Gilead Accuses Florida 340B STD Clinics of “at Least $43 Million” in Fraudulent PrEP Transactions

Your 340B Report for Tuesday Nov. 10, 2020

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Drug manufacturer Gilead accuses some Florida STD clinics in a lawsuit of misusing their 340B eligibility to defraud the company of at least $43 million on purchases of and reimbursement for PrEP medicines. | Source: Shutterstock

Gilead Accuses Florida 340B STD Clinics of “at Least $43 Million” in Fraudulent PrEP Transactions

Drug manufacturer Gilead Sciences has accused two groups of Florida health care providers, pharmacies, and labs—including five sexually transmitted disease clinics with multiple locations that participate in the 340B program and two contract pharmacies—of “captur[ing] tens of millions of dollars in profits through fraudulent enrollments and reimbursement claims” on Gilead’s HIV pre-exposure prophylaxis drugs Truvada and Descovy.

“Defendants have made at least $43 million in profits from their schemes since February 2018,” Gilead alleges in a Nov. 3 lawsuit.

We are trying to identify and contact lawyers for the defendants for comment.

Gilead’s lawsuit, filed in federal district court in Miami, accuses the defendants, in part, of recruiting “people who earn low incomes or are homeless” for sham wellness checks, prescribing them PrEP medications, and purchasing the drugs at their 340B prices instead of at wholesale acquisition cost (the price Gilead charges under its medication assistance program, MAP, for Trudava and Descovy prescribed for vulnerable patients). Gilead also accuses the defendants of buying back dispensed PrEP medications from patients “for as little as $10,” re-dispensing it to others for additional reimbursement, or selling it on the black market.

“By virtue of certain Clinic Defendants’ participation in the U.S. government’s 340B Drug Pricing Program (“340B Program”)—which is designed to expand patient access to essential medication at reduced costs—Defendants pay a steeply discounted price for each bottle of PrEP medication that they buy,” Gilead’s said in its legal complaint. “Accordingly, Defendants are able to secure over $1,000 in profit for each bottle of PrEP medication purportedly dispensed to a MAP enrollee. The per-bottle profit is even greater when Defendants obtain reimbursement from Gilead for dispensing PrEP medication that they illicitly repurchased from their recruits for as little as $10; when they do not actually dispense the prescribed medication at all; or when they illegally resell the already-dispensed PrEP medication on the black market.”

Gilead, citing a whistleblower at one of the clinics named as a defendant, said the relationship between the clinic defendants and their 340B contract pharmacies “is the linchpin underlying defendants’ schemes to profit from improper enrollments, prescriptions, and redemptions.”

Gilead said between February 2018 and mid-October 2020, one defendant “has bought 18,997 bottles of PrEP medication at the discounted 340B price, which were then purportedly dispended through the MAP [medication assistance program].” Other defendants similarly bought and dispensed 10,191 bottles, 1,687 bottles, 766 bottles, and 717 bottles, Gilead said.

Gilead asked the court to enjoin the defendants from enrolling patients in Gilead’s medication assistance program, seeking reimbursement for Trudava or Descovy for a patient enrolled in the assistance program, re-dispensing or reselling the drugs, and an order awarding actual and punitive damages, legal fees, and additional relief.

“We are taking the necessary actions to protect the integrity of this important patient assistance program and the health of impacted Floridians and their larger community,” a Gilead spokesperson told 340B Report this morning. “We are committed to providing Gilead medications to all people who can benefit from them regardless of income and insurance coverage and will continue to ensure that people in need of our medicines can access them.”

A source in the 340B provider community familiar with the case said the suit is frivolous, unfairly targets selected STD clinics in the state, and will divert valuable resources to pay for legal fees.


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Protecting Our Patients and Safety Net in the Short and Long Term

Michael Gonzalez, President and Lead Consultant, FQHC 340B Compliance Services

So much has changed in the past few months, especially in the 340B space. Pharmaceutical manufacturers are not only putting a stress on the safety net system but are also hindering our patients lives. There are many groups advocating on behalf of the covered entities to protect 340B, but even if they are successful, we expect it will take at least a few months to get things back in order. So, the question is what should your health center do today to stay afloat?

One of the thriving services that we provide is our contract 340B coordinator service for community health centers. This service provides the health center with their own remote 340B department. This includes performing monthly audits, presenting journal entries, updating P&Ps, handling contracting, maximizing the program, preparing a monthly board report, and really handling all 340B matters. Using our expertise, we have compiled the following tips on how to navigate the current environment.

