Drug Manufacturers’ 340B Contract Pharmacy Actions

Saturday, September 26, 2020

In current weeks, a number of drug producers have taken actions that impression coated entities collaborating within the 340B Drug Pricing Program (340B Program) and their contract pharmacies. Eli Lilly and Co. (Eli Lilly) and AstraZeneca knowledgeable coated entities that they are going to cease replenishing medication to 340B contract pharmacies and restrict distribution to coated entities and their baby websites solely. As well as, Merck, Sanofi, and Novartis requested that coated entities share contract pharmacy claims knowledge by means of Second Sight Options’ 340B ESP platform. Sanofi explicitly indicated that failure to take part would end in the same refusal to replenish contract pharmacy claims.

In response, a number of supplier teams and policymakers have written to the Division of Well being and Human Companies (HHS) and the Well being Sources and Companies Administration (HRSA) asking them to intervene. HHS just lately responded to a few of these actions. This consumer alert supplies an summary of those developments and impression on 340B Program stakeholders.

Background

Part 340B of the Public Well being Service Act requires drug producers to promote coated outpatient medication to coated entities at or under an outlined 340B ceiling value.1 Since 1996, HRSA has permitted coated entities to contract with a pharmacy to supply providers to 340B eligible sufferers.2 In steering, HRSA allowed contract pharmacies to entry medication at 340B costs by means of what is called a “invoice to/ship to” mannequin.3 Underneath the “invoice to/ship to” mannequin, the drug producer would invoice the drug to the coated entity however ship the drug to the contract pharmacy.

Though coated entities had been initially restricted to utilizing an in-house pharmacy or contracting with a single contract pharmacy, HRSA issued contract pharmacy steering in 2010 allowing coated entities to contract with a number of contract pharmacies.4 In each the 1996 and 2010 steering, HRSA argued that it was neither imposing extra burdens upon drug producers nor creating new rights for 340B coated entities by permitting them to contract with contract pharmacies.5

Drug Producer 340B Actions 

Carve out Contract Pharmacies

In July, Eli Lilly introduced that it will stop distribution of its erectile dysfunction drug Cialis to 340B contract pharmacies and restrict distribution to coated entities and their baby websites solely, efficient July 1. Eli Lilly subsequently issued a discover informing coated entities that it will be limiting distribution of “all 340B ceiling priced merchandise” to coated entities and their baby websites efficient September 1. Eli Lilly mentioned it will permit replenishment of a single contract pharmacy companion for entities that lacked an in-house outpatient pharmacy in addition to replenishment of insulin merchandise offered, in key half, that: 340B eligible sufferers are capable of purchase the insulin on the 340B value (i.e., on the present penny value); neither the coated entity nor the contract pharmacy marks-up or prices a dishing out price for the insulin; and no insurer or payer is billed.

Following within the footsteps of Eli Lilly, AstraZeneca despatched letters to coated entities and wholesalers in August informing them that, starting on October 1, it will additionally cease replenishing medication to 340B contract pharmacies and restrict distribution to coated entities and their baby websites solely. In a subsequent discover despatched to coated entities, AstraZeneca recognized an inventory of excluded merchandise from contract pharmacy replenishment, which notably didn’t embody all of AstraZeneca’s retail portfolio. Like Eli Lilly, AstraZeneca additionally provided a carve-out for replenishment of a single contract pharmacy companion for coated entities that lacked an in-house outpatient pharmacy.

Knowledge Sharing Necessities

Merck, Sanofi, and Novartis have despatched notices to coated entities requiring that they share contract pharmacy claims knowledge for his or her merchandise by means of Second Sight Options’ 340B ESP platform. The drug producers word that the information request is a part of a program integrity initiative. On this regard, nonetheless, the drug producers point out that they’re requesting pharmacy claims knowledge to forestall not solely Medicaid duplicate reductions, that are addressed by statute, but additionally Half D and industrial “duplicate reductions” in cases through which the producer by contract has agreed with the pharmacy profit supervisor to not pay rebates on the 340B Program claims.

Merck requested that coated entities take part by August 14 whereas Sanofi and Novartis requested that they take part by October 1. Merck and Novartis each indicated that they might take additional motion in opposition to coated entities that don’t take part by August 14 and October 1, however their notices didn’t point out if, and if that’s the case, when, they’d search such treatments. Sanofi, nonetheless, explicitly indicated that it’ll stop replenishment to contract pharmacy places—akin to Eli Lilly’s and AstraZeneca’s actions—for entities that don’t take part by October 1. 

These knowledge sharing necessities elevate sensible challenges, together with assessment of the association below well being care privateness regimes, the acceptance of the 340B ESP Phrases of Use, and the authority of coated entities below present agreements with contract pharmacy companions and/or their third-party directors (TPAs) to share the information. Some contract pharmacy companions and/or TPAs have knowledgeable coated entities that they won’t authorize the discharge of sure knowledge.

