May 25, 2022— Federal appeals courts are considering legal challenges to the government’s authority to require drug companies to restore 340B drug pricing program discounts on drugs dispensed at community and specialty pharmacies. In a series of legal briefs filed with two of the courts, five national hospital associations and 25 state attorneys general urged the courts to uphold the actions the Health Resources & Services Administration (HRSA) took in ordering drugmakers to restore 340B pricing.
340B’s Viability Is at Stake
In a pair of “friend of the court” briefs that 340B Health, the American Hospital Association (AHA), the Association of American Medical Colleges (AAMC), America’s Essential Hospitals (AEH), and the Children’s Hospital Association (CHA) filed with appeals courts in Philadelphia and Washington, D.C., the hospital organizations argued that unilateral drug company restrictions on 340B discounts are threatening the viability of the 30-year-old drug pricing program.
By imposing restrictions on pricing, drug companies are avoiding the requirement to offer large discounts on some of the costliest specialty drugs they sell and sidestepping inflationary penalties that Congress created to curb the rise in drug prices. Noting previous efforts by industry leaders to restrict the scope of 340B, the briefs said: “Having been unable to convince Congress to limit a program they do not like, the drug companies began taking unilateral action to curb the 340B program.”
Fox Guarding the Henhouse
In its own briefs to the Philadelphia and D.C. courts, the federal government said it shares the view of 340B hospitals that these restrictions on 340B discounts, including claims data reporting conditions, are unlawful. In some of its strongest language to date, the government noted that when Congress created 340B, lawmakers knew that most 340B hospitals would need to rely on outside pharmacies to obtain discounted drugs.
“Congress did not allow drug manufacturers to add provisos to their obligations under the 340B statute,” the briefs state. Allowing that to happen, they added, “would be akin to letting the fox guard the henhouse.”
The government also warned of serious harm to the health care safety net if the courts do not put a stop to the drug company actions. Citing reports from 340B hospitals and other covered entities, HHS says the drugmakers’ restrictions have cost providers billions of dollars and put patients’ health in jeopardy.
A Focus on the Patients
The attorneys general representing 24 states and the District of Columbia filed their own briefs with both appeals courts backing the HHS position and urging the judges to decide in favor of enforcement actions against the drug companies involved. This coalition of top state attorneys has spoken out in recent years about the need to protect 340B for the patients in need living in their states.
The AGs briefs note that the drugmakers’ policies are “in direct contravention of the statute and policies long pursued by Congress and advanced by the States.” Because of the drugmaker policies, the AGs said, safety-net providers in their states “are unable to provide vulnerable patients with affordable prescription drugs and expanded healthcare services.”
In a press release after the joint filing, Connecticut Attorney General William Tong stated: “These drug manufacturers have flouted the law to unlawfully inflate their profits – ignoring the critical medical needs of vulnerable communities. Our bipartisan, nationwide coalition urged HHS to use its enforcement authority to compel drug manufacturers to comply with the law. HHS’ actions were both necessary and lawful.”
Preparing For Their Days in Court
These briefs are the opening of a new round of legal debate over 340B. Four lower courts issued opinions on the matter that are now moving into the appeals courts. Oral arguments in three appeals courts are expected to occur in the coming months. If the federal courts ultimately agree with the position of hospitals and the government, the 16 drug companies would be compelled to end their restrictive policies and restore the discounted pricing.