The Biden administration has alerted six drugmakers that they are violating federal law by restricting safety net providers’ access to products discounted under the 340B program.
The Health Resources and Services Administration (HRSA) sent letters Monday to the six drugmakers that sought to restrict access to 340B-discounted products to contract pharmacies, which are third-party entities that dispense drugs on behalf of 340B-covered entities. The letters are a major win for the hospital industry, which has been clamoring for the federal government to step in.
The manufacturers also must “immediately begin offering its covered outpatient drugs at the 340B ceiling price to covered entities through their contract pharmacy arrangements,” the letters said.
The letters appear to bring an end to an escalating feud between drugmakers and hospitals that started back in July 2020.
Major drug companies such as AstraZeneca and Eli Lilly announced they would no longer provide 340B-discounted products to contract pharmacies. Other drug companies aimed to limit sales unless the 340B-covered entity provided data on claims to assuage concerns over duplicative discounts.
Under 340B, a drug company agrees to give discounts on products to safety net providers such as rural hospitals or community health centers in exchange for participation in Medicare or Medicaid.
Overall, HRSA sent letters to AstraZeneca, Eli Lilly, Novartis, Novo Nordisk, Sanofi and United Therapeutics.
If the drug companies do not halt the moves, they could face a $5,000 penalty for every violation. HRSA wants the drug companies to provide an update on the situation by June 1.
The letters earned major plaudits from hospital groups and advocates but warned that drug makers need to quickly begin fully repaying hospitals for any overcharges.
“We continue to urge HRSA to ensure that the drug companies that denied appropriate discounts since these illegal practices began last year make impacted hospitals whole for the benefit of the vulnerable communities they serve,” the American Hospital Association (AHA) said in a statement Monday.
The AHA sued the federal government last year to spur federal action to clamp down on the restrictions, arguing that they blatantly violated the federal statute that governed the 340B program.
"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," according to the advocacy group 340B Health, which also praised lawmakers for pressing for HHS to clamp down on drug makers.
America's Essential Hospitals, which represents safety net providers, also praised the move and pressed for drug companies to refund any overcharges made associated with the policies.
The pharmaceutical industry has criticized the 340B program as being too large and worries the benefits of the program do not go to patients. Hospital and provider groups counter that the program is vital to help safety net providers, which operate on thin margins and handle massive drug price increases.
Eli Lilly told Fierce Healthcare that it is in the process of reviewing the letter.
"Lilly has continued to offer 340B ceiling prices to all covered entities, and believes that patients—not large, for-profit contract pharmacies—should benefit from those 340B drug discounts," the company said in a statement.
Sanofi said that the moves it made were vital to preserve program integrity and clamp down on duplicative discounts provided for both 340B and Medicaid drugs.
"We continue to believe this integrity initiative complies with the 340B statute," the drug maker said.