HRSA Determines Six Manufacturers’ Contract Pharmacy Policies Violate 340B Statute

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HRSA Determines Six Manufacturers’ Contract Pharmacy Policies Violate 340B Statute

Yesterday, HRSA Acting Administrator Diana Espinosa sent letters to Eli Lilly, AstraZeneca, Novartis, Novo Nordisk, Sanofi, and United Therapeutics making clear to the manufacturers that their restrictions on access to 340B pricing at contract pharmacies “have resulted in overcharges and are in direct violation of the 340B statute.”  As a result, HRSA is requiring the six manufacturers to:

  1. immediately begin offering its 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;
  2. comply with its 340B statutory obligations and the 340B Program’s civil monetary penalty (CMP) final rule by crediting or refunding all covered entities for overcharges that have resulted from the manufacturer’s policy; and
  3. work with all of their distribution/wholesale partners to ensure all impacted covered entities are contacted and efforts are made to pursue mutually agreed upon refund arrangements.

HRSA’s letter notes that “[n]othing 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.”  HRSA reiterated its longstanding position that the 340B statute requires manufacturers to honor 340B purchases, regardless of the dispensing mechanism.  Furthermore, HRSA notes that the 340B Program Ceiling Price and CMP Final Rule specifies that a manufacturer’s failure to provide drugs at or below 340B ceiling prices may result in overcharging and is thus a violation of a manufacturer’s obligation under the 340B statute.  Failure to abide by the three requirements stated above could, therefore, result in CMPs imposed for each instance of overcharging by the manufacturer.  The letters give each manufacturer until June 1, 2021 to update HRSA on its plan to restart selling, without restriction, drugs at 340B prices to covered entities that dispense medications through contract pharmacy arrangements.

HRSA’s letters come nearly one-year after manufacturers began restricting access to 340B pricing at contract pharmacies.  Four of six the manufacturers (AstraZeneca, Lilly, Sanofi, and Novo Nordisk) have filed lawsuits challenging the final Administrative Dispute Resolution (ADR) regulations that were issued late last year and/or the HHS Office of General Counsel Advisory Opinion issued last December supporting the contract pharmacy program.  It is too early to tell whether the manufacturers will comply with the directives laid out in the letter or will continue to challenge HRSA’s position through their lawsuits or otherwise.

Given this uncertainty, this presents a wonderful advocacy opportunity for covered entities to thank HHS for issuing these letters and showing its support for the 340B program and the vulnerable patient population it serves.  CV340B will be drafting a sign-on letter to HHS to encourage the agency to follow through with its threat to hold the manufacturers accountable for their actions and enforce the requirement that manufacturers refund or credit covered entities for lost 340B savings.  In the meantime, covered entities and their 340B administrators should carefully monitor how the six manufacturers react to HRSA’s letters before placing 340B orders for contract pharmacy drugs with them again.

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