Community health centers sue HHS to install method to handle 340B violations after drugmaker feud

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An association representing community health centers sued the Department of Health and Human Services to approve a weapon the centers and hospitals can use to curtail violations of the 340B program. (Pixabay)

An association representing community health centers is suing the Department of Health and Human Services (HHS), seeking help in combating drug manufacturers that are refusing to give their products to 340B contract pharmacies.

Filed last week in the U.S. District Court for the District of Columbia by the National Association of Community Health Centers, the lawsuit is the latest salvo in an escalating feud over the 340B drug discount program. The centers want HHS to install a dispute resolution process to give 340B entities a pathway to remedy program violations.

The lawsuit comes after several drug companies announced they won’t provide 340B-discounted products to contract pharmacies, third-party entities that are hired by a 340B entity to dispense the drugs.

The association said that the drugmakers’ decision is “not only callous, but a clear violation of 340B statutory requirements and the binding pharmaceutical pricing agreements manufacturers have with HHS.”

The lawsuit wants a court to compel HHS to set up an administrative dispute resolution that handles violations of the 340B program. It argues that 340B hospitals and other entities have little recourse to combat the violations from the drug companies.

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

The Affordable Care Act directed HHS to implement the dispute resolution process after the law was passed in 2010, but HHS has never finalized the regulations. The agency did propose such a process in 2016, but a proposed rule was pulled in 2017.

The lawsuit wants HHS to finalize any dispute resolution regulations within 60 days after the court’s ruling.

HHS said it does not comment on pending litigation.

Major drug companies Eli Lilly and AstraZeneca have halted providing drugs discounted under 340B to contract pharmacies and will give them instead to the covered entity. Merck, Novartis and Sanofi have also called for contract pharmacies to provide claims data on 340B drugs so companies don’t provide duplicative discounts for both 340B and Medicaid drugs.

Novartis has said it will halt sales to contract pharmacies, but it remains unclear whether the policy has been implemented.

340B calls for drug companies to offer discounted drugs to safety net hospitals in exchange for participation in Medicaid and Medicare.

A majority of 340B entities use contract pharmacies to dispense drugs, but the pharmaceutical industry has charged the program does not benefit vulnerable patients and that the discounts are not passed down to patients. 340B advocates counter that the program is vital as health centers and safety net hospitals operate on narrow margins, and drug companies have raised list prices too high.

The Health Resources and Services Administration (HRSA), which oversees 340B, issued guidance in 2010 that allowed covered hospitals to contract with third-party pharmacies. But the Trump administration has curtailed agency enforcement of guidance documents, which has left a regulatory void for the 340B program, experts have said.

It remains unclear whether HRSA will be able to step in and halt the drug companies’ moves. HRSA told Fierce Healthcare that it is investigating the issue.

However, 340B proponents got a major boost in a letter from HHS’ general counsel Robert Charrow to Eli Lilly Sept. 21. The letter said Eli Lilly’s moves were, “at the very least, insensitive to the recent state of the economy.”

The letter said hospitals are still struggling due to the pandemic.

Charrow added that just because HRSA has not ruled on the drugmakers' moves does not mean that is an endorsement of the policy.