Health Centers Are Preparing to Sue Over Drug Makers' 340B Actions

Your 340B Report for Wednesday Sept. 9, 2020

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The National Association of Community Health Centers “is preparing legal action” in response to drug manufacturers’ recent actions regarding 340B contract pharmacy and duplication of 340B discounts and Medicaid, Medicare Part D, and commercial rebates. | Source: Shutterstock

Health Centers Are Preparing to Sue Over Drug Makers’ 340B Actions

The National Association of Community Health Centers (NACHC) “is preparing legal action” in response to drug manufacturers’ recent unilateral moves to stop providing reduced 340B pricing on their products or start imposing conditions on health centers and others that qualify for 340B drug discounts, the group says.

NACHC disclosed the work on the potential lawsuit in a statement issued late on Sept. 4. Other 340B providers and organizations are considering lawsuits, 340B Report has learned. Inside Health Policy first reported about NACHC’s legal preparations last night.

A lawsuit would be a major but not unexpected escalation in the current fight between drug manufacturers and covered entities over the companies’ 340B program obligations and prerogatives. “Let me be clear—community health centers cannot and will not stand by while manufacturers and for-profit third parties line their own pockets at the expense of people affected by COVID-19 and the providers who serve them on the frontlines,” NACHC President and CEO Tom Van Coverden said in the statement. “Countless lives are at stake.”

Van Coverden alluded to manufacturers Eli Lilly and AstraZeneca’s decisions to cease providing 340B pricing on products shipped to nearly all contract pharmacies; Lilly’s decision to impose conditions on the prices 340B covered entity patients pay and what insurers are billed for Lilly’s insulin products; manufacturers Merck, Sanofi, and Novartis’ decisions to ask or require covered entities to hand over 340B contract pharmacy claims data to a third party or risk losing 340B pricing at contract pharmacies; and anticipated decisions by some manufacturers to provide 340B pricing in the form of rebates, not discounts.

“Manufacturers have chosen…to pick and choose which 340B requirements to follow, and to impose new requirements on health centers in order to save themselves money,” Van Coverden said. “Unless Congress and [the U.S. Health Resources and Services Administration] HRSA take immediate and strong action, the 340B program may collapse and tens of millions of Americans will see their prescription drug prices skyrocket. For many, especially during a time like this, lack of access to vital medications could very well result in death.”

On the legislative front, Van Coverden referred to the Sept. 3 letter from three U.S. House Energy & Commerce (E&C) Committee Democratic leaders to U.S. Health and Human Services (HHS) Secretary Alex Azar warning that letting manufacturers “pick and choose” which 340B program requirements they will comply with “could set us on a treacherous path.”

“Several ‘Dear Colleague’ letters addressed to [Pharmaceutical Research and Manufacturers of America] PhRMA and HHS are currently circulating on Capitol Hill,” he said. “But much more must be done to protect the health and lives of our 30 million patients.”

Last Friday, U.S. Sen. Richard Blumenthal (D-Conn.) criticized the recent spate of 340B actions by drug manufacturers during an event with state lawmakers at a Middletown, Conn., health center. A local newspaper covered Blumenthal’s remarks.

“What is happening here is one more instance of Big Pharma trying to profiteer at the expense of our most vulnerable people,” said Blumenthal. “Why are they breaking the law to block needy people from having the drugs they need?” Blumenthal asked. “To make more money. It’s that simple. These drugs are not a luxury or convenience. They are life-saving.”


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Stakeholders Respond to Whirlwind of 340B Developments

Institutions and individuals representing health care provider and drug industry stakeholders have issued statements about the recent spate of 340B program developments or responded to our requests for comment on the developments.

Eli Lilly and Co.

340B Report asked drug manufacturer Lilly for comment on HRSA’s announcement last week that it was considering whether Lilly’s and other manufacturers’ recent 340B actions violate the 340B statute and whether sanctions may apply.

