HRSA, not deterred by legal battle, seeks to fine Merck for 340B violations

The Department of Health and Human Services (HHS) dinged drug giant Merck for cutting off 340B sales to hospitals’ contract pharmacies, potentially setting off a new legal battle over the controversial program. 

The Health Resources and Services Administration (HRSA) referred Merck to HHS’ Office of Inspector General (OIG) over the drugmaker’s noncompliance with the 340B federal statute. The warning, issued Oct. 20, shows that HRSA is not deterred by a series of lawsuits from other drugmakers surrounding similar moves. 

HRSA warned Merck back in May to discontinue a new effort surrounding 340B contract pharmacies, which dispense discounted drugs on behalf of the program’s covered entities.

Back in August 2021, Merck warned covered entities, which encompass safety net providers, that they had until Sept. 1 of that year to participate in a program integrity initiative that requires facilities to send over claims data. If a facility does not comply, Merck will cut off sales to their contract pharmacies. Merck will still provide discounted drugs to one contract pharmacy if a facility has no in-house pharmacy.

Merck claimed that the program is an effort to curb duplicate discounts offered to facilities via both 340B and Medicaid. 

Under 340B, a drug company offers discounts to safety et providers in exchange for participation in Medicare and Medicaid. However, pharma industry opposition has grown in recent years as companies claim the program has lax oversight and the discount benefits aren’t reaching patients. 340B advocates and the hospital industry counter that the program is vital to safety net providers that operate on very thin margins. 

Advocacy group 340B Health applauded HRSA’s move, noting Merck is one of 18 drug companies to cut off contract pharmacy sales. 

“For more than a year, the company has been boosting its profits even more by depriving the healthcare safety net of crucial resources needed to care for patients in need,” said 340B Health President and CEO Maureen Testoni.

Merck had not returned a request for comment at the time of publication. 

The drugmaker could join more than a half dozen companies that sued HHS over similar HRSA warnings, arguing the 340B statute doesn’t explicitly include contract pharmacies. The initial rulings last year were a mixed bag for HHS, with both sides scoring victories

HRSA told Fierce Healthcare that it continues to administer the 340B program, "including taking action where necessary to ensure all participants are complying with the law."

The agency does not appear to be deterred by the prospect of future legal action, as the letter is the latest action taken against drugmakers. Last week, HRSA sent letters to drugmakers AbbVie and Amgen over contract pharmacy restrictions, making them the tenth and eleventh companies to get such warnings.