Layoffs, budget cuts hit AIDS clinics
Drug industry's revolt against 340B program threatens prevention campaign and other vital services
While the health care sector was adding another 55,000 jobs in December, Chicago’s Howard Brown Health Center, which operates 11 clinics to serve the city’s LBGTQ+ community, dismissed 61 health educators, counselors, Spanish translators and other support staff.
“These people are essential for our providing services to the community. We can’t do our jobs without them,” said Dan Rowell, a 34-year-old registered nurse and member of the Illinois Nurses Association.
He used his lunch hour last Thursday to join the picket lines outside a Howard Brown clinic on the city’s north side, part of a three-day walkout by support personnel protesting the layoffs. Management blamed the cuts on a $12 million budget shortfall caused by declining revenue from the federal government’s 340B program, which imposes a hidden tax on drug firms to subsidize hospitals and clinics serving the poor and uninsured.
Meanwhile, most HIV/AIDS clinics across the country are bracing for large cutbacks in personnel in 2023 due to cuts in 340B reimbursement. New York state’s network of clinics serving LBGTQ+ clientele is facing an estimated $100 million shortfall this spring. In Nashville, where numerous for-profit health care chains are headquartered, the Music City PrEP (Pre-Exposure Prophylaxis) Clinic is considering a $50 million budget cut this year.
“We’re sinking and we have nothing left to lose by going public,” said Richard MacKinnon, executive director of a clinic that tries to keep a low-profile in that conservative state. “We’ve taken Tennessee from the bottom five to the top five in HIV prevention. The governor and the state did nothing different. The only thing different is that our clinic in Nashville took advantage of the 340B program. It’s a feather in their cap, but it is also theirs to lose.”
The cutbacks at federally-qualified health centers serving a largely LBGTQ+ clientele is a direct result of the drug industry-wide backlash against 340B, which was set up by Congress in 1992 to channel additional support to health care safety net institutions. Under 340B, pharmaceutical firms are required to sell drugs at sharply discounted prices to hospitals and clinics whose clientele are largely poor or uninsured. In turn, those providers are allowed to bill insurers (including Medicare) at market rates as long as the spread is used to offer free medicine or other services to their under- or uninsured clientele.
The program has been a huge boon to the AIDS treatment sector over the past decade. Surging sales under 340B Gilead’s Truvada and its follow-on drug Descovy, the once-a-day PrEP pills that prevent HIV transmission, have been used to finance AIDS clinics’ rapid growth in outreach, education and counseling. The initiative is crucial to the government’s goal of reducing HIV transmission by 90% by 2030.
Big Pharma’s anti-340B offensive
But now, the entire initiative is at risk because Gilead and the broader pharmaceutical industry is taking radical steps to sharply curtail use of 340B. The drug industry revolt is driven in part by the rapid expansion of the program, which is administered by HHS’ Health Services and Resource Administration (HRSA).
The program added 3,000 hospitals and clinics between 2010 and 2020, bringing the total to nearly 12,700 provider institutions, according to the Government Accountability Office. One pro-industry observer estimated the program generated nearly $50 billion in additional provider revenue in 2021, with 87% flowing to hospitals. (That estimate seems high to me since he used list prices, not actual commercial and government program reimbursement rates, to calculate the spread. Even if properly adjusted, it would still be a big number.)
The Pharmaceutical Research and Manufacturers Association (PhRMA) has launched a massive public relations campaign attacking the program, claiming widespread abuse. “The 340B program has strayed far from its safety net purpose,” the trade group says on its website. “Instead, it has become less about patients and more about boosting the bottom lines of hospitals and for-profit pharmacies.”
And there as least one major example that the company cites on its website. Last October, the New York Times exposed how Virginia-based Bon Secours Mercy Health funneled 340B savings from an inner city Richmond hospital that was closing vital services to hospitals in much wealthier neighborhoods, even as it was declaring hundreds of millions of dollars in annual surpluses.
The p.r. offensive has been accompanied by what amounts to mass civil disobedience on the part of the drug industry. Since 2019, at least 17 large drug firms have stopped providing discounted drugs to contract pharmacies (including Walgreen’s, CVS and other large chains) that fill prescriptions for 340B providers.
When HRSA ordered the firms to reinstitute the discounts, nearly all sued the agency seeking to overturn the order. HRSA has filed at least a half dozen lawsuits of its own seeking restitution.
“The drug company strategy is that it’s cheaper to litigate than to offer the discounts,” said Bruce Siegel, president of America’s Essential Hospitals, which represents over 300 large urban hospitals serving mostly poor patients. “We’ve heard from a number of safety net hospitals who are incurring multi-million dollar losses.”
Systemic failure
So what we have here is a classic American health care story: A program meant to help people with inadequate insurance coverage has been turned into a full employment act for health care lawyers. Meanwhile, drug companies which refuse to follow the law have triggered layoffs among the underpaid support personnel who are crucial to advancing important public health campaigns.
A similar story is playing out in the nation’s prisons. Last month, Stat’s Nicholas Florko reported the results of an investigation that found over a thousand inmates had died from the complications of chronic hepatitis C infection in the six years since Gilead’s Sovaldi, a breakthrough drug that cures the disease, came on the market. Wrote Florko:
For those who run the prison systems, there is a reason: Politicians and state corrections officials say the issue is money. Gilead drew extensive criticism for its initial decision to charge $84,000 for the medicine; even now, after an unprecedented price drop, treatments for hepatitis C cost roughly $24,000 per course of treatment. Missouri estimated in 2019, for example, that it would cost the prison system $90 million to treat every incarcerated person with hepatitis C — nearly 70% percent of its medical budget.
