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Hospitals Retaliate with Legal Salvo at Manufacturers Over 340b

The 340b program is once again in the news. All the wailing and gnashing of teeth over recent years boiled over on 2020 with a bright red line in the sand drawn by manufacturers against covered entities. The battle cry “We’re not gonna take it anymore!” resulted in manufacturers not providing drug at 340b acquisition prices to the many contract pharmacies nationally that dispense those drugs to eligible patients. That created a big problem for the covered entities and put a kink in the revenue pipeline for the many retail contract pharmacies and specialty pharmacies.

As you may recall from prior coverage of the 340b skirmishes, the 340b program was implemented to ensure that disproportionate share hospitals (by definition, those that serve mostly economically underprivileged patients) can obtain drugs at the deepest discount offered and, theoretically, pass those saving on to patients. Sounds great, huh? But Pharma doesn’t think that is what is happening. As detailed in a recent article below, Pharma continues to hold the line against the hospitals saying that they are gaming the program with rampant double dipping of discounts (340b and Medicaid). And, they also accuse covered entities of not passing the savings on to patients.

To the Battlements
Hospitals have benefited greatly by the savings and they don’t want to see them go away. In response, the hospitals ramped up a massive PR campaign in 2020 with special focus on Congress. They showed that it is easier to get a politician to respond favorably to a plea to help patients get access to desperately needed drugs vs. manufacturer claims that they are being robbed. They were particularly keen on strong arming HHS, which controls the 340b program, that the manufacturers’ policies violate the 340B statute.

In short, the end of 2020 was not the best time to get Congress or HHS to get involved. Hence, Plan B was implemented by the covered entities. Lawsuits are now seeking court relief to return the status quo. They are even seeking damages!

Pharmacies Continue to be Caught in the Middle
The big box SPs dispense the bulk of specialty meds in the program, but, many independent specialty pharmacies are also very active as hospitals can contract with multiple pharmacies. The pharmacies then earn a dispensing fee which, more often than not, generates more net revenue than the usual margin earned on a routine ‘fill’ for the same, non-discounted drug.

340B Rollback Prompts Action by Stakeholders

JANUARY 20, 2021 — The dispute between drugmakers and covered entities under the 340B Drug Pricing Program has ramped up, as a number of hospital and pharmacy associations are suing the Department of Health and Human Services to undo manufacturer limitations on 340B discounts.

Their efforts have paid off: On Dec. 30, HHS issued an advisory opinion stating that drug manufacturers are required to deliver 340B discounts on covered outpatient drugs when contract pharmacies are acting as agents of 340B covered entities. Although advisory opinions do not carry the force of law, “they set out the agency’s current views on issues,” HHS said in a statement. “Those views may be reflected in the … enforcement and oversight powers the federal government has to run the 340B Program.”

Beginning in mid-2020, a growing number of drug companies have restricted discounted sales of almost all drugs to covered entities dispensing 340B drugs through contract pharmacies, which a majority of 340B covered entities use as a channel for providing the discounted drugs. As per the 340B statute, manufacturers and covered entities cannot file lawsuits against one another, which is why HHS is the defendant for all of the covered entity lawsuits targeting manufacturer actions.

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