Manufacturers Create Chaos for the 340B Program and other updates for Grantees
By: Kristin Fox-Smith, 340B ACE and Visante Senior Vice President, and William Wood, RPh, Visante Senior Director/340B Specialist
Over the last several months, there have been numerous challenges for all types of 340B Program Covered Entities (CEs), including HRSA recognized federal grantees and specialized clinics (“Grantees”). Creating the greatest concerns among Grantees are the actions taken by several drug manufacturers. In this installment of Tips for Grantees, we would like to highlight recent developments and provide helpful insight for Grantees. (Please see our article from last August for more details about manufacturer actions).
Several pharmaceutical manufacturers have exempted grantees from their contract pharmacy restrictions, including:
- Boehringer Ingelheim (BI) Pharmaceuticals states The new policy does not apply to non-hospital covered entities.
- Novartis policy states The policy only applies to hospitals
- Novo Nordisk policy states The policy does not apply to any non-hospital covered entities.
- Sanofi’s policy is somewhat confusing. Sanofi states its policy only applies to the following covered entity types: consolidated health center programs, critical access hospitals, disproportionate share hospitals, rural referral centers, and sole community hospitals.
An important consideration is: Why single out only specific category of Grantees?
U.S. Department of Health and Human Services (HHS) Actions
The following letter sent to acting HHS Secretary Cochran on February 26, 2021, and signed by more than 200 members of the House of Representatives, stated, “As you know, Congress enacted the 340B Drug Pricing Program in 1992 following the creation of the Medicaid Drug Rebate Program. In order for their drugs to be covered by Medicaid, manufacturers are required to offer discounts to certain public and nonprofit health care organizations known as covered entities, including Federally Qualified Health Centers, Ryan White HIV/AIDS Clinics, Medicare/Medicaid Disproportionate Share hospitals, rural hospitals, and children’s hospitals. According to the legislative history, Congress’s intent in creating the discount program was to “stretch scarce federal resources to reach more eligible patients and provide more comprehensive services.” The 340B statute requires drug manufacturers to “offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price.” There are no provisions in the statute that allow manufacturers to set conditions or otherwise impede a provider’s ability to access 340B discounts. The Health Resources and Services Administration (HRSA), which oversees the program, has indicated on multiple occasions, dating back to the early years of the program, that the 340B statute requires manufacturers to provide 340B discounts to covered entities when covered entities purchase drugs to be dispensed through contract pharmacies on a covered entity’s behalf.”
There are many grantees who cannot operate their own pharmacy and must rely on contract pharmacies to provide these services. Indeed, the only benefit of 340B participation realized by many grantees is contract pharmacy services.
The manufacturers base their positions on the fact that the 340B statute does not specifically address drug distribution by contract pharmacies. While they may be technically correct, the statute does clearly require manufacturers to provide drugs at a price not to exceed the ceiling price (340B price) as stated in the following statute language: Section 340B of the PHSA, entitled “Limitation on prices of drugs purchased by covered entities,” states, in relevant part, that “[t]he Secretary shall enter into an agreement with each manufacturer of covered outpatient drugs under which the amount required to be paid . . . to the manufacturer for covered outpatient drugs . . . purchased by a covered entity . . . does not exceed [the ceiling price].”
Since the drugs are purchased by the covered entities, and not by the contract pharmacies, the statutory language seems quite clear.
This seems to ask another question: If the manufacturers are correct, why did they honor contract pharmacy pricing for more than 25 years, in essence recognizing them and validating them as legitimate methods of distribution of 340B drugs?
Many associations and organizations representing covered entities have worked to address drug manufacturers’ policies. Most notably, three hospitals and five professional associations including the American Hospital Association, 340B Health and the American Society of Health-System Pharmacists filed a federal lawsuit against HHS and submitted a memo in support of a permanent injunction against manufacturer policies in December of last year.
