Government Opinion Paves the Way for Reversal of Drug Company Refusals to Provide 340B Discounts

by Admin | January 8, 2021 4:15 pm

Jan. 8, 2021– While many of us were preparing for an untraditional New Year’s Eve celebration, the federal government made a vitally important announcement about 340B. The administration unequivocally stated that drug companies denying 340B discounts to hospitals, health centers, and clinics that partner with community pharmacies are in violation of federal law.

In an advisory opinion[1], the U.S. Department of Health & Human Services’ (HHS) top lawyer found no legal basis for manufacturers’ unilateral actions to deny discounts to providers on drugs dispensed at community pharmacies. In the past six months, six manufacturers – Eli Lilly, AstraZeneca, Sanofi, Novartis, United Therapeutics, and Novo Nordisk – have either cut off discounts to 340B covered entities or threatened to do so if these providers do not share reams of patient data with them. The manufacturers claim they are guarding against paying multiple discounts on the same drug and that they are squarely within the boundaries of the 340B statute.

But in his Dec. 30 opinion, HHS General Counsel Robert Charrow strongly disagreed. “[To] the extent contract pharmacies are acting as agents of a covered entity, a drug manufacturer in the 340B Program is obligated to deliver its covered outpatient drugs to those contract pharmacies and to charge the covered entity no more than the 340B ceiling price for those drugs,” he stated.

In a press release[2] accompanying the opinion, HHS said: “Drug manufacturers must provide 340B discounts when a contract pharmacy is acting as an agent of a covered entity, providing services on behalf of the covered entity.” The release went on to note: “Although advisory opinions do not carry the force of law, they set out the agency’s current views on issues. Those views may be reflected in the various regulatory, enforcement, and oversight powers the federal government has to run the 340B Program.”

340B Health and other provider organizations applauded the government for its action and urged an end to the drug company practices. “The important work of repairing the damage done to these hospitals must begin as quickly as possible,” 340B Health President and CEO Maureen Testoni said in a statement[3]. “The actions of these drug makers have deprived safety net providers of vitally needed resources as they battle the COVID-19 pandemic.”

What Comes Next?

Despite the advisory opinion, some of the manufacturers that have cut off 340B pricing through community pharmacies quickly made it clear that they believe their policies comply with all applicable legal requirements.. Both Lilly and Sanofi made public statements indicating that they disagree with the government’s opinion, and no manufacturers have yet announced plans to change their policies. Novo Nordisk, one of the nation’s major manufacturers of insulin and other diabetes products, started denying contract pharmacy discounts on Jan. 1, as the company previously said it would do.

So, while the advisory opinion marks an important milestone, the process of restoring 340B to its legal foundations is not over. The next important steps involve several possible routes, including:

• HRSA Enforcement: As the HHS press release notes, the federal government – specifically the Health Resources & Services Administration (HRSA) – has the responsibility to enforce the 340B statute. HRSA has the authority to direct the manufacturers to provide 340B discounts on their drugs when dispensed through community pharmacies and to repay 340B providers for the lost discounts. 340B Health and others have been urging the agency to take these steps since the controversy began. HRSA could follow up the advisory opinion with letters to specific manufacturers ordering them to cease their unlawful actions.

• Monetary Penalties: Under a 2010 law, HHS has the authority to impose civil monetary penalties on any drug company that “knowingly and intentionally” overcharge providers for drugs. The specific agency that can impose those penalties is the HHS Office of Inspector General (OIG). HHS could refer some or all the companies that are in violation if the law to the OIG, and the opinion could help support levying such penalties, especially if the companies continue denying 340B discounts despite issuance of the opinion.

• Administrative Panels: Absent specific enforcement action by HHS against the manufacturers, affected 340B hospitals eventually may try to challenge the overcharges using a new administrative dispute resolution (ADR) process that the administration approved for the 340B program last month. But the ADR process, which is designed to resolve 340B disagreements between covered entities and drug companies, could take months to set up, implement, and navigate. 340B Health does not believe this is the appropriate process for resolving disputes in this case, given that the dispute affects every covered entity and that multiple manufacturers and HHS’s top lawyer already have opined on the applicable law. We hold that HRSA should take enforcement action immediately.

• Litigation: 340B Health, joined by five national organizations representing hospitals and pharmacists and three 340B hospitals, filed a federal lawsuit[4] in December requesting that the court order HHS to enforce the 340B statute and stop the drug company actions. That litigation remains pending before the court, and the first hearing in that case has been scheduled for Feb. 23.

Hopes for the New Administration

Of course, all of this is happening as we prepare for a new president and his administration to take office on Jan. 20. While President-elect Joe Biden has not taken a public stance on the 340B controversy, his nominee to serve as HHS secretary has. California Attorney General Xavier Becerra – Biden’s pick for the top health job – led a group of state attorneys general in sending a letter[5] to the current HHS secretary calling on the department to stop the manufacturers.

While there will be more twists and turns in this dispute over 340B, hospitals remain hopeful that they will prevail. Legal experts have been pointing to the strong and direct language Charrow used in his opinion in place of the usual legalese. In rebutting manufacturers’ claims that community pharmacies are not explicitly authorized in the 340B statute, Charrow wryly noted that “contract pharmacy arrangements have been utilized, and honored by manufacturers, since 1996 and earlier.” And in what is the most-quoted sentence from his opinion: “The situs of delivery, be it the lunar surface, low-earth orbit, or a neighborhood pharmacy, is irrelevant.”

Source URL: https://340binformed.org/2021/01/government-opinion-paves-the-way-for-reversal-of-drug-company-refusals-to-provide-340b-discounts/

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