EP448 (Part 2): 340B: Why Employers Should Probably Care About What’s Happening Here, With Shawn Gremminger

Maybe you’re in the know because you listened to Part 1 of this conversation with Shawn Gremminger. But no worries, because here’s the scoop: The scoop is, after some pondering, I decided to release this 340B extravaganza of a conversation with Shawn Gremminger in two parts. So, listen to one, listen to both, pick your poison.

These shows aren’t particularly sequential. You are currently tuned in to Part 2, and you can, for sure, start here.

For a full transcript of this episode, click here.

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Right now, we are going to talk about how 340B impacts employers and commercial plans and other plan sponsors. So, if all you want to hear about is the why—as in, Why do employers care about what amounts to a program that is or was supposed to be for low-income Americans and Medicaid?—you are in the right place.

As just one example of the why should employers care if you are teetering on the edge of proceeding, did you know that if an employee or a member of a commercial plan gets a drug at a contract pharmacy participating in 340B, the employer does not get the rebate? The employer is gonna pay the list price for that med.

Wait, what? Yeah, details follow because Shawn Gremminger is gonna get into this and many other reasons why employers or anyone in the commercial market (or taxpayers, really) should care about this, as some may call it, Medicaid program. The fact is, 340B is currently so gargantuan that it creates market distortions that bleed into the prices and possibly the quality of healthcare for everybody, all Americans. And that could really matter to employer or Taft-Hartley plan sponsors.

If you have really zero idea of what 340B is beyond some program that was supposed to be safety-net hospitals buying drugs low and selling them high and then taking the dollars in the middle and using them to support underserved patient populations, that might actually be sufficient. You got the gist of it.

But after you listen to this show, if you want to drill in a little deeper on the “what the what” and the history of 340B, head back and take in Part 1 of this episode 448. Shawn Gremminger gives the skinny on how the program morphed over the years into a $53 billion juggernaut and is credited (or blamed) for all kinds of healthcare market consolidation and many other weird and unusual consequences that make me admire some of the folks who are truly gold medal winners in the sport of financial engineering.

Before we kick in to this fast-moving convo, I just want to point out a few interesting 340B posts and Tweets and articles. The first one is from Anthony DiGiorgio, DO, MHA, talking about the recent announcement by one 340B covered entity hospital to stand up a film studio. I guess it could be deemed an educational endeavor that may or may not be considered charity. But yeah … I, too, have questions.

Then there is a new report out from Neal Masia, PhD, and Health Capital Group that found that state Medicaid spending increases as the number of 340B sites per capita rises, adding about $30 billion a year in excess costs when spread across the country. Shawn and I both mentioned the study in the conversation that follows.

Additionally, the Avalere/Community Oncology Alliance study has come out and that shows how closely tied PBM-affiliated pharmacies are to the 340B program.

And now I’m gonna quote Brian Reid, who wrote in his really great newsletter. He wrote, “My gut says that wherever you stand on 340B, you probably feel uncomfortable with the idea [that] the program [is] padding the bottom line of PBMs.”

So, look, probably the most damning 340B studies lately have been funded by Pharma; but again, I like how Brian Reid puts it: “Talking about 340B research sometimes feels like watching one of those true-crime shows where the circumstantial evidence is overwhelming, and yet, there’s no definitive answer to the whodunit. Sure, there’s a motive and an opportunity and a questionable alibi, but with no smoking gun, the case hangs in the balance. … [However,] given all … the other circumstantial evidence in the case, it sure seems like this is a problem, even without a smoking gun.”

And lastly, a link to some comments by Adam Fein, PhD, on 340B, which Shawn mentions in this episode. Also, a study by Zack Cooper, PhD.

I’d also mention that this episode, both Part 1 and Part 2, is kind of a companion to the recent episode 444 with Ann Kempski. Both could probably have the subheading “Welcome to Policy Surprise Valley: When Things Don’t Turn Out As You Thought They Would.”

Now, this said, policies always require some trial and error. We cannot forget that, especially in healthcare where gamesmanship has become a fine art and the spirit of the endeavor is often nowhere to be found in how organizations choose to extract financial incentives.

If you want a summary of the points Shawn makes for why employers should care, it is your lucky day, because here you go. Here’s the four distortions in the market that Shawn talks about which impact employers:

Distortion 1: 340B contributes an incentive for hospitals to consolidate, and consolidation is known to drive up prices that employers will pay for their healthcare.

