1. Rationale for Rising Drug Costs
August 26, 2016

2. A Few Reminders
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This presentation is being recorded and will be available online following the webcast

3. Questions are Encouraged!
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Use the Q&A or Chat panels to ask your question and it will be answered during Q&A.

4. Children’s Hospital Association
Today’s Speakers
Vizient
Mark Laffoon
Senior Director, Pharmacy Program
Michael McGiboney
Director, CHA Pediatric Pharmacy Program
Children’s Hospital Association
Jennifer Gedney
Vice President, Supply Chain Services
Terri Lyle Wilson
Director, Supply Chain Services

5. CHA-Vizient Program Members
* Pharmacy only

6. CHA Annual Performance Trend: 2010 – 2015 Patronage Dividend Improvement
In 2012, CHA sunset practice of subsidizing non-GPO programs via administrative fee revenue
CHA has returned $61.7M more to participating hospitals since 2012
CHA budgets to return 65% of gross administrative fees earned
Actual patronage return is dependent on performance against gross administrative fee targets each year

8. Rationale for Rising Drug Costs

9. Topics to be addressed :
Pricing trends and current status of drug pricing
Factors now driving escalating drug prices
Future cost mitigation opportunities
Drug prices have historically been viewed as a high expense item, yada yada
As always, the laws off supply and demand continue to control the market, but the market and its components are rapidly changing
Stunning advances in genetics have enabled creation of a wide variety of new drugs for previously untreated or poorly managed disease states. Patient benefits may be remarkable or nominal, yet costs is almost certain to be driven exponentially higher by these options
This frightening rate escalation of drug costs is well beyond what consumers, providers, and payers are prepared to manage
The promise of high profits in exclusive markets has contributed to a manufactures shift in focus away from traditional, broad market pharmaceutical products to the specialized products with long term patent protection.
As suppliers have been departing this market, customers benefitted in the short term by loss of patents for large market, primarily retail products that had been dominating the top 10 drug expenditure spend. This created substantial savings for all, culminating in a long term market low of less than 2 percent increase in drug costs during (to be continued)
Pricing Volatility
Limited distribution channels
Regulatory challenges, supply chain issues

10. Vizient Drug Price Forecast vs Measured Expenditures
Vizient Drug Price Forecast History
IMS Measured Increase in Hospital Drug Expenditures (use + inflation)
Source – IMS Health National Sales Perspectives 2016

11. Top CHA Pharmacy Purchases* August 2015-July 2016
Rank
Brand Name
Total Sales 1
NOVOSEVEN RT
$  32,914,258.46 2
ONCASPAR
$  28,085,290.23 3
REMICADE
$  24,197,982.40 4
SYNAGIS
$  21,316,189.73 5
UNITUXIN (12)
$  20,160,000.00 6
AMMONUL (5)
$  20,085,981.59 7
GAMUNEX-C (6)
$  18,094,049.32 8
THROMBATE III
$  14,531,431.11 9
NITROPRESS (7)
$  13,252,091.47 10
NEULASTA
$  12,874,567.38 11
PULMOZYME
$  12,373,641.28
Rank
Brand Name
Total Sales 12
NEUPOGEN (9)
$  12,047,576.62 13
REVATIO (15)
$  11,837,263.13 14
ERWINAZE (22)
$  11,216,159.20 15
ISUPREL (13)
$  10,727,912.35 16
SOLIRIS (17)
$  10,272,852.80 17
VIRAZOLE (18)
$     9,854,294.89 18
GAMMAGARD (14)
$     9,843,306.59 19
PREVNAR 13
$     7,799,983.72 20
BUSULFEX
$     7,350,476.68 21
CYCLOPHOSPHAMIDE (20)
$     5,752,197.27 22
CLOLAR (21)
$     5,110,925.37
Point out changes being addressed in later slide (valiant, remicade, etc
* Projections based on Vizient distributed sales only – Direct sales not included
**Products highlighted in yellow are expected to have near term price reductions

