Manufacturers Challenge 340B Pricing

Merck, Sanofi, Eli Lilly, Novartis, and AstraZeneca have notified 340B hospitals that 340B Drug Pricing Program (340B Program) discounts may not be provided in the future for contract pharmacies.

Eli Lilly and AstraZeneca have notified covered entities that they will be limiting distribution of 340B priced drugs for contract pharmacy arrangements. 340B pricing will only be processed through a single contract pharmacy site for those covered entities that don’t operate their own on-site dispensing pharmacy. These manufacturers have claimed they aren’t obligated to provide 340B pricing to a covered entity’s contract pharmacies. 
  
Merck, Sanofi, and Novartis have notified covered entities requiring the upload of all 340B claims for contract pharmacy arrangements. While there are variations within the notices, two common themes are that manufacturers may only service one contract pharmacy with 340B pricing per covered entity and manufacturers may begin requesting that covered entities upload all 340B claims data to a portal for assessment. There is a risk of losing 340B pricing if the submission of data doesn’t occur. 

These manufacturer statements differ in tone from the one-on-one manufacturer settlements known to occur in 340B contract pharmacy. Typically, if it was determined that a manufacturer payback was required due to reversal of 340B claim eligibility, shipping anomalies, or 340B drug over-purchases, the covered entity would work with the manufacturer to resolve and settle the error in good faith. As it stands today, it seems the goal of the manufacturers is to call into question the growing scale of the 340B Program and heighten awareness of the 340B Program’s profitability. Manufacturers are running 340B covered entity claims data through software tools to determine if duplicate discounts have occurred. From these results, the software will determine if repayment to the manufacturer is required and from which party the payment should originate.

Contract pharmacies and drug store chains have urged the U.S. Department of Health & Human Services (HHS) to release clarification on the 340B statute. Both Wellpartner and Optum Specialty have advised clients to be tentative and mindful about obeying the manufacturer requests to upload claims. These companies specifically have concerns that uploading the requested claims data goes against contractual nondisclosure language within their pharmacy services agreements. 

Most recently, Congress provided significant bipartisan support urging HHS Secretary Alex Azar to support U.S. Health Resources and Services Administration (HRSA) to take action, stating “We urge HRSA to take immediate and appropriate enforcement action to halt these tactics and ensure safety-net providers are able to continue providing life-saving medications to patients across the country.” Congress, 340B covered entities, and advocacy groups are looking at HHS to step in and assert authority over contract pharmacy requirements. However, HHS’s authority has been recently put into question on multiple fronts, including how it oversees duplicate discounts. It’s expected that hospital groups and community health center groups will file lawsuits to halt these tactics as well.  

BKD recommends covered entities speak with legal counsel before responding to manufacturer data requests. If you have any questions, please reach out to a BKD Trusted Advisor™ or submit the Contact Us form below.

This information is only valid as of the date of this publication and is subject to change. The content was presented for illustrative purposes and your information only. Applying this information to your situation requires careful consideration of facts, circumstances, and timing of requirements. Consult your BKD advisor or legal counsel to apply to your unique situation and circumstances.