Focus extra attention on the uninsured to ensure continuity of care

We are very concerned with how the changes implemented by the manufacturers are affecting our low-income and other vulnerable patients. We have already seen this impact the lives of those patients who rely on 340B to afford their medications. I believe one of the most important things is to educate our providers on what medications are no longer available on 340B at our contract pharmacies. This gives the provider the ability to look for possible substitutions for a patient who cannot afford their medications, due to being removed from 340B pricing. If you need help with this, just reach out and I will send you a copy of the document we have utilized with our providers.

Crunch the numbers

It is more important than ever to analyze your data! If you look at e-prescription data from the EHR and 340B processed claims from your TPA, you can really understand how to maximize your program. You can also use the information to run an estimated loss analysis on claims that will no longer be processed as 340B. We have used this information to make sure we are selecting the right contracted pharmacies for those manufacturers that are requiring designations, providing management with key information needed to make decisions in these difficult times.

Look at an entity-owned pharmacy

One of my top recommendations is that management and the board of directors start discussing the possibility of opening an entity-owned pharmacy. Many health centers have relied on contract pharmacies to handle all of their 340B needs, but now we can see that it comes with the risk of losing the program. I believe that opening an entity owned pharmacy is a great hedge against the current threats. Even if contract pharmacy goes back to the way it was, it allows us to provide better care for the patient and reduce the dispensing fees for the claims captured inhouse. Many thriving health centers currently utilize both contract and entity owned pharmacies to maximize their programs.

Opening an entity owned pharmacy does come with many hurdles, including finding space to set it up, it requires a large investment, and in many cases, management does not really understand how to “manage” a pharmacy. I have partnered up with David Christian to develop a solution to combat these very common issues. Over the past few years, David and I have contracted with many centers to review the operations of their entity-owned pharmacies and provide recommendations that maximize efficiency.

We have now developed a solution to help centers pool together (saving each entity hundreds of thousands in just the initial investment) and open a remote, entity owned pharmacy. By using economies of scale, we were able to negotiate rates with vendors and provide a turnkey solution that will allow centers to own their own pharmacy. Utilizing alternative delivery sites and mail order prescriptions, this solution allows us to ensure that we take care of our patients.

For more information, please email me at mgonzalez@fqhc340b.com.


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HRSA Told Lilly in June its 340B Policy Would Harm the Safety Net. Lilly Implemented it Anyway.

The U.S. Health Resources and Services Administration (HRSA) told Eli Lilly and Co. in a June 11 letter that denying 340B discounts on drugs dispensed by contract pharmacies would significantly harm safety-net health care providers fighting COVID-19, and would undermine the 340B program and congressional intent behind 340B’s creation, a HRSA spokesperson confirmed yesterday. Nonetheless, while the agency strongly urged Lilly to reconsider ending 340B contract pharmacy discounts on its product Cialis, it did not require them to do so. 

Under pressure from Congress and provider groups, HRSA has since expressed more concern about Lilly and other manufacturer actions to restrict the use of 340B pricing at contract pharmacies. But the agency has not moved forward to penalize the companies.

On Aug. 26, HRSA told Lilly—then planning to expand the policy to nearly all its products—that it was incorrect to claim that HRSA in the June letter had concluded that Lilly’s plan to stop providing 340B pricing on drugs shipped to contract pharmacies did not give rise to any enforceable violation of the 340B statute, the HRSA spokesperson confirmed. Under the 340B statute, “manufacturers must offer covered entities outpatient drugs at specified prices,” the spokesperson confirmed that that agency wrote to Lilly. “HRSA continues to examine whether Lilly’s actions amount to attempts to circumvent that statutory requirement by inappropriately restricting access to 340B drugs for at least some covered entities.” Lilly implemented the expansion on Sept. 1.

Health care news service Inside Health Policy on Nov. 6 reported on HRSA and Lilly’s correspondence this spring and summer, which the news service obtained, about Lilly’s two-stage rollback of 340B drug discounts. 340B Report asked the U.S. Health and Human Services Department (HHS) for copies of the correspondence several weeks ago. HHS said yesterday it is still processing our request.

In a May 18 letter, first published in 340B Report, Lilly told HRSA that, effective July 1, it would stop honoring contract pharmacy-related requests for 340B pricing on Cialis, unless HRSA objected and gave its reasons why such action would be unlawful. In the letter, Lilly gave several reasons why it believes 340B-priced purchased for contract pharmacies are inconsistent with or not required by the 340B statute.