12. High percentage increases extend to generic non-injectable drugs as well
These are generic tablets, capsules, creams, etc with patents that have long expired.
Historically, this have been low priority but price escalation and shortages have created new focus on these products.
January 2015
Ursodiol
1711%
Allopurinol
1425%
Lorsatan potassium
1232%
Ofloxacin
773%
Prednisolone acetate
717%
Fluomethalone
663%
Baclofen
490%
Phenytoin sodium
442%
Phenylephrine
438%
July 2015
Amitriptylline
1949%
Carbamazepine
1820%
Clobetasol
1250%
Econazole
854%
Dibenzyline
824%
Bumetamine
656%
Ofloxicin Eye Drops
645%
January 2016
Hydroxychloroquine
1245%
Fluoxetin
1131%
Atenolol
803%
Propranolol
783%
Digoxin
681%
Urea 40%
590%

13. Key Drivers for Increased Drug Costs
Introduction of innovative new products and subsequent pricing escalation
Market changes resulting in legacy pharmaceuticals returning to single supplier status.
Older products now requiring clinical trials to continue to market the product
Due to shortage or low profitability, a supplier may return to a single supplier pricing strategy
Change in ownership resulting in exponential price increases with no improvements to product.

14. Vizient distributed sales only – 340B and Direct sales not included
2016 Drug Inflation Projections for CHA Members Based on January 2016 Drug Price Forecast applied to data from June 2015-May 2016
The range for CHA hospitals
is 8.73% – 20.61%
Forecasted percentages are created by applying the previous 12 months sales to the Vizient forecast with no other adjustments
Individual hospitals may refine this percentage with the Drug Price Forecast tool
Key Variables:
Patient acuity
Product mix
Product utilization
340B
Service changes
July Drug Price Forecast indicates a reduction in inflation to 7.66% based on anticipated market changes.
Vizient distributed sales only – 340B and Direct sales not included

15. Increasingly percentage of new drugs introduced are high priced biologicals
2010
2014 
Rank
Drug
Millions 1
Clopidogrel
$6,154
Sofosbuvir
$10,098 2
Atorvastatin
$5,329
Adalimumab
$6,078 3
Fluticasone/salmeterol
$4,026
Glargine insulin
$5,759 4
Aripiprazole
$3,606
Etanercept
$4,311 5
Pioglitazone
$3,582
Infliximab
$4,154 6
$3,304
$3,886 7
Montelukast
$3,219
Rituximab
$3,707 8
Quetiapine
$3,107
Pegfilgrastim
$3,523 9
$3,099
Fluticasone/ salmeterol
$3,325 10
Bevacizumab
$3,068
$2,928
Part of understanding the nature of drug pricing is realizing the extent to which the pharmaceutical market has changed. The change is significant, even if we look over only the last few years. This table lists the top medication purchases for the year 2010 as compared to The differences are substantial. In 2010, the top overall products were primarily small molecule drugs, such as Plavix (clopidogrel) and Lipitor (atorvastatin). Those two agents reached their patent limits in 2012 and have since faced generic competition. In their place, the products occupying the greatest expense are “specialty” drugs and frequently also biologic medications (highlighted in red in this table), agents derived from living organisms such as Humira (adalimumab), Enbrel (etanercept), and Rituxan (rituximab). These products, in addition to generally having a greater cost than small molecule generics, have also been insulated from competition following patent expirations. That status is beginning to change with the advent of biosimilars, highly similar competing products. Unfortunately, the biosimilars market is still very much in its formative stage and it will take an additional 3 to 5 years for competition to manifest for these commonly used biologics.
In addition, we are seeing greater commonality of top spend medications across different environments of the health care system. Historically, the spend on agents such as Plavix, Lipitor, and Seroquel would be of greater concern to retail pharmacy practice, pharmacy benefit managers, and outpatient focused providers. Hospital pharmacy spend would historically be associated with injectable, acute care agents. Today, spend on rheumatoid arthritis drugs, oncology drugs, hepatitis C drugs would likely be of equal concern to PBMs and specialty pharmacy as well as hospitals needing to expand their management of non-acute medication therapy. Therefore, pricing behavior and total medication costs are dramatically impacting all segments of pharmacy practice.
The management of expense for new and existing medications requires that pharmacists understand the issues that influence price, implement consistent mechanism to track utilization of all medication, and have supportive access to physicians and administrators to evaluate the impact of pharmaceuticals to the bottom line of health care costs.
Available at:

16. Branded Pharmaceuticals Price increases
Following new product introduction at shocking high prices, suppliers continue to escalate pricing, frequently multiple times per year
Suppliers continue to take significant price increases on these products at rates far exceeding prescription growth
12 of the top 30 products evaluated by the Wall Street Journal had reductions in prescription growth while prices were increasing substantially
In 2014, all new FDA approved cancers drugs were priced above $120,000 per year of use.

