Reduced Hep C Treatment Costs, Increased Manufacturer Revenue Under 340B

According to a recent JAMA Network Open study, reduced list prices for hepatitis C treatments might have increased net revenue for drug manufacturers, due to lower discounts in the 340B program, as well as the higher share of sales using the discount.

Sean Dickson, JD, MPH, West Health Policy Center, Washington, DC, and Ian Reynolds, MPH, Pew Charitable Trusts, conducted an investigation into whether drug manufacturers’ net revenue increased after list price reductions for hepatitis C treatments under new changes in pharmacy benefit manager and 340B program discounts and now recommend that policy makers consider the role of 340b discounts when evaluating policies to lower drug spending.

The cross-sectional analysis of Medicare Part D claims for hepatitis C treatments observed manufacturer and 340B health care facility net revenues from 2016 to 2018. Among the eligible claims were ledipasvir with sofosbuvir (Harvoni; Gilead Sciences Inc), sofosbuvir with velpatasvir (Epclusa; Gilead Sciences Inc), and elbasvir with grazoprevir (Zepatier; Merck). In the second half of 2018, these 3 treatments’ prices reduced by 60% or more. Mr Dickson and Mr Reynolds noted that such price decreases for brand-name drugs are rare, even with the introduction of generic competition.

“In this cross-sectional analysis of 112 630 Medicare Part D hepatitis C treatment claims for 3 drugs in calendar year 2016, estimated manufacturer net revenues increased by 28% after manufacturers reduced the list price of these treatments,” explained Mr Dickson and Mr Reynolds in the study’s abstract. “Net revenues for 340B health care organizations for these 3 treatments were estimated to have decreased by 74% after these list price reductions.”

The researchers noted that recent manufacturer decisions to decrease the list price for hepatitis C treatments appears inconsistent with the preference to discount high-priced drugs through rebates to PBMs, though it would seem that this is unique to the hepatitis C treatment market due to it’s relatively short treatment duration (8-12 weeks) and curative nature.

“Our analysis suggests that, given the high share of 340B sales within the HCV market, reducing a drug’s list price generates greater net manufacturer revenues than the same price reduction via a rebate mechanism,” explained Mr Dickson and Mr Reynolds. “This increase in manufacturer revenues is because with a high list price, the manufacturer would have to pay both a PBM rebate and a higher 340B discount, but with a lower list price and no rebate, the manufacturer faces only a lower 340B discount.”

Per the study, Mr Dickson and Mr Reynolds concluded, “that a large 340B market share for a product may encourage manufacturers to offer discounts through reduced list prices rather than through PBM rebates, counter to the idea that 340B discounts lead to higher prices. Proposals to reduce the size of the 340B program may therefore diminish the 340B program’s potential to restrain price increases or encourage list price decreases. Policymakers should carefully consider the potential effects the 340B program may have on manufacturer pricing decisions as part of any efforts to revise the 340B program.”

—Edan Stanley

Reference:
Dickson S, Reynolds I. Estimated changes in manufacturer and health care organization revenue following list price reductions for hepatitis C treatments [published online July 05, 2019]. JAMA Netw Open. 2(7):e196541. doi:10.1001/jamanetworkopen.2019.6541