HHS cracks down on AstraZeneca, Eli Lilly, Novartis, Novo Nordisk and Sanofi for limiting access to discounted drugs under the 340B program
Last summer, some of the world’s top drugmakers took matters into their own hands and tried to halt the ballooning of a federal health program that requires the companies to offer steep discounts on their products to contract pharmacies working with hospitals that primarily treat low-income patients.
Companies like Novartis and Eli Lilly raised concerns that the program, known as 340B, had grown beyond what it was initially tasked to do. They also explained how the program was lining the pockets of these hospitals. The hospitals, meanwhile, denounced the unilateral moves by the drugmakers to stop offering the lowered prices to contract pharmacies and complained to HHS’ Health Resources and Services Administration (HRSA), which runs the 340B program.
On Monday, HHS took the side of the hospitals.
HRSA Acting Administrator Diana Espinosa sent identical letters to AstraZeneca, Eli Lilly, Novartis, Novo Nordisk, Sanofi and United Therapeutics, explaining how the administration has determined that their policies that place restrictions on 340B program pricing related to contract hospital pharmacies are in direct violation of the 340B statute.
“Nothing in the 340B statute grants a manufacturer the right to place conditions on its fulfillment of its statutory obligation to offer 340B pricing on covered outpatient drugs purchased by covered entities,” Espinosa’s letter says. “Furthermore, the 340B statute does not permit manufacturers to impose conditions on covered entities’ access to 340B pricing, including the production of claims data.”
Espinosa also explained how if the companies claim their restrictive actions are to prevent diversions and duplicate discounts, there’s a mechanism by which they can address these concerns with an audit and submitting a claim through an Administrative Dispute Resolution process.
The letters also tell the companies that they “must immediately begin offering” covered outpatient drugs at the 340B ceiling price to covered entities through their contract pharmacy arrangements, regardless of whether they purchase through an in-house pharmacy.
Sanofi said in an emailed statement that it supports the core objective of the 340B program to increase access to outpatient drugs for uninsured and vulnerable populations.
“However, waste and abuse in the form of duplicate discounts – when manufacturers pay Medicaid rebates on 340B-priced drugs – has become increasingly prevalent in recent years with over 30% of Health Resources and Services Administration (HRSA) audits of covered entities in 2018-2019 finding Medicaid duplicate discounting,” the company said. Sanofi last October launched an initiative to limit the use of contract pharmacies and collect limited, de-identified, claims data on 340B-priced drugs dispensed by contract pharmacies.
Lilly said in a statement that it “has continued to offer 340B ceiling prices to all covered entities, and believes that patients – not large, for-profit contract pharmacies — should benefit from those 340B drug discounts.” And Novartis said it will give the letter a thoughtful review and respond to HRSA.
The other companies did not immediately respond to a request for comment, but the biopharma industry group PhRMA also expressed concerns with the 340B program.
“We continue to have concerns with the increasing number and role of contract pharmacies in the 340B program and the lack of evidence that their participation in 340B has improved patients’ access to medicines. The fact is that contract pharmacies were never authorized by Congress in statute, nor does the 340B statute require manufacturers to ship 340B medicines to contract pharmacies,” said PhRMA spokesperson Nicole Longo.
“Contract pharmacies only appear in sub-regulatory guidance, which cannot impose any binding requirements on the public and lack the force and effect of law. Past reports from independent government watchdogs have shown there is little to no oversight of contract pharmacies and no way of ensuring covered entities are using the program to the benefit of America’s vulnerable patients. That’s why we are advocating for meaningful improvements to the program that ensure patients directly benefit from the tens of billions of dollars in discounts that manufacturers provide each year,” she added.
Others representing the hospital industry were pleased by the letters from HRSA.
“As we have been saying for nearly a year, the 340B statute requires drug manufacturers participating in the program to provide discounted prices to support the care of patients. The denial of these discounts has damaged providers and patients and must stop. It is vital that these companies immediately begin to repay the millions of dollars owed to these providers,” 340B Health, a nonprofit membership organization of more than 1,400 public and private non-profit hospitals and health systems, said in a statement.