17. An FDA safety measure with unintended consequences
A History of Drug Approval
Pure Food and Drugs Act (1906)
First brought drug regulation under federal law, prohibited the sale of adulterated or misbranded drugs
Food Drug and Cosmetic Act (1938)
Added requirement that new drugs be approved for safety
Food Drug and Cosmetic Act amended (1962)
Required new drugs demonstrate safety and efficacy prior to FDA approval
Question :
What about drugs already on the market prior to these acts?
FDA’s Unapproved Drug Initiative
These products are identified as Marketed Unapproved Drugs
The FDA has offered suppliers that complete clinical trials a receive two year exclusivity on the product to encourage completion of these trials, reducing the number of unapproved products on the market

18. Neostigmine –patented in 1933
Neostigmine was first synthesized in 1931 and then patented in The original Federal Food and Drugs Act of 1906 in place at that time prohibited the sale of adulterated or misbranded drugs, but did not require that drugs be approved for safety and efficacy. The 1962 amendment to the FD&C Act affected drugs marketed after 1938, so this product and others escaped the requirement to be reviewed by this process. Several manufacturers of neostigmine marketed their product until recently without the need for the lengthy and expensive ANDA process, as there was no reference NDA-product to compare to. The neostigmine market remained in this state for over 75 years.
In June 2013, Eclat Pharmaceuticals received NDA-approval for Bloxiverz, or neostigmine methylsulfate injection, making it the sole FDA-approved version of neostigmine injection on the market. As the NDA-owner, and technically now the branded version of neostigmine, Bloxiverz within months placed themselves at a price premium more than 10% higher than the older products.
Once this NDA approval was granted, Eclat, petitioned the FDA to require the older pre-NDA versions to be withdrawn from the market, even though they had been available for many, many years. Makers of the original products were allowed to sell their existing inventories, but by early 2015, Bloxiverz became the only version of neostigmine on the market, and subsequently took another 6-fold price increase.

19. Vasopressin Example Exclusivity Vasostrict
Add in the impact of the new contract adjustment?
Vasostrict

20. Price Increases Due to Product Shortages
Over the past 18 months, several products already in the market, some for many years, were acquired by new suppliers, either through an acquisition of the original company or a sale of the individual brands. Some of these new owners have viewed the market for their acquired products as undervalued in regard to pricing, and have implemented very large price increases.
Price Increases Due to Product Shortages

21. Supply Disruptions Continue
IV Solutions Shortage
Market Summary
Multiple Factors Contributed to the Onset & Continuation of I.V. Solution Shortages
Flu Season
November 2013
Early and harsh winter contributed to worse than expected flu season
Allocations
November/December 2013
B. Braun and Baxter
Plant Maintenance
July 2013
Plant Maintenance
December 2013
Supply Disruptions Continue
Routine shutdown for scheduled maintenance
Routine shutdown for scheduled maintenance
Voluntary Recalls
January Present
Shifts in Demand

22. Price Increases Due to Change in Ownership
Over the past 18 months, several products already in the market, some for many years, were acquired by new suppliers, either through an acquisition of the original company or a sale of the individual brands. Some of these new owners have viewed the market for their acquired products as undervalued in regard to pricing, and have implemented very large price increases.
Price Increases Due to Change in Ownership

23. Nitroprusside – safety and efficacy established in 1955
Marathon

24. Isoproterenol was discovered in 1940
Valeant
A similar older, branded product is Isuprel, also purchased by Marathon, and later by Valeant. This product is also a sole-source issue, and hospital’s only action to avoid this price is to reduce utilization and convert to other therapies when possible.

