Attorneys general ask HHS to punish 340B program bilkers — but pharma claims it's fighting 'waste and abuse'
Imagined as a benefit for low-income patients, the government’s 340B scheme requires participating drugmakers to sell their drugs at significant discounts to play ball in Medicare and Medicaid. But some pharmas are now loudly refusing to follow the rules after citing “waste and abuse” — and state prosecutors are demanding an intervention.
In a Monday letter to HHS Secretary Alex Azar, a group of attorneys general from 28 states and the District of Columbia called on the agency to impose civil penalties on a group of Big Pharma players it claims have either stopped or plan to stop honoring discounts under the government’s 340B program.
The 340B program requires drugmakers that choose to participate in Medicare Part B and Medicaid to offer negotiated discounts for outpatient drugs to “covered entities,” which include six different hospital types: disproportionate share hospitals, children’s hospitals and cancer hospitals exempt from the Medicare prospective payment system, sole community hospitals, rural referral centers, and critical access hospitals.
The attorneys general targeted six drugmakers in their letter — AstraZeneca, Sanofi, Eli Lilly, Merck, Novartis and United Therapeutics — for failing to meet their end of the agreement and asked HHS to impose civil fines and lean on its new “adjudicated dispute resolution” framework to encourage 340B hospitals to hound drugmakers who don’t participate.
“Each day that drug manufacturers violate their statutory obligations, vulnerable patients and their healthcare centers are deprived of the essential healthcare resources that Congress intended to provide,” the AGs wrote. “Drug manufacturers are, without justification, flouting discounted pricing requirements for low-income patients and/or unreasonably conditioning 340B pricing on data demands, depriving such patients of affordable medications to the detriment of the health centers and hospitals that serve these vulnerable communities.”
But Big Pharma — unsurprisingly — doesn’t see itself as a bad actor and claims it’s fighting “waste and abuse” in the program. Even more, one drugmaker said, it isn’t threatening to cut 340B pricing for hospitals that play along.
Take Sanofi, for instance: The French drugmaker on Oct. 1 kickstarted an initiative requiring 340B hospitals to forward “de-identified” patient claims data to determine whether there had been “duplicate discounts,” in which those companies are offering both 340B-priced drugs and paying rebates to Medicaid. Sanofi claimed 30% of Health Resources and Services Administration (HRSA) audits in 2018-19 found duplicated discounts at 340B hospitals.
If 340B hospitals comply with the program, Sanofi said, it would happily continue working with HRSA; if not, Sanofi said it would still sell its drugs to those hospitals at 340B prices, just outside of the government’s purview. The drugmaker also took exception with contract pharmacies that 340B providers use to distribute the program’s outpatient drugs to patients, claiming the middle-man arrangement cuts benefits for patients.
“Sadly, and contrary to recent public statements by other program stakeholders, patients do not always benefit from contract pharmacy arrangements,” a spokeswoman told Endpoints News via email. “Often patients receive no discount at all on contract pharmacy-dispensed drugs, and 340B covered entities’ own in-house pharmacies are much more likely to provide discounts to patients than pharmacy chains.”
Novartis is taking an even more direct line of attack on contract pharmacies, taking on a “focus-based approach” that would only honor discounts for 340B providers that use contract pharmacies within a 40-mile radius of their location.
“The overwhelming majority of discounts from medicines dispensed at contract pharmacies are not shared with patients,” a spokesperson said by email. “The discounts benefit for-profit pharmacies, third-party administrators, other middlemen and hospitals, with no requirement that those funds be used for charitable care at hospitals.”
AstraZeneca was more coy in its response, saying its relationship with 340B contract pharmacies “fully complies with all operative requirements.”
Spokespeople for United, Eli Lilly and Merck could not be reached for comment by press time.
The decision by top state attorneys to team up in their pursuit of chronic 340B jumpers is the latest escalation in a years-long war of words between Big Pharma and HRSA over the 340B program. Companies have long threatened to force their hand, claiming duplicate discounting has led to overcharging.
In their letter, the attorneys general called out drugmakers’ “deeply troubling” decision to go ahead with their data roundups amid the Covid-19 pandemic, a decision they said could have an adverse impact on low-income patients.
“Not only are the manufacturers’ actions an attempt to disrupt long-settled expectations and existing contractual arrangements for dispensing 340B drugs, but they have been taken when millions of Americans in our respective States are already reeling from the grave health and financial consequences caused by a historic pandemic and unprecedented economic crisis,” the prosecutors said. “We urge HHS to do more than decry these unlawful practices and provide immediate relief.”