An overview of the events of 2021 by Kristin Fox-Smith, Senior V.P. and William Wood, Senior Director
Our predictions for the 340B program for 2021 began with this statement: Without question, the greatest issue facing 340B Covered Entities (CEs) in the coming year is the threat faced by the actions of several manufacturers who plan to restrict shipment of 340B purchased drugs to contract pharmacies.
(Readers may wish to review our August 21, 2020, blog for greater detail. “Manufacturers Create Chaos For the 340B Program,” written by Kristin Fox-Smith (Senior Vice President), Douglas E. Miller (PharmD, Senior Director) and William Wood (RPh, Senior Director).
Unfortunately, this issue also looks to be the most significant issue in 2022
The first manufacturers to announce the restrictions were Astra Zeneca and Eli Lilly.
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. On September 1, 2020, Lilly followed this policy by announcing further restrictions to contract pharmacy purchases. In its letter of September 1 Lilly made the following statement: Effective September 1, 2020, Lilly is limiting distribution of all 340B ceiling priced product directly to covered entities and their child sites only. Covered entities will not be able to purchase Eli Lilly and Company products at the 340B ceiling price for shipment to a contract pharmacy.
In the same document Lilly announced a “Special Exception for Insulins: Contract Pharmacies that Pass on 340B Discounts.” Lilly claimed that “Consistent with the spirit of Executive Order 13,937, “Access to Affordable Life-saving Medications” (July 24, 2020), Lilly will grant an exception to the limited distribution program described above for Lilly insulin products subject to a 340B covered entity and their contract pharmacies.” Lilly then stated, “Lilly shares the goal of ensuring that 340B patients directly benefit from the significant 340B discounts on Lilly insulins.”
Astra Zeneca soon followed Lilly with a letter to covered entities stating:
Dear Valued Partner, AstraZeneca to date has processed chargebacks associated with Contract Pharmacy arrangements consistent with the approach proposed in the Health Resources and Services Administration’s (“HRSA”) April 2010 guidance. Beginning on October 1, 2020, AstraZeneca plans to adjust this approach such that AstraZeneca 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. To implement this new approach, AstraZeneca will stop processing 340B chargebacks for all 340B Contract Pharmacy arrangements effective October 1, 2020. Any 340B Covered Entity that does not have an outpatient, on-site dispensing pharmacy should contact AstraZeneca to arrange for a contract pharmacy of its choice to be eligible to receive 340B pricing on behalf of the Covered Entity. To initiate this process, please contact Membership@AstraZeneca.com. 340B Pricing for Contract Pharmacies will be honored on all invoices, consistent with AstraZeneca’s historic approach, through September 30, 2020. For additional information or questions, please contact your AstraZeneca Account Director.
Following the actions of Astra Zeneca and Eli Lilly several other manufacturers announced similar restrictions. These manufacturers include:
Boehringer Ingelheim (BI) Pharmaceuticals
And just this week UCB, Inc. (UCB), a Belgium-based drug company
These manufacturer actions took place shortly after HRSA stated, “The 2010 contract pharmacy guidance is not legally enforceable and its authority to enforce certain 340B policies contained in guidance is limited unless there is a clear violation of the 340B statute.” Without question, this statement emboldened the manufacturers to take their actions. It appears that the manufacturers are relying on this statement by PhRMA: “We agree with this Administration’s recent statements regarding the rule of law and status of agency guidance. Unlike laws and regulations, agency guidance cannot impose any binding requirements on the public and lack the force and effect of law.”
As we see, the manufacturers are basing their actions on the fact that the 340B statute makes no statements about contract pharmacies. Although they are technically correct, there is no mention anywhere in the statute about contract pharmacies. Actually, there is no mention about how 340B purchased drugs are to be distributed.
Yet the government, through HRSA, states that the statute clearly requires manufacturers to charge CEs a price that does not exceed the ceiling (340B) price. This is stated in Section 340B of the PHSA, entitled “Limitation on prices of drugs purchased by covered entities,” which 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].” 42 U.S.C. § 256b(a)
So far, the manufacturers have shown no sign of giving in. As they continue, what have the affected CEs done and more importantly what has the federal government done?
