Written by: Kristin Fox-Smith (Senior Vice President), Douglas E. Miller (PharmD, Senior Director), William Wood (RPh, Senior Director)
In recent weeks, several drug manufacturers announced plans to discontinue offering 340B drugs to contract pharmacies. These actions, in addition to plans by some manufacturers to require Covered Entities to upload contract pharmacy claims to a new and unproven vendor’s software platform, have created new challenges to 340B Covered Entities already burdened by the COVID-19 pandemic.
It comes as no surprise to those of us who have worked with the 340B program for many years that these actions began almost immediately after the Health Resources and Services Administration (HRSA) stated that HRSA’s power to enforce 340B guidance is limited.
At the recent 340B Coalition 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.
Was HRSA’s announcement that its authority is limited what the drug manufacturers have been waiting for? The following statement from the highly regarded “340B Report” seems to think so: “The wave of drug manufacturer activity all appears to trace back to HRSA’s position that it cannot enforce its 340B program guidance absent a clear violation of the 340B statute.”
The first “salvo” was fired by Merck in late June. Merck issued strongly worded “requests” that 340B Covered Entities start submitting a wide array of 340B contract pharmacy claims data as part of what the company calls a new “integrity initiative.” Part of Merck’s letter involves requests for commercial, Medicare Part D, and Medicaid managed care claims data that are beyond the scope of the 340B statute. In the letter, Merck asked Covered Entities to begin uploading contract pharmacy claims data every two weeks into a new and unproven vendor’s software platform, 340B ESP platform of Second Sight Solutions. Second Sight Solutions is a prescription drug information technology company that collects 340B contract pharmacy claims data on manufacturers’ behalf.
Although the company letter was described as a request, Merck said it might take “less collaborative, and substantially more burdensome” action against uncooperative entities. It asked entities to begin supplying the requested data by August 14.
Those of us that follow 340B closely might have heard of 340B ESP’s founder, Aaron Vandervelde. As Managing Director of Berkeley Research Group (BRG), he has written or co-written articles about the 340B program on behalf of Pharmaceutical Research and Manufacturers of America (PhRMA). He has also done work for the drug-company-led advocacy group AIR 340B and the trade association for private practice oncologists Community Oncology Alliance (COA). PhRMA, AIR 340B, and COA cite Vandervelde’s research in arguments that hospitals benefit from the 340B program, but low-income and uninsured patients do not, and that the program raises the cost of cancer care.
The next drug manufacturer to announce a similar plan was Sanofi. The letter sent from Sanofi to covered entities stated: “Sanofi will require 340B covered entities to submit claims data for 340B prescriptions of Sanofi products filled through its contract pharmacies.” The letter goes on to say “340B covered entities that elect not to provide 340B claims data will no longer be eligible to place Bill To / Ship To replenishment orders for Sanofi products dispensed through a contract pharmacy.”
The letter adds, beginning October 1, entities must submit the requested data to 340B ESP, the same contractor Merck is using, every two weeks. HRSA’s only comment to date states it “is aware of Sanofi’s requests to covered entities and is working to better understand their plan.” We hope to receive updates from HRSA in the near future as it relates to these types of manufacturer changes.
Yet another drug manufacturer, Novartis, has now announced that it intends to begin collecting and analyzing 340B Covered Entities’ contract pharmacy claims data to mitigate duplicate 340B drug discounts and “ineligible rebates.” As recently as August 18, Novartis declined to address reports that it is joining Merck and Sanofi as clients of Second Sight.
In a similar policy release on August 17, AstraZeneca sent letters to 340B Covered Entities and their wholesalers informing them that, effective October 1, it “only will process 340B pricing through a single contract pharmacy site for those covered entities that do not maintain their own on-site dispensing pharmacy.” In the event a Covered Entity does not have an owned outpatient pharmacy, they will need to make a selection of only one contract pharmacy to limit their bill to/ship to arrangements.
So far HRSA’s only comment has been “We are in the process of reviewing the information.”
In addition to the above-named manufacturer actions; AstraZeneca and Eli Lilly announced restrictions to sales of their products to contract pharmacies.
Lilly took the first step when it said it would only allow contract pharmacies to get discounted units of Cialis if a 340B provider did not have an in-house pharmacy.
Following the Lilly announcement, AstraZeneca informed Covered Entities that, starting Oct. 1, it no longer will offer 340B pricing to Covered Entities with on-site outpatient pharmacies for any of its drugs dispensed through contract pharmacies.
In response to Lilly’s action, 340B advocacy organization 340B Health sent Lilly a letter stating that “we believed its policy change was contrary to the 340B statute” and requested a meeting with company officials to discuss further. Lilly declined a follow-up meeting and insisted that it is on firm legal ground in cutting off access to program discounts through contract pharmacies.
AstraZeneca said it believes the change is consistent with HRSA guidelines and operative 340B statutory provisions in a written statement.
An article published in Modern Healthcare on August 19 made the following statement: “Pharmaceutical companies appear to be testing how far they can challenge sub regulatory guidance issued by the Health Resources and Services Administration that allows 340B providers to receive discounts for working with multiple contract pharmacies.”
As we stated above, it does appear obvious that the drug manufacturers are indeed testing how far they can go in challenging HRSA’s lack of statutory enforcement authority.