27 states and D.C. call for HHS to rein in drugmakers over 340B moves after hospital group lawsuit

Gavel and flag in courtroom
A collection of five hospital groups have filed a lawsuit against the Department of Health and Human Services asking the agency to halt several drug companies from restricting access to 340B drugs. (Getty/AlexStar)

A collection of 27 states and the District of Columbia wrote to the Department of Health and Human Services (HHS) imploring the agency to rein in drugmakers they say are restricting access to 340B discounted drugs.

The letter, released Monday, is the latest salvo in an escalating feud between 340B covered entities and drug companies who have restricted sales to contract pharmacies, which are third-party entities that dispense 340B-discounted products. The letter comes after a collection of hospital groups sued HHS Friday to spur the agency into action.

“Discounts afforded under the 340B Drug Pricing Program are more critical now than ever,” said California Attorney General Xavier Becerra in a statement. “We call on HHS to hold these non-compliant drug manufacturers accountable and provide immediate relief for healthcare centers and the Americans they serve.”

Becerra is President-elect Joe Biden’s nominee to lead HHS.

Drug companies Eli Lilly, Novo Nordisk, AstraZeneca, Sanofi and United Therapeutics have restricted sales of 340B drugs to contract pharmacies. The companies make some exceptions: Eli Lilly still provides insulin to the pharmacies.

RELATED: Bipartisan group of Senate, House lawmakers press HHS to quash drug companies' 340B moves

Novartis also announced it won’t give 340B drugs to contract pharmacies that are more than 40 miles away from the covered entity.

A majority of 340B-covered entities, which include safety net hospitals and community health centers, employ a contract pharmacy to dispense the discounted drugs. Manufacturers agree to provide discounted drugs to the covered entities in exchange for participation in Medicare and Medicaid.

Drug companies have complained that the benefits of the program don't reach patients, but safety net providers say the discounts are vital as they survive on thin profit margins and face rising list prices.

The states say HHS has the authority to address the violations made by the manufacturers.

“For example, HHS may require manufacturers to reimburse covered healthcare centers and/or terminate manufacturers’ [pharmaceutical pricing agreements],” according to a release on the letter.

But some legal experts question whether the Health Resources and Services Administration, which oversees 340B, has the authority to enforce the moves surrounding contract pharmacies.

The letter comes a few days after the American Hospital Association, advocacy group 340B Health, the American Society of Health-System Pharmacists, America’s Essential Hospitals, the Association of American Medical Colleges and the Children’s Hospital Association filed a federal lawsuit.

The lawsuit, filed Friday in the U.S. District Court for the Northern District of California  calls on HHS to enforce the 340B program’s requirements and stop the drug companies.

“Despite frequent communications with HHS urging it to enforce the law and block these actions, the department has yet to do so,” according to a release on the lawsuit. “The 340B law does not permit drug companies to condition discounts on the locations where patients obtain these drugs.”

The lawsuit asks the court to order HHS to require drug companies to provide discounted drugs to contract pharmacies and give refunds to hospitals refused any discounts.

The states and the hospital groups were not assuaged by HHS’ finalization of an administrative dispute resolution process in a final rule last week.

The dispute process, mandated by the Affordable Care Act, can address concerns over contract pharmacy use. But hospital and advocacy groups charge that the resolution process isn’t a timely solution to the loss of discounts.