340B Program in Peril as More Pharmaceutical Companies Continue Defying Federal Orders  

Pharmaceutical Production

The number of such companies has grown from eight to 13 in recent months.

EDITOR’S NOTE: Maureen Testoni, president and CEO for 340B Health, reported this story live today on Monitor Mondays.

Strongly worded letters aren’t getting it done.

That was the message gleaned from a recent 340B Health report citing pharmaceutical companies defying federal directives not to limit 340B drug discounts on outpatient prescription drugs sold to safety-net hospitals and dispensed through community pharmacies.

The report cited 12 companies, up from eight last year, including some industry giants, that are actively restricting or planning to restrict 340B pricing for such pharmacies: Eli Lilly, AstraZeneca, Sanofi, Novo Nordisk, Novartis, United Therapeutics, Merck, Boehringer Ingelheim, Amgen, UCB, AbbVie, and Bristol Myers Squibb. A 13th company, Pfizer, will join the list starting in March, according to an Endpoints News article published online next week.

“The 340B program has come under fire as, according to the pharma companies, it has ballooned in recent years to include numerous contract pharmacies working with certain qualified hospitals. The hospitals, meanwhile, have criticized the unilateral moves by the pharma industry and have lost millions in revenue from the changes,” the article read. “Like its fellow peers, Pfizer said in a letter to stakeholders last week that it’s cutting back on its participation in the federal 340B program after reviewing examples, and evaluating the wider risk, of ‘duplicate discounts and diversion that occur through contract pharmacy transactions.’”

Those strongly worded letters urging the companies to reconsider are available to view online – there were at least 13 sent last year alone by the Health Resources & Services Administration, or HRSA (https://www.hrsa.gov/opa/program-integrity/index.html). Many of them even include common language.

“Continued failure to provide the 340B price to covered entities utilizing contract pharmacies, and the resultant charges to covered entities of more than the 340B ceiling price, may result in CMPs (civil monetary penalties) as described in the CMP final rule. The CMP final rule states that any manufacturer with a PPA (pharmaceutical pricing agreement) that knowingly and intentionally charges a covered entity more than the ceiling price for a covered outpatient drug may be subject to a CMP not to exceed $5,000 for each instance of overcharging,” HRSA’s May 17, 2021 letter to the New Jersey-based Sanofi reads. “Assessed CMPs would be in addition to repayment for an instance of overcharging as required by section 340B(d)(1)(B)(ii) of the PHS (Public Health Service) Act.”

Some of the letters indicate that penalties will be warranted, or not, “based on … willingness to comply.” Others go so far as to refer the matter to the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).

340B was established as a program in 1992, but it was less than two years ago that the trouble started.

“In July 2020, Eli Lilly became the first drug company to unilaterally impose restrictions on 340B discounts on drugs purchased by covered entities to be dispensed by community pharmacies. Since then, 11 other companies have followed suit,” 340B Health’s report read. “Eight of these drug companies have filed lawsuits challenging HRSA’s enforcement actions in federal court. To date, two district courts have agreed with HRSA’s position that drug companies cannot impose limits on 340B discounts, while a third court said HRSA’s reading of the law is not the only possible interpretation. Meanwhile, 340B providers face significant reductions in 340B savings that are creating financial hardship and harming patients. Providers have reported an increasing impact on patients they serve, including being forced to change medications to continue affording their treatments.”

340B Health conducted a survey of its member hospitals late last year, and the results showed that small and rural hospitals enrolled in the 340B program are being impacted most severely.

“Discounts on drugs dispensed at community pharmacies make up an average of about a quarter of overall 340B savings for hospitals participating in 340B. Among critical access hospitals (CAHs), savings from partnerships with community pharmacies represent an average of 52 percent of their overall 340B savings,” the report read. “CAHs have 25 or fewer acute care inpatient beds, are located more than 35 miles from another hospital, maintain an average length of stay of 96 hours or less, and provide 24/7 emergency services.”

Their survey found that on average, 340B hospitals that are mostly larger and urban already have lost 23 percent of their community pharmacy savings. For CAHs, that figure is 39 percent. The median reported loss for such hospitals was $220,000.

The American Hospital Association (AHA), for its part, is aware of the issue – last March it issued a fact sheet including a position specifically urging federal monitors to increase transparency among pharmaceutical companies, urging that they “must not be permitted to unilaterally and unlawfully change the 340B program.”

It remains to be seen what action, if any, will be undertaken by HHS-OIG on the matter.


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