Legal and Legislative Actions
In a recent H.R. Appropriations Committee meeting, the committee praised HRSA for initiating enforcement actions against the six drug companies that have stopped offering discounted drugs through contract pharmacy arrangements. It urges HRSA “to continue to use its authority and any available measures, including the imposition of civil penalties, where appropriate, to hold those drug manufacturers in violation of the law directly accountable.” The committee says it will ask HRSA for a report on the actions it has taken to safeguard access to statutory discounts within 120 days of Congress approving the agency’s budget.
Government attorneys representing HHS are presenting federal courts with more than 6,000 pages of complaints from more than 150 covered entities as a key element of the evidence that drug company restrictions against the use of 340B contract pharmacies are unlawful. The documentation from hospitals and other covered entities that have been denied 340B pricing through their contract pharmacy arrangements is part of what is known as the administrative record in six pending lawsuits from drug companies challenging HHS’s authority to enforce the requirement to provide 340B discounts for drugs dispensed through contract pharmacies.
Four insulin manufacturers conspired to cease 340B pricing on drugs shipped to contract pharmacies last year after the failure of a more than $7 million joint lobbying push to limit 340B discounts for insulin and diabetes medicines, New York health center Mosaic Health alleges in an antitrust class action against the companies. In the suit Mosaic requests that the court certify the case as a class action on behalf of all 340B entities nationwide with contract pharmacy arrangements that have issued prescriptions for the manufacturers’ products since September 1, 2020.
340B Health and other associations have filed “friend of the court” briefs for all five of the drug company lawsuits challenging HHS’s authority on this issue. The briefs for the Eli Lilly, Sanofi, AstraZeneca, Novartis, and Novo Nordisk cases assert that the plain meaning of the 340B law requires manufacturers participating in the program to provide discounts to covered entities on eligible drugs dispensed at contract pharmacies. The filings note that May 17 enforcement letters the Health Resources & Services Administration (HRSA) sent to the companies reiterate longstanding HHS policy in this area. A sixth company, United Therapeutics, also announced pricing restrictions through contract pharmacy arrangements but has not sued the government over the matter.
The above statements concerning legal and/or legislative actions against the manufacturers are illustrative of many of the actions taken so far. There are others and the status changes so quickly that it is not possible to include all of these actions in this article.
Take Away: Stay tuned! Things are happening on an almost daily basis.
Additional Recent HRSA Trends
A Federally Qualified Health Center went to court in 2019 to challenge a diversion finding. Within two weeks of the challenge, HRSA chose to vacate the diversion finding rather than defend it. As a result of this action in September 2019, HRSA announced that it was evaluating its enforcement authority. Subsequently, HRSA “paused” release of new audit reports from June 2019 – October 2019. However, the audits continued. Following HRAS’s review of its enforcement authority, it renewed its request for regulatory authority. This request was denied by the U.S. House Appropriations Committee.
At the 340B Coalition 2020 Summer Virtual Conference, Admiral Krista Pedley, Director of HRSA’s Office of Pharmacy Affairs (OPA) stated: “HRSA’s enforcement ability is limited, as guidance does not provide HRSA appropriate enforcement capability.“ This statement came shortly after the U.S. House Appropriations Committee turned down HRSA’s request to give it broad regulatory authority over the 340B program. Since HRSA’s evaluation of its limited enforcement authority, audits have focused on only those areas governed by statute.
As a result of HRSA’s limited enforcement authority, audit report cover letters now include a statement indicating that any findings are based on the agency’s interpretation of the statute and covered entities that decide to challenge the findings should submit “any applicable, alternative interpretation of the 340B statute”
Take Away: Following HRSA’s evaluation of its enforcement authority, audits have focused on only those areas governed by statute:
- Covered Entity eligibility
- Maintaining the accuracy of the OPAIS database.
- Duplicate discount prevention
- Auditable records
As always, Visante is fully prepared to assist your organization in navigating these changes. We are here to help you successfully manage all elements of your 340B program and reach your compliance goals. Contact us to talk more about how we can help!
In 2020 Visante initiated a new series focusing on the specific needs of grantees and specialty clinics. We named it “Key Takeaways for Grantees.”
The series consisted of the following articles:
Published date: September 24, 2020
Published date: November 18, 2020
Published date: January 26, 2021