Advocacy efforts by numerous organizations include:
- An Overcharge Reporting Template
- A hospital template letter to HRSA reporting Lilly overcharges
- An e-mail template to Congress to report manufacturer actions
- An Apexus form to report manufacturer actions
- An Op-ed template for opinion piece submission to local newspapers
- Letters to manufacturers and their responses
- Numerous letters to members of Congress and several Attorneys General
- Many sessions devoted to the issue at the 2021 340B Coalition Conference
Community Voices for 340B has sponsored Opinion Leader Forums in multiple states
Ryan White Clinics for 340B (RWC-340B), among other efforts, issued the following press release: Ryan White Clinics Call on Congress, HHS, & HRSA to Stop Drug Manufacturers from Undermining Our Use of the 340B Program to Care for People with HIV
Other advocacy efforts include:
A bipartisan letter on February 26, 2021, from more than 100 members of the U.S. House of Representatives urging Acting HHS Secretary Cochran to:
- Begin assessing civil monetary penalties on manufacturers that deny 340B pricing to covered entities in violation of their obligations under the 340B statute;
- Require manufacturers to refund Covered Entities the discounts they have unlawfully withheld since 2020;
- Halt, through guidance or other means, any attempt to unilaterally change 340B upfront discounts to post sale rebates; and
- Immediately seat the Administrative Dispute Resolution Panel to begin processing disputes within the program.
Government actions and efforts:
In December, 2020, the HHS General Counsel issued an Advisory Opinion stating that drug manufacturers must provide 340B discounts for drugs dispensed through hospitals’ eligible contract pharmacies. However, while HHS indicated it plans to use a new administrative dispute resolution (ADR) process to adjudicate the claims, few CEs view this as a reasonable solution.
HHS withdrew this advisory opinion on June 21, 2021, in response to a lawsuit filed by AstraZeneca, Eli Lilly, Sanofi and Novo Nordisk arguing that the opinion didn’t adhere to federal law and that drugmakers “might not get a fair hearing if they were to file a complaint.” HHS stated that it withdrew the opinion “in the interest of avoiding confusion and unnecessary litigation.”
In April, 2020, the leaders of six major organizations representing hospitals and pharmacists sent a letter to U.S. Health and Human Services (HHS) Secretary Xavier Becerra urging him to halt the actions of the drug companies that are denying 340B discounts on prescription drugs sold to hospitals treating a large percentage of low-income urban and rural Americans.
The letter, signed by 340B Health, the American Hospital Association (AHA), the American Society for Health-System Pharmacists (ASHP), America’s Essential Hospitals (AEH), the Association of American Medical Colleges (AAMC) and the Children’s Hospital Association (CHA), asks the Secretary “to halt this detrimental and illegal conduct.”
Last fall, a group of 340B health centers affiliated with Ryan White Clinics for 340B Access (RWC-340B), and the National Association of Community Health Centers (NACHC) on behalf of its members, separately sued HHS and HRSA to compel them to publish an 340B ADR final rule that Congress had instructed HHS to finalize by September 2010.
On December 11, 2020, a lawsuit was filed in the U.S. District Court for the Northern District of California by
- THE AMERICAN HOSPITAL ASSOCIATION
- 340B HEALTH
- AMERICA’S ESSENTIAL HOSPITALS
- THE ASSOCIATION OF AMERICAN MEDICAL COLLEGES
- THE CHILDREN’S HOSPITAL ASSOCIATION
- AMERICAN SOCIETY OF HEALTH-SYSTEM PHARMACISTS
- AVERA ST. MARY’S HOSPITAL
- RIVERSIDE REGIONAL MEDICAL CENTER
- MARY’S MEDICAL CENTER
THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, 200 Independence Avenue, SW Washington, DC 20201, ALEX M. AZAR II, in his official capacity as the Secretary of Health and Human Services, 200 Independence Avenue, SW Washington, DC 20201
The lawsuit seeks, among other points:
- A declaratory judgment that Defendants’ decision that HRSA lacks the authority to require the Drug Companies to provide 340B Covered Entities with covered drugs at or below 340B ceiling prices when they dispense those drugs through contract pharmacies is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, in violation of 5 U.S.C. § 706(2)(A);
- An order directing Defendants to require the Drug Companies to provide covered outpatient drugs at or below 340B ceiling prices to Covered Entities when they dispense those drugs through contract pharmacies; and
- An order directing Defendants to require the Drug Companies to refund the Hospital Plaintiffs and the Association Plaintiffs’ members the difference between what each covered entity paid for covered outpatient drugs and the 340B ceiling price.
