BREAKING: HHS Top Lawyer Tells Lilly, Don’t Assume We Endorse Your 340B Policy

Your 340B Report for Wednesday Sept. 23, 2020

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HHS Top Lawyer Tells Lilly, Don’t Assume We Endorse Your 340B Policy

The top lawyer at the U.S. Health and Human Services (HHS) department told drug manufacturer Eli Lilly and Co. in a letter dated Sept. 21 and made public this morning that it “cannot and should not view the absence of any questions from the government” about Lilly’s decision to dramatically scale back 340B pricing on its products “as somehow endorsing Lilly’s policy.”

HHS General Counsel Robert Charrow was responding to a Sept. 8 letter from Lilly asking whether the company would be subject to sanctions due to its Sept. 1 decision to limit 340B pricing on virtually all of its products to covered entities and their child sites only, or to just one contract pharmacy per entity for those without an in-house pharmacy. Lilly also imposed strict conditions on 340B covered entities on charges and reimbursement for Lilly insulin.

The U.S. Health Resources and Services Administration (HRSA) posted a link to Charrow’s letter to Lilly on the Office of Pharmacy Affairs (OPA) homepage.

We have reached out to Lilly for comment.

Charrow did not explicitly tell Lilly to reverse its 340B policy. He observed that Lilly, in a July 17 letter to the HHS Deputy Secretary Eric Hargan and in a May 18 letter to OPA Director Adm. Krista Pedley, noted that “at least one covered entity has been the subject of” a whistleblower’s False Claims Act lawsuit “arising, in part, out of the 340B program.”

“Please bear in mind,” Charrow continued, “that a similar suit against Lilly is a potential consequence in the event that the company knowingly violates a material condition of the program that results in over-charges to grantees and contractors.”

It is all but given that Charrow’s letter to Lilly will be studied closely by AstraZeneca, which is implementing a policy similar to Lilly’s effective Oct. 1, and by Sanofi and Novartis, which are requiring covered entities to upload their contract pharmacy claims data to their vendor 340B ESP so it can be vetted for duplicate 340B discounts and Medicaid, Medicare Part D, and commercial rebates on the same drugs.

Sanofi and Novartis said starting Oct. 1 they will cut off 340B pricing on drugs dispensed by contract pharmacies for entities that don’t supply the data. Merck asked covered entities to supply contract pharmacy claims data to 340B ESP beginning Aug. 14 or possibly face unspecified consequences. 340B Report has learned that few covered entities have provided the claims data.

340B ESP also likely will study Charrow’s letter closely, as will Kalderos, which has launched a service to let drug manufacturers provide 340B pricing as a rebate instead of as a discount.

Charrow’s letter to Lilly on Monday notes that, in addition to its Sept. 8 letter, “Lilly has submitted four other letters with respect to its proposal to scrap 340B pricing to contract pharmacies” on Aug. 27, Aug. 19, July 17, and May 18.

Charrow said HHS indicated to Lilly in earlier responses that HRSA “has significant initial concerns” about Lilly’s new 340B policy, continues to review the policy, “and has yet to make a final determination as to any potential action.”

“Correspondingly, Lilly cannot and should not view the  absence of any questions from the government as somehow endorsing Lilly’s policy especially when this department is leading the government’s response to the COVID-19 pandemic,” Charrow said.

Charrow said HHS has four concerns about Lilly’s letters “that do not relate to the legal propriety of your unilateral price increases”:

First, Charrow said Lilly tried to impose unilateral deadlines on HRSA in its May 18 and Aug. 19 letters. He said, in the May 18 letter, Lilly said that if HRSA did not object by June 30 to Lilly’s decision to limit 340B pricing on Cialis, it would assume HRSA had no objections to its price restructuring. Similarly, Lilly said in its Aug. 19 letter that, unless Lilly heard to the contrary from HRSA by Aug. 31, it would begin limiting 340B pricing on all products effective Sept. 1.

“Lilly cannot and should not seek to impose such deadlines on the government’s deliberations—especially when HRSA is playing a pivotal role in responding to an unprecedented pandemic,” Charrow wrote. “Nor is Lilly entitled to know the substance of those ongoing deliberations.”

Second, Charrow said “Lilly’s decision to interpret HRSA’s responses as tantamount to definitive agency agreement with Lilly’s position is incorrect….HRSA is still evaluating how to proceed.”

Third, Charrow said Lilly’s claims that its Sept. 8 and May 18 letters are exempt from public disclosure “is fundamentally in error.”

Fourth, Charrow said Lilly’s timing is “insensitive to the recent state of the economy.” He noted the price of Lilly’s stock has increased by more than 11 percent since the start of the year, and contrasted it with health care providers, many of them 340B entities, continuing to struggle financially and needing taxpayer assistance. “It is against this backdrop that you are effectively increasing the prices of 10 mg and 20 mg Cialis by more than 500,000 percent and have done the same for other drugs in your portfolio,” Charrow said.

340B Report will have more details on reaction to this breaking news development in tomorrow’s issue.


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