Of course, these dire scenarios could be avoided if drugs were reasonably priced and the U.S. had a universal health insurance program that didn’t force its less well-off citizens to rely on charity or special programs for necessary drugs. Nor would clinics serving poor clientele have to rely on backdoor taxes on drug companies if Congress had adequately funded the social services necessary for their public health campaigns like HIV prevention to succeed.
The U.S. government scores an F on all counts. But rather than addressing the structural problems of high drug prices and underfunded services, the hospitals and clinics that serve the poor wind up fighting to preserve their hidden subsidy, which can lead to its own abuses.
The inducement for abuse lies in the high market price of the drugs. Under 340B, the appearance of a generic, usually considered a good thing because it saves consumers and payers money, directly threatens the clinic and hospital revenue generated by the program. This perverse incentive as it applies to the HIV/AIDS arena was laid out in The New England Journal of Medicine perspective last June, two of whose three authors received research grants from Gilead. They pointed out that Truvada, which became available as a generic in 2021, is “safe and highly effective for the overwhelming majority of people at risk for HIV infection.” Yet:
There has not been a groundswell of physicians and patients switching to or initiating generic PrEP. Aggressive pharmaceutical marketing of Descovy as safer than Truvada undercut generic TDF/FTC (the generic name’s acronym) even before the first generic option hit the market. Once generics became available, 340B clinics had incentives to prescribe brand-name PrEP medications to fund HIV-prevention and other services. When these factors are taken together, it is not surprising that 45% of PrEP users in the United States were taking Descovy in 2021 — with costs to the health care system that far exceed the clinical benefits.
My own interviews for this piece confirmed this bias. “Descovy is better than Truvada,” said MacKinnon of the Music City PrEP Clinic. “It’s not for me to be able to explain why. It’s what has been handed down to us. It has fewer complications.”
The clinical trials did show that Descovy was accompanied by fewer side effects (less decrease in bone density; less deterioration in kidney function) compared to Truvada. But there were no significant health outcome differences between the two groups. Meanwhile, patients on Descovy had greater weight gain and elevated cholesterol levels. From a medical as well as financial perspective, it makes most sense to start all PrEP users on generic Truvada.
But with Truvada having gone generic, Gilead has intensified its push to switch patients to Descovy by touting its superior side effect profile. It has stepped up use of its trademarked “Advancing Access” program, which provides free drugs to uninsured patients, even as it has reduced its payments to contract pharmacies like Walgreens and CVS to the cost of the drug plus a dispensing and overhead fee.
The company also launched a “contract pharmacy integrity initiative” to root out what it claims is fraud in the 340B program as applied to its hepatitis C drugs, Sovaldi and Harvoni. “The 340B program has grown rapidly in recent years, and a well-documented lack of program oversight has elevated concerns among stakeholders about the program’s integrity and sustainability,” the company said in a press release. “Over time, Gilead has seen duplicate discounts and diversion of its hepatitis C products distributed through contract pharmacies with increased frequency. This means multiple discounts have been improperly applied to the same single bottle of Gilead medicine, and/or discounts are being claimed on bottles dispensed to individuals who are not patients of a 340B covered entity.”
A coalition of HIV/AIDS clinics supported by the Ryan White act called the changes financially devastating. “Our organization relies on 340B savings generated through the Advancing Access program to provide necessary healthcare and case management services to our patients,” said Shannon Stephenson, CEO Cempa Community Care in Chattanooga and president of Ryan White Clinics for 340B Access. “The proposed change comes at a critical time when we are fighting a pandemic and facing attacks from third-party payers, pharmacy benefit managers, and other manufacturers attempting to usurp the benefits of the 340B program that Congress intended to reside with the safety-net provider.”
When the Los Angeles-based AIDS Healthcare Foundation last October on World Aids Day charged Gilead with “refusing to offer the 340B discount price for HIV drugs to providers who use contract pharmacies,” the company told Fierce Healthcare its "contract pharmacy integrity initiative does not apply to Gilead’s HIV medicines."
A new approach is needed
I agree with the NEJM perspective writers. For the U.S. to reach its goal of reducing HIV transmission by 90% by 2030, it “will require an overhaul of the HIV-prevention financing infrastructure.”
Their recommendation? They borrowed liberally from a recent proposal from former Maryland Health Commissioner Joshua Sharfstein and colleagues at the Johns Hopkins Bloomberg School of Public Health. In conclusion, allow me to quote their perspective at length:
One approach is to establish a national PrEP program, an idea espoused by President Biden in his budget request for fiscal year 2023. As envisioned in a recent proposal from a team at Johns Hopkins University, the federal government could negotiate fair prices for PrEP medications and laboratory services for uninsured people or Medicaid beneficiaries and could build and support a broad network of PrEP providers. Access to PrEP medications would be based on clinical evidence rather than the potential for revenue generation. Community-based organizations, many of which are not 340B entities and may not have a clinician on site, could be paired with telehealth providers to expand access. Finally, the federal government could boost HIV-prevention funding to safety-net clinics to increase PrEP prescribing capacity while reducing dependence on 340B revenue.