Several other legal actions taken by manufacturers are currently in progress:
HRSA’s statement on the Office of Pharmacy Affairs (OPA) home page is the federal government’s first about the five court rulings on 340B contract pharmacy.
HRSA’s statement on the Office of Pharmacy Affairs (OPA) home page is the federal government’s first about the five court rulings on 340B contract pharmacy.
The first court decision came on Oct. 29, 2021 in Lilly’s lawsuit against HRSA and the U.S. Health and Human Services Department (HHS). Two more came on November 5, the first in Novo Nordisk and Sanofi’s lawsuits, the second in Novartis and United Therapeutics’ lawsuits. Lilly, Sanofi, and Novo Nordisk have appealed the decisions in their cases. Novo Nordisk’s notice of appeal, like Sanofi’s, is one sentence long and does not say which parts of U.S. Chief District Judge for the District of New Jersey Freda Wolfson’s November 5 ruling it is challenging. Wolfson’s joint ruling upheld the federal government’s finding that the two companies cannot unilaterally impose restrictions on offers of 340B pricing to Covered Entities and that their policies must cease. She also, however, vacated the government’s May 17 findings that the companies owe credits or refunds to Covered Entities and face civil monetary penalties “to the extent that such determinations may depend on the number of permissible contract pharmacy arrangements under the 340B statute.” Wolfson sent the May 17 letters back to HRSA for further consideration consistent with her ruling.
A fourth federal district judge heard arguments in AstraZeneca’s contract pharmacy lawsuit. Both sides have asked the judge to expedite his ruling.
In another recent court action, a federal court in Washington, D.C., rejected the government’s rationale for enforcement actions against Novartis and United Therapeutics. HRSA disputes the decision and is weighing its options.
From the actions taken by Covered Entities, Congress, HRSA, and the drug manufacturers it is obvious that this threat to Covered Entities is unlikely to be settled until next year.
Visante’s advice to our readers is to stay tuned and CONTINUE TO ADVOCATE.
While contract pharmacies are certainly the greatest issue faced by 340B Covered Entities in 2022, they are not the only ones.
In addition to the manufacturer actions against contract pharmacies, 340B hospitals face another year of deeply reduced Medicare drug reimbursement. The Trump administration announced that many hospitals’ Medicare Part B 2021 reimbursement for drugs bought through the 340B program will stay at the same deeply reduced rate it has been at since 2018—average sales price (ASP) minus 22.5 percent. The cuts will be made under the Medicare outpatient prospective payment (OPPS) rule.
The Supreme Court will hear arguments in a case seeking to reverse these cuts before the end of this year, and the outcome could have consequences for all providers, even those who don’t access the 340B discounted drugs. Plaintiffs, including the American Hospital Association and providers that participate in the program, are asking the high court to reverse a nearly 30 percent cut in 340B reimbursements the Centers for Medicare and Medicaid Services initiated during President Donald Trump’s administration and continued under President Joe Biden. Oral arguments were scheduled for November 30, 2021.
There have also been several state actions and proposals that affect the 340B Program:
Over the past several years, states have shown an increased interest in policies impacting Medicaid MCO reimbursement for 340B drugs, such as transferring the Medicaid pharmacy benefit from Medicaid MCOs to fee for service (FFS) or establishing a single Medicaid PBM that sets MCO reimbursement. Such policies could intentionally aim to transfer the 340B benefit to the states or could be pursued for reasons unrelated to 340B.
Pharmacy Benefit Transfers
- Entire pharmacy benefit moves from Medicaid managed care to FFS
- All 340B drugs billed to Medicaid pharmacy benefit become subject to federal AAC-based reimbursement requirement and can no longer be billed and paid based on negotiated rates with Medicaid MCOs
- Could affect CE’s ability to have contract pharmacy dispense 340B drugs to Medicaid patients, depending on state’s willingness to allow it for FFS
Recent State Action (New York):
New York’s 2021 budget included a pharmacy benefit transfer with April, 2021, effective date. 340B advocates alerted state officials about the negative impacts the policy would have on 340B providers and successfully received a 2-year delay on implementation.