25. Giving capitalism a bad name
Martin Shkreli – CEO Turing Pharmaceuticals
Raised price from $500/30 tablets to $10,800, in September 2015
Arrested on unrelated securities fraud, December 2015.
Daraprim – pyrimethamine
Developed in 1953 by Burroughs-Wellcome for treatment of malaria, now primarily used for treatment of toxoplasmosis

26. Daraprim 25mg Single Tablet Cost Vs Use
Sept 2015
Oct 2015
$750.00
$13.55
One of the price increase stories that garnered publicity this year was the 55-fold increase is pyrimethamine, or Daraprim. Touring Pharmaceuticals acquired that older product, and took the price from $13.55 to $75.00 a tablet overnight, causing an uproar in the lay press, and drew attention to this dynamic from the public and from Congress. As can be seen in the bar graph, purchases of Daraprim by our members, while never very high, trailed off beginning in May of this year. Drug wholesalers were unable to get product from the manufacturer, and after the September pricing announcement, have had little product to sell. Touring, the manufacturer, has supported their pricing action, stating that it “barely caused a ripple in the health-care system” overall. Early statement from their CEO, Mr. Shkreli, focused on shareholder value, and the ability of the market to handle a higher price. Recent comments from Touring related to discounting “up to 50%” to hospitals has not been seen in the market yet. Repeated calls by Novation to the supplier have gone unanswered.

27. CHA Expenditures on EpiPen and AUVI-Q

28. Market Changes and Vizient Impact
Daraprim:
Turing Pharmaceuticals now offers price reductions up to 50%, implemented August 2016
Isuprel and Nitropress:
Valiant will offer a volume based price reductions of 10-40%. This agreement under Vizient legal review for potential September 1 launch
Ammonul:
Valiant implemented a base price reduction on Ammonul in August
An additional generic is expected to be available in October 2016 from Zydus Pharmaceuticals
Virazole:
Zydus Pharmaceuticals is expected to launch a generic version of this product first quarter, 2017

29. Vizient Integration value examples
Vendor
Additional Novation value
Additional MedAssets value
Fresenius-Kabi
$10.1M
$6.8M
AbbVie
$2.3M
$3.4M
Eclat
$2.7M
$5M
Otsuka
$2.6M
Guerbet
$485K
$167K
Lantheus
$121K
$184K
Sandoz
$2.5M
$2.1M
Totals
$20.51M
$20.25M

30. Future Pharmacy and Savings Opportunities

31. Positive Changes Underway
Government:
Current improvements underway in FDA approval processes to restore competition on in generics marketplace. The Vizient pharmacy team provided data and background information for congressional investigation resulting in price decreases with Valiant Pharmaceuticals
Alternative Products:
Introduction of biosimilars into the market the Affordable Care Act legislation as alternatives to sole source therapies
Technology based therapy optimization:
New availability of genetics-based testing and software to target therapy selection for best set of options for specific patients based on their genetic profile

32. Price Reduction Requires Competition
Timeliness and number of generic drug approvals have a direct impact on generic drug price competition
Backlog of current FDA generics approvals status:
ANDA – Abbreviated New Drug Approval – for generics products
PAS – Post Approval Study - additional data to assure safety and effectiveness
*From FDA FY 2015 performance report for Generic Drug User Fee Amendments (PDUFA)

33. Biosimilars: Potential savings of 20-30%*
Comparison of Biologic Monoclonal Antibody and an Aspirin Molecule
These high-spend medications are complex, large biological molecules. These products have limited, if any competition
9 out of top 11 drugs are biologicals and represent more than 50% of typical hospital pharmacy spend
The Affordable Care Act provided for an approval pathway for “biosimilars” enabling the FDA to approve lower cost alternatives to innovator biologics
The FDA has a designation for generic pharmaceuticals to determine if they are interchangeable. This designation has not yet been identified by the FDA for biosimilars
* Projections based on European markets and US filgrastim biosimilar release
Comparison of Biologic Monoclonal Antibody and an Aspirin Molecule
Aspirin
Comparison between a Biologic Monoclonal Antibody and an Aspirin Molecule. An approximately 800-fold difference in size necessitates magnifying the boxed area to clearly identify the aspirin molecule on the lower left. The antibody structure was taken from the RCSB Protein Data Bank and has the identifier 1HZH.
Monoclonal antibody biologic

34. Challenges to biosimilars adoption: managing expectations
Remicade $21,000,000 annual sales x 25% price reduction $5,250,000 Savings
20%? 30%?