“There is no statutory obligation to allow 340B priced product to be shipped to contract pharmacies,” a Lilly spokesman said. “The statute requires that manufacturers must offer 340B ceiling prices to covered entities, which Lilly is continuing to do. And, while HRSA has provided sub-regulatory guidance that, in HRSA’s view, essentially permits contract pharmacies to acquire product at 340B prices, this guidance is inconsistent with the statute and not legally binding. Lilly has been open and transparent with HRSA regarding the design and implementation of this decision and its position on compliance with the statute.”

American Hospital Association

The American Hospital Association (AHA) yesterday asked U.S. Health and Human Services (HHS) Secretary Alex Azar again to take “swift and decisive action” to halt drug manufacturers’ “pernicious action” to limit distribution of 340B drugs to AHA member hospitals.

In late July, AHA asked Azar in a letter to address Lilly’s decision to stop providing 340B pricing on its drug Cialis when it is shipped to contract pharmacies and manufacturers Merck and Sanofi’s decisions to request or demand covered entities’ contract pharmacy claims data. AHA accused the three companies of “publicly flaunting the 340B statute and HRSA 340B programmatic guidance and taking matters into their own hands to suit their best interests.”

In its Sept. 8 follow-up letter to Azar, AHA noted that, since late July, other manufacturers have adopted similar “abusive tactics.” Even if the companies have valid concerns about duplicate 340B discounts and Medicaid rebates on the same products, “there is no legitimate basis for these companies to limit the distribution of prescription drugs to 340B hospitals or demand superfluous paperwork,” AHA wrote.

AHA acknowledged, as we first reported last week, that the Health Resources and Services Administration (HRSA) is looking into whether recent manufacturer policies to restrict access to 340B pricing at contract pharmacies violates the 340B statue and whether sanctions may apply. It nonetheless urged “swift and decisive action to halt these pernicious tactics so as to prevent other manufacturers from following suit.”

Pharmaceutical Research and Manufacturers of America

340B Report asked Pharmaceutical Research and Manufacturers of America (PhRMA) for comment about HRSA’s announcement that it was considering whether drug manufacturers’ recent actions violate the 340B statute, and the House Energy & Commerce committee Democratic leaders’ letter to HHS Secretary Azar expressing “strong concerns” about the manufacturers’ actions.

“We have long advocated for fixes to the 340B program to ensure it is working as Congress intended and helping needy patients, which includes revisiting the role of contract pharmacies,” a PhRMA spokeswoman said. “Over the years, the exponential growth in the number of contract pharmacies participating in 340B, including the largest for-profit chain pharmacies in the country, has raised concerns about the integrity of the program. Unlike laws and regulations, agency guidance cannot impose any binding requirements on the public and lack the force and effect of law. This is important to note given contract pharmacy arrangements were born out of guidance issued by the Health Resources and Services Administration, and contract pharmacies are not mentioned in the 340B law or in any regulations.”

American Society of Health-System Pharmacists

The American Society of Health-System Pharmacists (ASHP) on Sept. 3 applauded HRSA and the House Energy & Commerce Committee Democratic leaders “for taking steps to safeguard the 340B program.”

“We are deeply concerned by what appears to be a coordinated effort by manufacturers to restrict the supply of essential drugs to safety net providers,” said Tom Kraus, Vice President of ASHP’s Government Relations Division. “It is unconscionable that manufacturers are compromising patient care for their own financial benefit. We hope the investigations by HRSA and Congress will shine a light on the threat these manufacturer actions pose to patient access and the patient services supported by 340B savings.”

AIDS Healthcare Foundation

AIDS Healthcare Foundation (AHF) said yesterday it was pleased by the House Energy & Commerce Committee Democratic leaders’ letter to Azar and HRSA’s announcement that it was investigating manufacturers’ recent 340B actions.

“All these unprecedented moves by drug manufacturers are a brazen attempt to take advantage of chaotic times—a pandemic and civil unrest,” said Scott Carruthers, AHF Chief of Pharmacy and Senior Manager.

“It’s no secret that drug companies don’t like the 340B program, because providing discounts to safety net providers eats into their profits,” said Tracy Jones, AHF Senior Manager and Executive Director of the AIDS Task Force of Greater Cleveland. “In the current chaotic climate, drug companies perceive the henhouse as unguarded, and so they are moving in like the fox to pretend to guard it. They aren’t interested in guarding it. They are interested in dismantling it.”

