UPDATED: Amgen halts some drug discounts for safety net hospitals as SCOTUS takes on 340B case
Amgen will soon be the 10th biopharma company to pull back on offering drug discounts to contract pharmacies of safety-net hospitals under a federal program. Like its peers, Amgen argues that the growth of these contract pharmacies has ballooned in recent years and needs to be reigned in.
Beginning Jan. 3, 2022, Amgen’s policy will only allow 340B covered hospitals to designate a single pharmacy location, with the exception of federal grantees and contract pharmacies wholly owned by a 340B hospital, or that have common ownership with a health system.
Amgen said in a statement:
The Company is concerned with the well-documented issues about program integrity arising from expansion of contract pharmacy arrangements in recent years. In the decade since the Health Resources & Services Administration (HRSA) expanded its contract pharmacy policy, the number of contract pharmacy arrangements in the 340B program has grown by a staggering 4,000%. More than 50% of the profits generated by contract pharmacies are retained by for-profit companies, diverting resources from federal grantees and other covered entities that provide care to uninsured and vulnerable patients.
The move aligns Amgen with Eli Lilly, Merck, UCB, Sanofi, Novo Nordisk, United Therapeutics, Novartis, Boehringer Ingelheim and AstraZeneca. All of the companies have curtailed their discounts to differing degrees, and some of them have been threatened with fines by the Biden administration and have since taken the issue of the administration’s handling of the 340B program to court.
So far those court decisions have been a mixed bag for industry.
Washington DC’s district court handed Novartis a clear win early last month, arguing that the Big Pharma can place conditions on the sales of drugs discounted by a federal program to contract pharmacies, following an Eli Lilly win in court earlier in November. But this interpretation was contradicted by another decision handed down last month in a New Jersey district court, in which Novo Nordisk and Sanofi were told that they cannot unilaterally impose restrictions on the 340B program and that their new policies “must cease.”
340B hospitals are sounding the alarm on Amgen and UCB’s recent entries into this more restrictive space.
“Amgen’s decision to follow the path of other drug companies in violating the federal 340B law will greatly magnify the harm that these refusals are causing for safety-net hospitals and the patients in need who rely on them. Two federal district courts have ruled that drug companies cannot refuse these discounts or impose conditions on them, and the administration and a bipartisan majority of Congress strongly agree,” 340B Health president and CEO Maureen Testoni said in a statement.
SCOTUS on 340B
Meanwhile, the US Supreme Court on Tuesday heard oral arguments related to another 340B dispute. This case deals with a rule from 2017 in which CMS said Medicare would reimburse some covered outpatient drugs purchased through the 340B program at lower rates.
According to the Commonwealth Fund, the rule reduced reimbursements for 340B hospitals to 22.5% below the average sales price of a drug; and non-340B hospitals continued to be paid 6% above the ASP. The change in payments saved Medicare and beneficiaries an estimated $1.6 billion in 2018, but hospitals claimed that they were unfairly targeted.
The back and forth between the justices and former solicitor general Donald Verrilli, who argued the case for the hospitals, centered mostly on whether CMS could legally set this lower reimbursement rate, with several justices seeming to support Verrilli’s arguments, according to the transcript.
Michigan law professor Nicolas Bagley also wrote at the SCOTUS blog that the justices seemed to back the claim that CMS “overstepped its authority when it cut the amount that it paid certain hospitals for drugs they dispensed in their outpatient departments. None of the justices voiced sympathy with the government’s argument that Congress had precluded judicial review of the question.”
Editor’s note: Article updated with comment from Amgen.