340B providers continue to advocate for full reversal of the policy
Recent State Action (Ohio):
- In 2019, the Ohio legislature directed the Ohio Department of Medicaid (ODM) to select and contract with a single pharmacy benefit manager (PBM) for Ohio Medicaid MCO plans
- ODM requested interested PBMs to submit proposals by September 4, 2020
- Request for proposals requires the contractor be able to provide “functionality to apply different reimbursement logic or benefit coverage as specified by ODM including…ingredient cost and dispensing fee payments based on…340B drugs”
- CEs were concerned this could result in lower reimbursement for 340B drugs, though ODM has publicly indicated this is not their intention but, in January, Ohio enacted a law prohibiting discriminatory reimbursement of 340B drugs that applies to Medicaid MCOs
Single Medicaid PBMs
- Occurs when a state selects a single Medicaid Pharmacy Benefit Manager (PBM) that can set Medicaid MCO reimbursement
- 340B providers have expressed concerns that a single Medicaid PBM could set lower or discriminatory reimbursement rates for 340B claims
State-level Protections from Discriminatory Reimbursement
Over the last several years, some PBMs and health plans have attempted to reimburse 340B providers less than they pay non-340B providers and/or offer other discriminatory contractual terms that undermine the intent of the 340B program. No federal law protects 340B providers from discriminatory practices, but several states have passed legislation protecting CEs.
Several states have enacted laws to protect 340B providers from discriminatory reimbursement practices:
- Arkansas, Georgia, Indiana, Minnesota, Montana, North Dakota, Ohio, Oregon, South Dakota, Tennessee, Utah, West Virginia, Vermont
- Additional states have introduced similar bills
- This decision appears to make it less likely PBMs could successfully challenge 340B non-discriminatory reimbursement laws under ERISA
Other State Action on Contract Pharmacy
- Other state policymakers have taken action to support 340B providers against manufacturer’s illegal contract pharmacy policies, but Arkansas is the first (and currently only) state to attempt to protect 340B providers through legislation
- West Virginia governor sent Sept. 10, 2020, letter to then-HHS Sec. Azar asking him to use HHS’ authority to stop manufacturer attacks on 340B
- A group of 29 state attorneys general, including then-California Attorney General Xavier Becerra, sent a letter urging action by HHS against drug companies that cut off 340B pricing for drugs dispensed at contract pharmacies
- Connecticut Attorney General William Tong sent letters to Eli Lilly, AstraZeneca, Merck, Sanofi and Novartis demanding the companies not refuse 340B pricing for drugs dispensed at contract pharmacies
340B Reporting Requirements
2019: Legislatures in Ohio and Wisconsin considered including state-level 340B reporting requirements in their budgets
2020: The Vermont legislature considered a proposal to establish 340B reporting requirements
2021: The Minnesota legislature considered a bill that, if passed, would have implemented 340B reporting requirements
In summary it appears that 2022 will be at least every bit as busy as 2021 was for 340B.
Contract pharmacy issues, Part B Reimbursement reductions, increased state activities. STAY TUNED
As of the time of this article publication (December 16, 2021), Lilly announced that it will permit 340B covered entities to buy drugs for shipment to an unlimited number of contract pharmacies. This is conditioned on a requirement that covered entities agree to provide claims-level data associated with such orders. Lilly said it will use manufacturer vendor Second Sight’s 340B ESP platform to implement its new policy, and “will voluntarily honor contract pharmacy purchases for prescriptions dispensed to eligible 340B patients on or after October 29, 2021,” provided that they are submitted through Second Sight “no later than March 15, 2022.”
Lilly was the first manufacturer to deny 340B pricing on covered outpatient drugs shipped to contract pharmacies. Lilly now becomes the first manufacturer to appear to reverse its position. Will 340B CEs accept Lilly’s new position? There are still pending lawsuits that could address a manufacturer’s ability to unilaterally impose restrictions on offers of 340B pricing to covered entities.