America’s Essential Hospitals

America’s Essential Hospitals President and CEO Bruce Siegel on Sept. 3 thanked House Energy & Commerce Chairman Frank Pallone (D-N.J.) on Twitter for Pallone’s and his committee colleagues’ letter to Azar about drug manufacturers’ recent 340B actions.


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Two TPAs Block All Lilly NDCs from 340B Contract Pharmacy Replenishment Systems

At least two 340B third party administrators (TPAs) have informed covered entity clients during the past week that they have excluded all Eli Lilly NDCs from the clients’ 340B contract pharmacy inventory replenishment systems. Pharmacy consultants and attorneys for 340B entities say the moves by Wellpartner and Walgreens 340B Complete appear to be designed to prevent covered entities from overpaying for Lilly medications, and to help customers track the financial impact of Lilly’s action.

Both Wellpartner and Walgreens 340B Complete told customers in recent email messages they were acting in response to Lilly’s announcement that, effective Sept. 1, it was ceasing distribution of all of its products to 340B contract pharmacies, apart from insulin. Both TPAs indicated they were blocking all Lilly products, including insulin.

Wellpartner told its clients that it will similarly block all AstraZeneca NDCs effective Oct. 1 in response to the manufacturer’s announcement that it would stop providing 340B pricing on its products shipped to contract pharmacies on that date.


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Kalderos’ 340B Rebate Service Goes Live

Prescription drug information technology company Kalderos notified 340B covered entities by email yesterday that 340B Pay, its service to let drug manufacturers provide 340B ceiling prices on their products as rebates instead of as discounts, is open for business.

Kalderos promotes 340B Pay as a collaborative solution for the duplication of 340B discounts and Medicaid, Medicare Part D, and commercial rebates on the same drugs. Duplicate 340B discounts and Medicaid rebates are prohibited by law; the other duplicate discounts and rebates are not. A number of 340B providers question the legality of substituting 340B rebates for discounts, and they say manufacturers cannot legally change statutorily defined 340B ceiling prices to offset Medicare Part D or commercial rebates. Providers also have questions about their and the federal government’s ability to validate manufacturers’ 340B rebate calculations.  National 340B provider organizations are also not pleased with Kalderos’ new initiative nor are they pleased with other third-party claims collections firms that have come into the marketplace recently.

340B Pay has two components—Request for covered entities and Verify for participating manufacturers. “Request streamlines the way 340B covered entities request and receive their 340B discounts for participating products and eliminates the risk for duplicate discounts to occur,” Kalderos’ Sept. 8 email to entities said. “Simply request eligible 340B discounts for participating products through the Request tool. Manufacturers can then directly approve and pay 340B discounts through a third-party payment partner.”

Kalderos yesterday also sent a separate email to executives at covered entities who authorize the entity’s participation in 340B. It links to a 340B Pay account creation page.

“Manufacturers electing to use our platform will notify the covered entities, the marketplace, and [the U.S. Health Resources and Services Administration] HRSA with a minimum of a 30-day notice prior to the program going live at the covered entity,” Steve Zielinski, Kalderos Senior Director Industry Relations, told 340B Report yesterday. “At this point we are asking covered entities to register for their Request account, review the terms of the Agreement and contact Kalderos if they have any questions with the registration process.”

Kalderos last week held a webinar about 340B Pay geared toward providers. It is holding another with prescription drug supply chain analyst Adam Fein this week Friday, Sept. 11. Kalderos has not yet announced which manufacturers have signed up for 340B Pay. Zielinski said it will not announce the names during this week’s webinar.

A Kalderos rival, Second Sight Solutions, recently launched a product to let manufacturers collect and scour 340B providers’ contract pharmacy claims data for duplicate 340B discounts and Medicaid, Part D, and commercial rebates. Providers that decline to supply the data risk losing 340B pricing on drugs shipped to contract pharmacies or other unspecified adverse action. Drug manufacturers Eli Lilly and AstraZeneca, meanwhile, are ceasing to provide virtually all 340B pricing on drugs dispensed by 340B contract pharmacies.