35. Barriers to biosimilars uptake and conversion
Limited competition – approval process slow; also continued litigation issues remain
Clinicians have limited understanding of the biosimilars evaluation process – substantial education required
Biosimilars will require at least a minimum formulary review at P & T Committee – greater resource requirement than what is applied to generic drugs
Provider and patient acceptability
Availability of pediatric specific dosage forms
Reimbursement requires greater definition
Aggressive marketing, sales tactics, and competitive pricing from branded suppliers
Hit 3, 5

36. The Biosimilars Horizon (FDA Filed/Approved - Not Launched)
Drug
Biosimilar of…
Manufacturer
Estimated Launch
Inflectra® (infliximab)
Remicade – Janssen
Celltrion/Hospira
Sept- Oct 20161
Neupeg® (peg-filgrastim)
Neulasta – Amgen
Apotex/Intas Q
Grastofil® (filgrastim)
Neupogen – Amgen Q
Lapelga® (peg-filgrastim)
Neulasta - Amgen
Sandoz Q
Retacrit® (epoetin)
Epogen – Amgen
Procrit – Janssen
Hospira Q
GP 2015 (Etanercept)
Enbrel- Immunex/Amgen Q
ABP 501 (Adalimumab)
Humira - Abbvie
Amgen Q
SB 2 (infliximab)
Remicade - Janssen
Merck/Samsung Q
(1) Inflectra- Ad com approval , vote was 21 to 3, → BsUFA date Apr (FDA Approved Apr 5th) → IPR resulted in PTO ruling of patent invalidity → JJ appealing IPR → possible launch was originally June 30, 2016 (if no 180d ruling)…otherwise Sept 15, 2016 (result of joint declaration from Janssen/Pfizer to court). With July Appeals ruling on 180 day notice (Amgen v. Apotex), launch may be delayed until Oct. 5th.
(2) Neupeg- No ad com scheduled (may not be necessary) → BsUFA date Q → Litigation with Amgen ongoing → possible launch originally early Q (if no 180d ruling), after appeals court ruling (Amgen v. Apotex) new likely launch date end of Q1 2017
(3) Grastofil- No ad com scheduled (may not be necessary) → BsUFA date Q → Litigation with Amgen ongoing → possible launch originally early Q (if no 180 d ruling), after appeals court ruling (Amgen v. Apotex) launch is now likely end of Q1 2017
(4) Lapelga- BsUFA date was July 2016 → Instead Sandoz received CRL (not enough info provided) → Refiling means earliest FDA approval around Dec → Possible launch date end of Q2 2017
(5) Retacrit- No ad com scheduled → CRL received, and Pfizer will re-file Q (6 mo. Review) → possible launch upon approval during Q (if no 180 d ruling), after appeals ruling Amgen v. Apotex, new likely launch date Q2 2017
(6) Etanercept → BsUFA date June, 2016 → Arthritis Ad-Com mtg held July 13, 2016 → Approval recommendation was unanimous → FDA Ad com determined GP 2015 highly similar to Enbrel → Sandoz bridging data to EU use was sufficient according to FDA Ad Com → Sandoz also provided extensive data package to support extrapolation for all Enbrel indications → Usually 2 mo after AdCom, FDA can approve (Sept 2016) → 180 days of notice means Q expected launch….Contentious litigation ongoing → 50% chance of Q launch (or years later if Amgen wins litigation)
(7) Adalimumab (ABP-501) – Arthritis Ad Com held July 12, 2016 → Vote was 26 – 0 (unanimous approval) → Ad Com recognized that small glycan differences are not clinically relevant and that the core of biosimilarity is a non-clinical determination → Abbvie will probably wait for approval and then litigate, litigate and litigate some more (including the FDA). → BsUFA date 9/25/2016 → Contentious litigation ongoing → possible launch by Q (50% chance), that is if Amgen wins litigation with AbbVie…years later otherwise
(8) Infliximab (SB 2) – second infliximab filed May 2016 →BSUFA date (10 mo) Feb 2017 → 180 days notice pursuant to Amgen/Apotex ruling = Sept potential launch *