Distortion 2: Turns out, 340B covered entities actually mark up drugs more than non-340B entities. Weird. So, 340B hospitals buy drugs cheaper, and they sell them for more.

Distortion 3: 340B hospitals have said, flat out at summits and elsewhere, they will do formulary machinations so as to ensure clinicians prescribe the most profitable drugs (ie, the ones with the best 340B discounts) so as to make the most money possible. This gets really interesting when you layer in the IRA (Inflation Reduction Act). Quiet part, literally said out loud at a recent summit, is that some 340B entities are busy cooking up ways to move patients off of the IRA drugs to get them on non-IRA drugs so that they can continue to make the same money off of 340B. (Sometimes I just close my eyes and slip slowly off my chair onto the floor.)

Distortion 4: When employees get drugs at a 340B contract pharmacy, the employer does not get the rebate; the hospital does. Oh, wow …

So, kind of taking it from the top here, the two really big takeaways for employers in this show (Part 2) here is, number one, this is not cost neutral for employers, this whole 340B thing.

And the last takeaway is that 340B is not this little thing that everybody pats on the head and chuckles about, like it’s some kind of reality TV where the PBMs and Pharma point fingers at each other and it’s just dramatic and hilarious. 340B is now so huge that it is sitting at the center of the drug pricing debate. It is not this tangential little side scuffle. It has a center of gravity that pulls 340B onto the main stage. And anybody trying to figure out drug pricing really has to be aware of what’s going on here.

Shawn Gremminger, my guest today, is the relatively newly installed president of the National Alliance of Healthcare Purchaser Coalitions. But rounding out the why, as in why did I ask Shawn to come on the show today and talk about what is or was supposed to be a program for low-income adults and children, Shawn started his career doing government relations for the Children’s Hospital Association. He spent nine years at America’s Essential Hospitals, which represents the big kind of urban safety-net public hospitals around the country. And since then, he has been in a number of different roles representing consumers and employers.

So, he’s seen this 340B juggernaut from many perspectives, I guess, is the main point. And it’s a big point because it was hard (with a capital H) to find a guest so situated.

Also mentioned in this episode are National Alliance of Healthcare Purchaser Coalitions; Doug Geinzer; Anthony DiGiorgio, DO, MHA; Neal Masia, PhD; Health Capital Group; Brian Reid; Adam Fein, PhD; Zack Cooper, PhD; Ann Kempski; Children’s Hospital Association; and America’s Essential Hospitals. 

You can learn more at National Alliance of Healthcare Purchaser Coalitions and by connecting with Shawn on LinkedIn.

Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, is known for his wide-ranging policy expertise and government relations experience. He brings to the National Alliance a successful record of working with coalitions, employers, and other healthcare purchasers, policymakers, and industry stakeholders toward the mission of achieving high-quality, affordable, equitable healthcare.

Shawn was most recently senior vice president at Reservoir Communications Group, where he led communications and public affairs strategy and execution on a range of relevant issues, including 340B and the drug supply chain, employer-sponsored insurance regulations, and Medicare payment. He has a strong history of healthcare advocacy and public affairs with employers, plans, hospitals, and consumer organizations.

Shawn was previously director of health policy for the Purchaser Business Group on Health, a member of the National Alliance, where he ran efforts to improve quality and affordability for consumers and healthcare purchasers through federal policy. He has held senior leadership roles at Families USA and America’s Essential Hospitals.

Shawn began his career as a lobbyist for the Children’s Hospital Association. He achieved a Master of Public Policy from George Washington University in Washington and a bachelor of arts degree from the University of Mary Washington in Fredericksburg, Virginia.

09:11 Why do employers care about 340B, which is a Medicaid program?

11:30 Why do I care as an employer, even if I’m not Pharma?

12:44 Why is 340B causing employers to pay significantly more for healthcare?

14:36 Study by Zack Cooper, PhD.

15:06 Why are there distorted pricing models at 340B hospitals?

21:22 Why do employers need to stop playing the blame game?

Recent past interviews:

Click a guest’s name for their latest RHV episode!

Elizabeth Mitchell (Summer Shorts 9), Dr Will Shrank (Encore! EP413), Dr Amy Scanlan (Encore! EP402), Ashleigh Gunter, Dr Spencer Dorn, Dr Tom Lee, Paul Holmes (Encore! EP397), Ann Kempski, Marshall Allen (tribute), Andreas Mang