May 19, 2021– The Health Resources & Services Administration (HRSA) has taken decisive action to put a stop to the actions of six drug companies that are denying 340B drug pricing program discounts for medications dispensed at community pharmacies. The action could lead to the end of a nearly year-long dispute pitting for-profit pharmaceutical companies against nonprofit safety-net hospitals, community health centers, and public health clinics.
In letters to the six companies – Eli Lilly, AstraZeneca, Novo Nordisk, Sanofi, Novartis, and United Therapeutics – HRSA Acting Administrator Diana Espinosa said their actions “have resulted in overcharges and are in direct violation of the 340B statute.” She goes on to note, “[n]othing in the 340B statute grants a manufacturer the right to place conditions on its fulfillment of its statutory obligation to offer 340B pricing on covered outpatient drugs purchased by covered entities.”
The agency told the drug makers to “immediately begin offering its covered outpatient drugs at the 340B ceiling price to covered entities through their contract pharmacy arrangements” and gave the companies until June 1 to provide the government with their plans to “restart selling, without restriction, covered outpatient drugs at the 340B price to covered entities that dispense medications through contract pharmacy arrangements.” HRSA also warned that any company continuing to refuse the 340B price to covered entities using community pharmacies may be liable for federal fines of up to $5,000 per instance of overcharging.
Months of Bipartisan Outrage
The dispute goes back to July 1, 2020, when Lilly became the first company to stop providing 340B pricing for one of its 340B-eligible drugs to safety-net providers when dispensed to their patients at community pharmacies. In September Lilly extended the denial of discounts to all its drugs, and the other five companies followed suit with their own pricing restrictions. In the months since, provider groups filed several lawsuits seeking action by the government to halt the drug companies. The unilateral drug company actions drew a storm of protest from organizations representing the providers and their patients.
A key turning point came in a Dec. 30, 2020, advisory opinion issued by then-Health and Human Services (HHS) General Counsel Robert Charrow. That opinion said the drug companies were required, under the statute, to offer discounts for their drugs to covered entities that distribute the drugs to their patients through community pharmacies. At that time, HHS officials indicated they planned to require covered entities to use a new administrative dispute resolution (ADR) process to adjudicate the claims. 340B Health and others opposed those plans because the ADR process has not yet become fully operational and likely would take a great deal of time to get a final decision. The Biden administration appears to have taken another path.
HRSA’s action follows months of advocacy by hospitals and health centers. More than 1,100 340B hospitals sent a letter to HHS requesting intervention. The drug companies’ actions also drew a strong, bipartisan reaction on Capitol Hill. In 2020 and again in 2021, more than half the members of the U.S. House of Representatives signed letters to HHS leaders urging them to take action to protect safety-net providers and their patients. Similarly, 29 state attorneys general sent a letter late last year calling on the federal government to put a halt to the discount denials and impose penalties on the six companies. One of those AGs, California’s Xavier Becerra, is now the HHS secretary.
Resolution Could Take Time
Despite HRSA’s deadlines in its letters, resolution of the dispute could stretch on for some time. It is likely that some or all the manufacturers will try to block enforcement of HRSA’s new order by adding it to their existing lawsuits challenging the December advisory opinion. Decisions in those cases could take months.
News of HRSA’s actions drew praise from national organizations representing safety-net hospitals and patients. 340B Health President and CEO Maureen Testoni said, “Today’s action by the Health Resources & Services Administration is an emphatic defense of the 340B drug pricing program and the thousands of safety-net hospitals, health centers, and clinics serving millions of Americans with low incomes and those in rural communities.” She added, “As we have been saying for nearly a year, the 340B statute requires drug manufacturers participating in the program to provide discounted prices to support the care of patients. The denial of these discounts has damaged providers and patients and must stop. It is vital that these companies immediately begin to repay the millions of dollars owed to these providers.”