37. US Future Market?
Remove?

38. Education Utilizing Published Vizient Material

39. Biosimilars Resources

40. The focus of pharmacy is ever changing…
Specialty Pharmacy
Regulatory impact
DSCSA
USP 797
USP 800
340B Audit Activity
Medical Marijuana
Pharmacogenomics
Drug Shortages
Ongoing Drug price increases
Biosimilars

41. The focus of pharmacy is ever changing…
Specialty Pharmacy
Regulatory impact
DSCSA
USP 797
USP 800
340B Audit Activity
Medical Marijuana
Pharmacogenomics
Drug Shortages
Ongoing Drug price increases
Biosimilars

42. PHARMACOGENOMIC TESTING
Better Understand Appropriate Drug Choices
Safe Medication Management Protocols
Minimize Side Effects
Reduce The Risk Of Drug-to-Drug Interactions
Help Reduce Medical Costs

43. Importance of Pharmacogenomics
“At least a third of the money that is spent on prescription drugs is wasted…more than $100 billion per year…because a substantial proportion of patients are prescribed medications that are, at an individual level, either ineffective or dangerous.”

44. Why pharmacogenomic testing?
Patient group
Drug toxic but beneficial
Drug toxic but NOT beneficial
Same diagnosis, same prescription
Drug NOT toxic and NOT beneficial
Drug NOT toxic and beneficial

45. When performing pharmacogenomic Testing on only 7 genes
86%

46. Pharmacogenomics Test Sample
Testing permits clinicians to predict which specific therapy will work best for each individual based on their genetic makeup.
Possible results in improvement of care
Speed to positive outcomes
Minimizing side effects.
Cost reduction by using best agent first, reducing drug cost and length of stay
Sample from Admera Health PGxOne™ Plus report

47. What is the cost?
There are many implementation and maintenance costs to consider, however there are also savings to consider!
Increased staffing to manage the entire process
Laboratory costs approx $1000/23 gene panel
EMR build and maintenance
Legal considerations
Reduce potential adverse reactions
Avoid overutilization of medications
Improved outcomes or decreased length of stay

48. RxOPs Benchmarking Study
Purpose Enable pharmacy directors and staff to identify best practices, reduce waste and maximize productivity through review of actionable, repeatable metrics with their peers.
Staffing
Productivity
Inventory Control
Operations
Distribution Logistics
Clinical/ Quality
Technology
Annual Benchmarking Report**
Desired Outcome
Provide a report set inclusive of easily understood and director-validated pharmacy operational measurements to benchmark in the areas of:
30 health systems submitted for pilot year. Outstanding response!
**Including productivity measures collected in PROSPECT

49. CHA and Vizient Advocacy Efforts
Senate Committee on Aging – Met with the committee and shared examples of pediatric specific hits due to acquisition
340B Advocacy – worked with our advocacy team to elaborate on the Pediatric specific concerns regarding the program
Working with the Campaign for Sustainable RX pricing group, which is making fostering dialogue to support a balance between acquisition and innovation, we are representing the pediatric interests within the group

