered by Medicaid had to sell them to 340B-covered programs at steep discounts -- up to 50% by some estimates.

In the language of the law, this was intended to help qualifying organizations "stretch scarce Federal resources as far as possible." Nonprofit hospitals that treated a large number of people who were unable to pay were the primary beneficiaries of the new law, but Ryan White programs benefited too, said Dickson.

When the first effective antiretroviral drugs came out in 1996, Ryan White clinics, Ryan White early intervention programs and state ADAPs had access to steeply discounted drugs.

It was expected, said Dickson, that 340B-covered hospitals, clinics and ADAPs would receive full insurance reimbursement for the discounted drugs so they could fulfill another intent of the law -- reaching more eligible patients and providing more comprehensive services. That's why qualified organizations are allowed to give the discounted drugs to all their patients yet charge insurers full price for the same drugs: The program was meant to provide an income stream for cash-strapped agencies, said Dickson.

"Three-forty-B entities were intended to receive the revenue from purchasing drugs at lower prices and receiving full reimbursement on those drugs," he said. "ADAPs operate a little differently, but the rebates have allowed ADAPs to expand services and support the Ryan White program."

Pushback and Rising Prices

In the 23 years since its launch, the range of organizations participating in the 340B Program has grown exponentially. Today, it includes federally qualified health centers, sexual health clinics, contract pharmacies, family planning clinics and, with the passage of the Affordable Care Act (ACA) in 2010, so-called critical-access and rural hospitals.

In 2005, 583 hospitals were part of the 340B Program. By January 2015, HRSA counted 11,530 enrolled organizations. In 2011, about 516 of those were Ryan White clinics, according to a 2014 report from the National Conference of State Legislatures.

As the program grew, so did drug costs. Daraprim is the most recent example. The drug, an anti-parasitic used to treat opportunistic infections in people with HIV, is a generic. Still, its owner, Turing Pharmaceuticals, raised its price from $13.50 a pill to $750 overnight earlier this year, and changed the ways in which insurers could access the drug. According to NASTAD, the Georgia state ADAP program has already been unable to access it.

Add in new medications like Sovaldi (sofosbuvir), which can cure hepatitis C but came with an initial sticker price of $1,000 a pill, and it makes sense that public insurance programs like Medicare, which covers the elderly, and Medicaid, which covers the poor, disabled and pregnant, are seeing their costs spike.

Some of that spike comes from 340B-covered institutions themselves. The Medicare Payment Advisory Commission (MedPAC), an independent commission to Congress, reports that 340B organizations charged Medicare $3.5 billion for drugs they got at a discount in 2013 -- a 543% increase over the half a billion dollars they charged Medicare in 2004.

With growth came push back. In 2011, the U.S. Government Accountability Office suggested that the 340B Program required more oversight. At the end of 2013, some members of Congress called for reform. Then, in spring 2014 the Alliance for Integrity and Reform of 340B, a pharmaceutical industry group, issued a report claiming that many 340B hospitals were not treating enough low-income and uninsured patients to justify their inclusion in the program. The report said nothing about ADAPs, Ryan White clinics or ASOs like Iris House.

Narrowing in on Ryan White

Nevertheless, the 90-page draft HRSA guidance on program changes includes a few pages impacting HIV/AIDS service providers. Qualifying Ryan White clinics would continue to receive drug discounts and be permitted to continue billing the full price of medications to insurance companies. (People without insurance receive the drugs for free.)

However, ASOs like Iris House that don't have a medical provider on staff or under contract could no longer be part of the program. Under the new rules, Iris House would have to shutter its new pharmacy and transfer prescriptions back to neighborhood pharmacies that don't always protect patient privacy. Iris House's Blanc said she's heard stories from her clients about other pharmacies' staff publicly announcing the names of drugs. And when she called local pharmacies to have client prescriptions transferred to Iris House, some said those clients wouldn't be welcomed back.

If Iris House has to close its pharmacy, it might also have to downsize the treatment adherence program it started with revenue from the 340B Program and revise plans for educational workshops, holiday parties and group outings that foster community and trust between clients and the organization. Purchasing over-the-counter medications for clients who can't afford them and assisting clients with copays may have to stop, too. The small stream of revenue Iris House generates from billing insurance companies funds all of those services. No 340B Program, no revenue.

"We have plans for a clinic, but we don't have the capacity to open one yet," she said. "We'll somehow continue to provide our educational services. We'll somehow continue teaching clients. But it will be limited in what we can do for them. And we will have to tell people who just switched their prescriptions to us that we can no longer help them with health expenses they couldn't afford before, like humidifiers or allergy medicine. These are the little things that help our clients feel better. These changes would just make the job that much harder."

ADAP Impact

ADAPs stand to lose revenue too. To understand how, you first have to understand how ADAP programs work. They aren't a provider; they don't hire doctors or process blood tests. Instead, they are like Medicaid for people with HIV: They pay for specific services and drugs for those who qualify. Since ADAPs don't treat patients, instead of receiving discounts for every treated patient, ADAPs are allowed by 340B to access drug discounts and receive rebates on copays, deductibles or the cost of coinsurance once a patient deductible is met. ADAPs can also cover clients' monthly premiums, but they aren't required to.

That would change under the proposed guidance. If the proposals go through, ADAPs wouldn't be allowed to receive rebates for clients' copays, deductibles and other cost sharing unless they were also paying those clients' monthly insurance premium.

"If an ADAP were to only pay someone's deductible but not their premium, the ADAP wouldn't be eligible for a rebate," said Dickson. "On its face, that seems reasonable. But it's challenging in a lot of ways."

One of those ways leads to the statehouse. Because ADAPs are state programs, state legislatures determine how each program works. Some states, like North Carolina, don't allow ADAPs to cover client premiums.

But even in states where ADAPs are allowed to cover premiums, there are reasons why an ADAP might not do so. For example, the only way for an ADAP to cover an employer-sponsored health insurance premium would be to send a check to the employer, which would necessitate the employer knowing that one of its employees is HIV positive. That could leave a patient vulnerable to HIV- or sexual orientation-related discrimination or stigma, said Dickson.

All this may sound like a lot of negotiating details, but Dickson said the proposed 340B Program changes could have a very real effect. If they had been in effect in June 2014, 26,866 ADAP clients wouldn't have been eligible for rebates, according to data from the June monitoring report of state ADAP programs put together by NASTAD.

NASTAD estimates that the proposed rule changes would result in up to $515 million less income for state ADAPs. That could be as much as a 55% drop nationwide in rebate revenue for the program, and would account for almost a quarter of the entire national ADAP budget, said Dickson.

"It's not that ADAPs would cut all these people from their program," said Dickson. "It means the programs will have less income, so it means the programs may have to make changes in what they cover and lower income eligibility limits."

Hitting Where It Hurts

In areas like the South, where the HIV crisis has its epicenter and where many states have elected not to offer other forms of coverage such as the expanded Medicaid option under the ACA, it could mean longer ADAP waiting lists and more people out of care, said Nic Carlisle, executive director of the Southern AIDS Coalition.

Take Carlisle's home state of Alabama. The state's budget was so tight this year that ADAP funding was cut by half, from $4.8 million to $2.4 million.

"It's absolutely fair to say that [340B] money is the difference between staying in care and falling out of care" for people with HIV, he said. "We can't afford that in the South. We can't afford that anywhere."