Federal 340B Program Updates

The Section 340B federal discount drug program (340B program) is a federal program under which pharmaceutical manufacturers enter into contracts with the U.S. Department of Health & Human Services (HHS) in exchange for obtaining Medicaid and Medicare drug coverage.  Pursuant to these contracts, drug manufacturers agree to provide discounts on drugs purchased by Covered Entities, or healthcare organizations such as federally qualified health centers and hospitals who serve vulnerable patient populations from rural and low income areas.  Covered Entities, in turn, enter into agreements with Contract Pharmacies to provide pharmacy services to the Covered Entities’ patients.  While the number of pharmacies contracted with Covered Entities has increased in recent years, drug manufacturers have also been refusing to provide discounts.  Drug manufacturers seek to only provide discounts to one pharmacy for every Covered Entity, and have stated they will only provide discounts to Covered Entities that do not have in-house pharmacies.  In recent months, manufacturers have filed lawsuits challenging HHS’ policies and rules under the 340B program.

More specifically, last year, HHS implemented a rule establishing processes for Contract Pharmacies to sue drug manufacturers in order to obtain the same discounts that Covered Entities receive under the 340B program.  The HHS rule also created panels to resolve 340B program disputes.  However, pharmaceutical manufacturer Eli Lilly succeeded in persuading a federal Indiana judge to rule that it would be irreparably harmed if HHS was allowed to decide discounts on drugs before Eli Lilly had a chance to comment on the HHS rule, in Eli Lilly and Co. et al. v. Xavier Becerra et al. in the U.S. District Court for the Southern District of Indiana. 

Despite the Indiana judge’s ruling, disputes surrounding the 340B program are far from over.  In fact, more recently, a healthcare technology company filed a complaint in federal court in the District of Columbia challenging an HHS policy that precludes drug manufactures from requiring Covered Entities to give them claims data when Covered Entities ask for statutory ceiling prices.  340B program ceiling prices are the maximum amount manufacturers can charge Covered Entities for purchases of 340B covered drugs.  However, the federal government has indicated that drug manufacturers cannot put restrictions on 340B Covered Entities from asking for ceiling prices.  Additionally, various pharmaceutical manufacturers continue in their efforts to limit drug discounts to a distinct number of Contract Pharmacies.

The impact of court rulings surrounding the 340B Program may affect Contract Pharmacies and Covered Entities alike.  Further, it is clear that drug manufacturers’ position to limit Contract Pharmacies that contract with Covered Entities has the potential to negatively impact the 340B program overall all and to the detriment of beneficiaries. 

How Frier Levitt Can Help

Frier Levitt assists entities with the negotiations of contracts between Contract Pharmacies and Covered Entities, and helps Contract Pharmacies take action to receive drug discounts.  If you are participating in the 340B program and have any issues discussed above, contact Frier Levitt.