Drugmakers dig in and signal fight over HRSA's demands to reverse 340B contract pharmacy policies

Drug prices
Several drugmakers signaled they won't comply with the Health Resources and Services Administration's demands to resume sales of 340B discounted products to contract pharmacies. (Getty/Charles Wollertz)

Several drugmakers are digging in and refusing to reverse policies that cut off sales of 340B drugs to contract pharmacies despite a federal directive to do so.

The Health Resources and Services Administration (HRSA), which oversees 340B, wrote to the six companies on May 17 calling for them to resume sales to contract pharmacies and giving the companies until June 1 to respond with a plan to do so. But three of the companies refused HRSA’s request, and two others have sued the Department of Health and Human Services (HHS) over the issue.

The responses signal that drugmakers are not budging in a nearly yearlong feud with providers and the federal government over making sales to contract pharmacies, which are third-party entities that dispense drugs on behalf of 340B-covered entities.

Drugmakers say the efforts to restrict sales are due to concerns they are providing duplicative discounts to providers for products covered under 340B and Medicaid. Under the 340B program, companies agree to offer discounts to their products to safety net providers in exchange for participation in Medicare and Medicaid.

Drug companies charge that contract pharmacy arrangements with 340B entities have soared in recent years, and there is little evidence patients have benefited from the explosion of deals. Providers in turn argue that the 340B program is vital to safety net hospitals and community health centers that operate on thin margins and that the drugmakers are in obvious defiance of the 340B statute.

“The refusal of these six companies to comply with the law endangers patients and undermines the safety net,” said Maureen Testoni, CEO of the advocacy group 340B Health, in a statement earlier this week.

RELATED: AHA urges Express Scripts to rescind 340B claims reporting policy

Sanofi, one of the six drugmakers HRSA warned, told Fierce Healthcare in a statement that it launched a program back in October that requires covered entities to provide “limited, de-identified claims data on 340B-priced drugs dispensed by contract pharmacies.”

If the covered entity provides the data, nothing changes, but if not, “it will remain able to purchase 340B-priced drugs for shipment to its own facilities.”

A 340B entity with no in-house pharmacy can choose only one contract pharmacy to dispense products.

“We continue to believe this integrity initiative complies with the 340B statute,” the company said.

Novo Nordisk, another of the companies warned by HRSA, told Fierce Healthcare that it believes its contract pharmacy moves comply with the law. 

Going to court

Eli Lilly and Novartis have both issued lawsuits that seek to prevent HRSA from issuing monetary penalties for not complying with the May 17 letter.

Eli Lilly told HRSA in its response that the agency’s interpretation of the 340B statute has been wildly inconsistent.

The company called the May 17 letter an “unexplained and unreasonable departure” from earlier statements from HRSA. Lilly said HRSA had told it back in June 2020 that contract pharmacies are not independent covered entities and that prior advice on the pharmacies was only guidance and not a binding regulation.

Lilly also referenced a 2010 HHS guidance that said 340B entities could have as many contract pharmacies as they want. But HRSA wrote to Lilly back in July 2020 that the guidance was not enforceable.

“The agency’s frequent changes in its understanding of the 340B statute’s relationship to contract pharmacies, and the statutory source (if any) for its preferred views, creates confusion, and is arbitrary and capricious,” the response said.

RELATED: HHS proposes nixing rule rule affecting insulin and EpiPen discounts for community health centers

Lilly argues the letter goes against the 340B statute that does not require drugmakers to deliver drugs to contract pharmacies.

Novartis made a similar argument in its own lawsuit. It says HRSA failed to offer an “adequate explanation for its evolving position on whether and in what circumstances contract pharmacy arrangements trigger the 340B discount.”

United Therapeutics did not return requests for comment as of press time on their responses to HRSA.

AstraZeneca did not share with Fierce the company’s response to HRSA but did say the company remains committed to the program and that its contract pharmacy moves are in line with the statute.

AstraZeneca had sued HHS last year over a general counsel advisory opinion that argued the drugmaker contract pharmacy moves violated the 340B statute.

HHS pulled that advisory opinion earlier this week to avoid confusion and unnecessary litigation, the agency said in a court filing. A federal judge denied HHS’ bid last week to dismiss the lawsuit.

HHS did not respond to a request for comment on what steps it plans to take against drugmakers that choose to not resume sales nor offer plans to do so.