50. Policy Actions Related Drug Pricing
Hearings 
House Committee on Oversight and Government Reform Hearings
Senate H.E.L. P Committee Hearing on Generics
Senate Special Committee on Aging Hearings and Meeting
Policy Efforts
Collaborate with the Healthcare Supply Chain Association in garnering support for legislation that would increase competition in the generic market
Create an internal 340B & Drug Pricing Work Group 
Respond to GAO requests
Hearings:
Over the past few months there have several drug price hearings held in both the House & Senate. Most notably was the House Committee on Oversight and Government Reform hearing where leaders from Valeant and Turing Pharmaceuticals were forced to testify. There was a lot media coverage of this hearing.
On the Senate side, a lot of the focus has been on generic drugs and drugs that have been acquired by a new company and then marked up the price. The Senate Committee on Health, Education, Labor and Pensions is working on lot of their Healthier Innovation package which made include polices related to drug development and pricing.
Prior to the Senate Special Committee on Aging Hearing, the Children’s Hospital Association was asked to meet with the committee staff. During this meeting CHA staff provide examples of pediatric specific hits due to acquisition.
Policy:
As member of the Healthcare Supply Chain Association , CHA is supportive of measures that look to increase competition in the generic market. Most of the efforts have focused on the Senate. As the Senate continues to examine drug pricing, we are hopeful that legislation aimed at increasing competition will be passed.
It is important to note that there are several bills that have been introduced that look at giving vouchers to companies whose drug meets certain standards. There is a lot of debate around the effectiveness of these vouchers and if they are the solution in promoting new drug development. As many know, these vouchers are sold for a lot money. In addition, the FDA has stated that these vouchers adversely affects the agency's ability to set its public health priorities by requiring FDA to provide priority reviews of new drug applications that would not otherwise qualify if they do not treat a serious condition or provide a significant improvement in safety or effectiveness.
In addition, the association was interviewed by the Government Accountability Office on issues pertaining to the pediatric rare disease voucher and drug shortages.

51. Policy Actions Related to 340B
Administrative Action 
“Omnibus guidance”
Regulation addressing 340B ceiling price
Regulation addressing dispute resolution
Congressional Action
Hearing on 340B in March 2015
Multiple government reports on 340B (GAO, OIG)
340B Hill Meetings with House and Senate Offices
Administrative Action
In August, HRSA released their proposed guidance. The guidance addresses hospital eligibility, recertification, eligible patients and the group purchasing organization exclusion.
In June, HRSA released a proposed rule addressing the ceiling price and the imposition of civil monetary penalties (CMPs) on manufacturers under the 340B program. CHA joined with other 340B covered entities outlining positive areas of the proposed rule and areas that could use further clarification.
We also anticipate a draft regulation addressing dispute resolution either later this year or early next year.
Congressional Action
The House Energy and Commerce Committee held a hearing on 340B in March of Overall the hearing was pretty balanced. It was clear that some members support the program and some feel that changes need to be made. The hearing witnesses included representatives from HRSA, OIG, and GAO.
During the markup of the 21st Century Cures package, 340b draft language was floated around by committee staff. The draft language looked at changing the patient definition, requiring audits for high volume entities, and requiring additional reporting requirements.
Multiple Reports on 340B
This past summer the Government Accountability Office released a report that found in both 2008 and 2012, per beneficiary Medicare Part B drug spending, including oncology drug spending, was substantially higher at hospitals utilizing the 340B discount than other hospitals. Some 340B covered entities have questioned how GAO came up with the results and that the findings deserve additional exploration. Children’s hospitals were not included in the study.
340B Hills Visits
At the beginning of 2016, CHA staff organized a handful of hill visits where we shared our concerns around the HRSA guidance.

52. Vizient Advocacy -Drug Pricing Practices
In 2014, led awareness efforts with the Healthcare Supply Chain Association (HSCA) and by responding to Congressional requests for information about percentage increases of key drugs
That information was used in the first hearings on the issue
Have taken the most vocal position in the industry on the price increase due to changing distribution channels (Genentech).
Have met with multiple congressional staffers in DC 6 times over the past year to raise awareness and education re: price spikes
Through HSCA, we have also been instrumental in drafting proposed legislation that would allow expedited review of new generic entrants into the market, increase competition among manufacturers and support quality metrics for manufacturers
Through these efforts to Congress/FDA, we hope to urge change that will ultimately lead to more affordable drugs

53. Action and outcome
Partner with your Director of Pharmacy to develop and support cost management strategies related to drugs.
Review current drug utilization and drug budget forecast to identify areas of focus
Discuss products and specific variables influencing your hospital’s drug costs
Work with Pharmacy and Supply Chain leaders to create a targeted, multipronged plan for cost containment strategies that may include:
Inventory management
Interdisciplinary teams
Clinical pharmacy services
Adoption of new technologies producing increased return of investment for costs and patient care

54. Questions?