A HRSA spokesperson confirmed that, in its June 11 letter, HRSA replied, “While HRSA has published contract pharmacy advice in guidance, rather than through binding regulations, HRSA strongly encourages Lilly to reconsider its position. Lilly’s refusal to sell 340B priced drugs to covered entities through contract pharmacy arrangements would have a significant negative impact on the nation’s safety net, especially at a time when the health care community is under great pressure to address the current COVID-19 pandemic.”

Lilly disregarded HRSA’s appeal and began blocking 340B pricing on Cialis for contract pharmacies in July.

Inside Health Policy reported that, in an Aug. 16 letter, Lilly wrote to HRSA again, this time saying that, effective Sept. 1, it would extend its denial of 340B discounts to nearly all of its pharmaceuticals shipped to contract pharmacies. Inside Health Policy said Lilly gave HRSA until Aug. 31 to object on ground that the plan was unlawful.

We have reached out to Lilly for confirmation.

HRSA confirms that on Aug. 26 it told Lilly the company was “not correct” to claim that HRSA had concluded that Lilly’s plan, in Lilly’s words, “did not give rise to any enforceable violation of the 340B statute.”

HRSA also confirmed it told Lilly it was continuing to examine whether Lilly’s actions violated the 340B statute.

Lilly extended its denial of 340B contract pharmacy pricing effective Sept. 1, and on Sept. 8 asked the U.S. Health and Human Services (HHS) General Counsel whether its actions would subject it to sanctions. The department’s top lawyer, Robert Charrow, told Lilly on Sept. 21 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.”

HIV/AIDS clinics and community health centers are suing HHS to force it to respond to Lilly’s denials of 340B discounts on its products and similar denials of 340B pricing by AstraZeneca and Sanofi. There are seven known letters from groups of U.S. House representatives and three from U.S. senators to HHS or drug manufacturer raising deep concerns about the legality of manufacturers’ recent denials of or restrictions on 340B discounts.


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CMS Tees Up CY 2021 OPPS Rule for Publication

The U.S. Centers for Medicare & Medicaid Services (CMS) has sent the White House its final rule continuing or deepening Medicare Part B drug reimbursement cuts for 340B hospitals, moving the rule another step closer to publication.

CMS last Thursday sent its calendar year 2021 hospital Outpatient Prospective Payment System (OPPS) final rule to the White House Office of Management and Budget (OMB) for approval. In August, CMS proposed either keeping Part B reimbursement for hospitals’ 340B-purchased drugs at average sales price (ASP) minus 22.5 percent next year (down from ASP plus 6 percent in 2017), or reducing the rate further to an effective ASP minus 28.7 percent rate.

The OPPS rule is statutorily required, and needs to be in place before the new year starts. It would be complicated for the Biden administration to pause, unwind, or withdraw the rule after Inauguration Day, almost a month after CMS starts using it as the basis for Medicare outpatient payments to hospitals.

The new administration will be under pressure to disclose fairly soon where it stands on the cuts. Hospital groups have until mid-January to decide whether they will ask the U.S. Supreme Court to decide whether the cuts are illegal and should be stopped, with affected hospitals made whole for an estimated $4.8 billion in losses through the end of this year. If the hospital groups sue, the clock will begin ticking for the new administration to file its motion in response.

340B Implications in Today’s SCOTUS Arguments on ACA

The U.S. Supreme Court heard arguments this morning in a high-stakes lawsuit over whether Congress’ removal of the Affordable Care Act’s tax on individuals who do not buy health insurance rendered the law’s mandate to buy insurance unconstitutional—and by extension, made the entire law unconstitutional.

It appears from today’s oral arguments that the ACA will remain intact.  However, if the court rules the whole law is unconstitutional and must be thrown out, its 340B provisions would be thrown out with it. They include extension of eligibility to four types of hospitals; language on calculation of 340B ceiling prices, posting prices on a secure website, and imposing financial penalties for overcharges; annual recertification of providers’ eligibility; creation of a mandatory and binding 340B dispute resolution system; and exclusion of 340B pricing on orphan drugs for rural and free-standing cancer hospitals.

