Novartis scales back decision to restrict 340B drug sales

Novartis headquarters
Novartis announced Friday it will not provide drugs discounted under 340B to contract pharmacies more than 40 miles away from the safety-net hospital part of the program. (Image: Wikimedia Commons / Andrew / Flickr)

Novartis scaled back an earlier move to halt sales of drugs discounted under the 340B program to contract pharmacies.

The drugmaker announced Friday that it will still provide discounted drugs to contract pharmacies, but only those facilities within 40 miles of the 340B hospital’s location.

Novartis is one of three drug companies that has restricted sales to contract pharmacies, which are third-party entities that dispense 340B drugs on behalf of the participating hospital, prompting a dispute with hospitals over the legality of the moves.

Novartis previously announced back in August it would restrict sales to all contract pharmacies, but the restriction never went into effect.

Novartis said the new policy goes into effect Nov. 16. The drugmaker will not put a cap on the number of contract pharmacies in the 40-mile radius.

“This geographic restriction seeks to take a common-sense approach to ensure the program benefits the intended communities and is consistent with other federal guidelines around hospitals and off-site affiliates," Novartis officials said in their notice.

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

Most 340B hospitals employ a contract pharmacy to dispense drugs acquired through the program, which requires drugmakers to offer discounts to safety net hospitals in exchange for participation in Medicaid and Medicare Part B.

Novartis is also calling for all 340B hospitals to upload their claims data to the drugmaker’s software platform.

Merck and Sanofi have also asked 340B contract pharmacies to upload their claims data to ensure the companies are not providing duplicate discounts under both 340B and Medicaid.

But hospitals have charged that the moves are a way to avoid having to offer discounts to the facilities.

The advocacy group 340B Health blasted Novartis’ decision as “inexcusable.”

“The 340B statute is crystal clear,” said 340B Health CEO and President Maureen Testoni in a statement. “Pharmaceutical companies that participate in Medicaid and Medicare Part B must sell certain outpatient drugs to eligible hospitals at no more than the ceiling price. They are not permitted to put limits on those discounts based on where hospitals are distributing the drugs to their patients.”

Novartis is the third drugmaker to restrict sales to 340B contract pharmacies, although it did not go as far as its peers.

AstraZeneca started restricting sales this month to any contract pharmacies if hospitals already had a pharmacy in house. If a hospital doesn’t have an in-house pharmacy, then it will dispense products to only one contract pharmacy.

Back in September, Eli Lilly announced it will halt all 340B sales to contract pharmacies.

340B advocates and hospital advocacy groups have pressed U.S. Department of Health and Human Services (HHS) to step in and halt the moves, but some legal experts question whether the agency has the authority to do so.

Meanwhile, community health centers sued HHS a few weeks ago to compel the agency to set up a dispute resolution process to give 340B entities a pathway to fix program violations.