Back in the simpler days of 340B, drug manufacturers would publish notices for covered entities on the HRSA website to convey important information, like price recalculations or new NDC numbers for its products. The system worked smoothly for many years, but times have changed.
Last summer, the 340B world was rocked when Eli Lilly issued a limited distribution plan notice, aimed exclusively at covered entities, saying it would no longer sell Cialis, its popular erectile dysfunction drug, at 340B ceiling prices through contract pharmacies. In a move that seemed counter to its longstanding guidance of not allowing manufacturers to discriminate based on 340B status, HRSA published the notice.
Two months later, the drug maker doubled down, saying it would no longer extend 340B pricing on any of its drugs to contract pharmacies. In both cases it allowed covered entities that lacked their own in-house outpatient pharmacy to designate a single contract pharmacy for patients.
We all know where things have gone since then. Several other manufacturers have followed Lilly’s example, bypassing established HRSA guidance and unilaterally placing restrictions on 340B drug access. While most are similarly limiting the sale of 340B-priced drugs at contract pharmacies (Novo Nordisk and AstraZeneca), others like Merck, Sanofi, Novartis and United Therapeutics are demanding that covered entities turn over claims data from contract pharmacies.
Three models of limiting access
Generally speaking, there are three models being promoted to try and limit access to 340B drugs:
- Data — Manufacturers are using third-party technology companies to collect data, including payer/insurance information, as a requirement for all contract pharmacy transactions.
- Limited access — Companies like Eli Lilly, AstraZeneca and Novo Nordisk have said they’ll allow only a single contract pharmacy, if the covered entity lacks its own in-house pharmacy, or will set a distance limit, such as a 40-mile radius, from the parent site.
- Rebate — Supporters are touting a model under which covered entities would be forced to pay full WAC or GPO prices for drugs up front, then submit documentation to the drug makers to determine whether they qualify for a 340B discount in the form of a rebate.
No manufacturers have publicly committed to the rebate model yet, which is being pushed hard by a third-party technology vendor and is being closely watched in the industry. It’s an especially callous proposal that effectively asks the safety net covered entity to serve as the bank for drug manufacturers, all in the name of preventing duplicate discounts, above and beyond the 340B law.
A pattern of interference
This is not how 340B was supposed to work, but it follows years of drug manufacturers unilaterally bending the rules to limit sales of 340B drugs.
Around the middle of the last decade, amid rising numbers of drug shortages, manufacturers began announcing limited distribution networks for certain specialty drugs with safety considerations. These notices stipulated that only providers who underwent special training could prescribe those drugs and that their distribution would similarly be limited. The notices were often sent directly to covered entities as a way to get around HRSA’s policies forbidding manufacturers from discriminating against 340B covered entities during a time of rising drug shortages.
Today, limited distribution network notices are published to the HRSA website nearly every month.
Program proponents are taking a variety of approaches to counter these actions. At year’s end, the Department of Health and Human Services (HHS) published an advisory opinion clarifying that 340B discounts do apply to contract pharmacies. While it lacks the weight of the law, the move was seen as a reproach of drug makers, some of whom have responded by filing suit against HHS.
After a huge outcry from advocates and pleas for help from covered entities, HRSA finally issued orders on May 17 via letters sent to the six drug companies that had imposed 340B pricing restrictions. The letters, sent to AstraZeneca, Lilly, Novartis, Novo Nordisk, Sanofi and United Therapeutics, stated that the companies’ actions “have resulted in overcharges and are in direct violation of the 340B statute.”
The letters are the strongest response to date by HHS in the drug manufacturers’ ongoing attack on the 340B industry. The HRSA letters state that the drug companies are out of compliance and must:
- Come into compliance and start selling drugs at 340B prices, or
- Face Civil Monetary Penalties (CMPs) of up to $5,000 per instance of overcharging
- Credit or refund covered entities for all overcharges
While the letters state that drug companies should “immediately” begin selling drugs at 340B prices, it also gave them a deadline of June 1 to respond to HRSA.
HHS Secretary Xavier Becerra, along with his senior appointees for leadership positions, has voiced his strong support for 340B, and we are pleased with the strength and content of the HRSA letters. At the same time, the larger battle over 340B contract pharmacy access will continue. AstraZeneca moved quickly to file an emergency motion on May 19 to block the HRSA order, while Lilly and Sanofi filed motions on May 20, that are pending. It is expected that others will take similar action.
These latest drug company responses to the HRSA filings are slightly different, but all ask for the same net result — namely that HRSA stop enforcing the contract pharmacy requirements and imposing CMPs until the larger questions surrounding contract pharmacies, at issue in lawsuits pending by PhRMA and four of the drug companies, are resolved. These issues include the legality of the Alternative Dispute Resolution (ADR), which was placed on hold by a Federal judge on March 16, and the December 2020 HHS Advisory Opinion supporting 340B.
We’re here to help
In the meantime, Sentry is committed to supporting our customers every step of the way, whether you’re trying to abide by the manufacturers’ requests for claims data or are continuing to exclude claims. We can help by providing you with reports from our system that demonstrate the impact of lost savings by patient, by prescription and what you should have paid.
The 340B program is heating up this summer, but we’re here to help you fight for what we know is right.