Extension of Medicaid rebates to managed care utilization would also cease. That would be bad for the federal treasury (the federal government doesn’t split these rebates with the states as it does in Medicaid fee for service). But it would end a root cause for the fight over prevention of duplicate 340B discounts and Medicaid rebates on the same drugs.

Millions of individuals who get health insurance now through the ACA’s insurance exchanges would have to find new coverage or go without. Federal financial incentives to states to expand Medicaid eligibility would end. The accelerated approval pathway for biosimilar therapies would be shut down.

The court could hand down its decision possibly as soon as late February. However, it habitually releases it biggest decisions toward the end its term, which should come in June or early July.

If the court declares the ACA unconstitutional, the odds of Congress passing and the White House signing a major health care bill would rise. That bill could include 340B provisions addressing not just the ACA’s defunct 340B sections, but anything about 340B up for debate.

Potential Biden HHS Secretary Candidates Have Some 340B Experience

News organizations report that Democrat Joe Biden secured enough electoral votes in last week’s election to defeat Republican Donald Trump and succeed him as U.S. president. But Trump has not conceded and his campaign is challenging election results in several states. Most Republicans in Congress and other GOP elected officials have not publicly acknowledged that Biden won. The states’ Electoral College members will vote for president and vice president on Dec. 14. The new 117th Congress will meet in joint session on Jan. 6 to count the votes and declare the winners.

Democrats retained control of the U.S. House but with a reduced majority. As of now, the U.S. Senate is evenly divided, 48 to 48. Republicans are expected to win in Alaska and North Carolina, giving the GOP 50 seats. The outcomes of Jan. 5 runoff elections for Georgia’s two U.S. Senate seats could decide which party ultimately controls the chamber.

President-elect Biden said responding to the COVID-19 pandemic would be one of his first priorities, signaling a focus on health care during his presidency. Yesterday, he announced a 13-member COVID-19 advisory board to help shape his administration’s approach.

Vivek Murthy, a hospital internist and President Obama’s U.S. Surgeon General from 2014 to 2017, is one of the advisory board’s three co-chairs. Oncologist Ezekiel Emanuel, an Obama administration special advisor for health policy, is a member. Both reportedly are leading candidates to be Biden’s U.S. Health and Human Services (HHS) secretary. New Mexico Gov. Michelle Lujan Grisham (D), who was in the running to be Biden’s running mate, reportedly is under consideration for HHS secretary as well.

In November 2016, Murthy issued a Surgeon General’s report on drug and alcohol addiction pointing out that federal qualified health centers (FQHCs), due to their access to 340B pricing, can play an important role in improving access to treatment for substance use disorders.

In an October 2016 article in RealClearPolicy offering health policy advice to then-President-elect Trump, Emanuel said Medicare could achieve savings by revoking “many of the rules that currently allow stakeholders to game the system,” including “the 340B cancer drug program, which increases the margins on chemotherapy given at hospital-affiliated facilities.” The Trump administration drastically reduced Medicare Part B reimbursement for hospitals’ 340B-purchased drugs.

While serving in the U.S. House in December 2017, Lujan Grisham cosponsored U.S. Rep. David McKinley’s (R-W.Va.) bipartisan legislation to nullify the Trump administration’s Part B drug reimbursement cut for 340B hospitals. While serving in the U.S. Senate in October 2017, Vice President-elect Kamala Harris was one of 57 senators who signed a bipartisan letter urging the Trump administration “to carefully consider stakeholder concerns and feedback” before cutting 340B hospitals’ Part B drug reimbursement.

Calif. Health Centers Seek Order Blocking Medicaid Rx Drug Benefit Transfer

A coalition of California community health centers enrolled in the 340B program today asked a federal district court to issue a temporary restraining order stopping the state from transferring the state Medicaid (Medi-Cal) managed care pharmacy benefit to Medi-Cal fee for service effective January 2021, saying the move would “irreparably harm” health centers and their patients.

Community Health Center Alliance for Patient Access (CHCAPA), a statewide organization of federally qualified health centers (FQHCs) serving 2.1 million patients, sued the state Department of Health Care Services over the impending transfer late last month.

CHCAPA says the state health department’s insistence “on pressing forward with the carve out of the pharmacy benefit from Medi-Cal managed care” without implementing “a non-managed care reimbursement system for federally qualified health centers that meet federal requirements could force an end to critical programs, including vaccinations, HIV/AIDS and Hepatitis C, among others.” It said a restraining order is warranted “because it is likely to succeed in court on the merits of these claims.”