HHS Secretary Alex Azar (AP Images)

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.”

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