HRSA’S Preliminary Response to These Actions

In early responses to those developments, HRSA indicated that, though its 2010 steering stays in impact, it isn’t legally enforceable.6 HRSA famous that, except there’s a clear violation of the 340B statute, its authority to implement steering is proscribed, including that it’s unable to develop enforceable coverage with out authority.7 Most just lately, HRSA indicated that it’s “contemplating” whether or not producers’ insurance policies violate the 340B statute and whether or not sanctions might apply.8 

On this regard, over the previous few years, HRSA has more and more taken the place that it lacks statutory authority to challenge and implement 340B Program subregulatory and regulatory steering. As mentioned in additional element in our consumer alert right here, in 2019, for instance, HRSA declined to additional defend destructive audit findings in opposition to Genesis Well being Care, a South Carolina-based Federally Certified Well being Heart, which was perceived to be because of HRSA’s lack of statutory authority to implement a extra restrictive affected person definition by means of the audit course of.9 As well as, HRSA has not proposed to make 340B Program eligibility adjustments as a part of its annual price range justifications because it had achieved in earlier years.10 

Stakeholder and Congressional Response

However HRSA’s preliminary place, a variety of supplier teams and policymakers have despatched letters to HHS and HRSA asking them to intervene on this matter. A 340B coalition, together with 340B Well being, the American Hospital Affiliation, and several other supplier teams, requested HHS to ban producers from taking motion in opposition to coated entities that don’t submit their knowledge to 340B ESP and to forestall them from limiting 340B pricing.11

Following up, congressional leaders in each the Home and Senate have additionally requested HHS and HRSA to step in. Within the Home, a bipartisan group of greater than 243 members of Congress, together with a variety of Republicans, despatched a letter to HHS and HRSA on September 12 stressing that these producer actions violate the 340B statute.12 This letter adopted a letter by Home Power and Commerce Committee leaders expressing their issues over these actions and noting that “Congress has offered [HHS] with instruments, together with producer auditing rights and civil financial penalties, to implement [the 340B statute].”13

Within the Senate, a bunch of 28 senators, together with Senate Majority Whip John Thune (R-SD)—the Senate’s second-highest rating Republican—wrote to HHS on September 18 urging the division to take “instant and acceptable enforcement motion.”14 A gaggle of 22 Democratic senators wrote to an trade commerce affiliation requesting a response “relating to steps being taken by the trade to finish denials of 340B pricing for medication distributed by means of contract pharmacies and calls for for contract pharmacy claims knowledge no later than September 29, 2020.”15

HHS Responds to Contract Pharmacy Carve-Outs 

In response, on September 22, HHS took the extraordinary step of constructing public its most up-to-date response to Eli Lilly’s request for a pre-enforcement advisory opinion as as to whether its actions would topic it to sanctions. In its response letter, HHS famous that HRSA has “important preliminary issues” with Eli Lilly’s current actions. HHS mentioned that HRSA is continuous to assessment Eli Lilly’s coverage and has but to make a remaining dedication as to any potential enforcement motion.16 Nevertheless, HHS pressured that Eli Lilly mustn’t view this as “in some way endorsing Lilly’s coverage,” including that “Lilly’s determination to interpret HRSA’s responses as tantamount to definitive company settlement with Lilly’s place is wrong.”17 HHS additionally expressed its view that Eli Lilly’s timing for the pricing adjustments is “insensitive to the current state of the financial system,” highlighting particularly the value of Lilly’s inventory and elevated revenue through the course of the COVID-19 pandemic.18

Conclusion 

As famous above, Merck initially set a deadline of August 14 for coated entities to start sharing their contract pharmacy knowledge, and Sanofi and Novartis are requiring that coated entities take part of their pharmacy claims knowledge sharing program by October 1. Likewise, AstraZeneca was poised to take motion to terminate contract pharmacy replenishment of sure of its medication efficient October 1. How producers will reply to the congressional and administrative response is but to be seen. 

1 See 42 U.S.C. § 256b(a).
2 See 61 Fed. Reg. 43,549 (Aug. 23, 1996).
3 Id.
4 See 75 Fed. Reg. 10,272 (Mar. 5, 2010).
5 See 61 Fed. Reg. 43,549, 43,550 (Aug. 23, 1996); 75 Fed. Reg. 10,272, 10,273 (Mar. 5, 2010). 

6 See Tom Mirga, HRSA Says its 340B Contract Pharmacy Steerage Is Not Legally Enforceable, 340B REPORT (July 9, 2020), right here.
7 Id.
8 See Tom Mirga, HRSA is Investigating Whether or not Producer Insurance policies to Prohibit 340B Pricing at Contract Pharmacies Violates Statute, 340B REPORT (July 9, 2020), right here.
9 See Genesis Well being Care, Inc. v. Azar, No. 4:19-cv-01531-RBH (D.S.C. 2019). On 6 June 2019, HRSA voluntarily voided its audit findings and closed the audit, and the district court docket dismissed the case.
10 See HEALTH RES. & SERVS. ADMIN., FY 2021 JUSTIFICATION OF ESTIMATES FOR APPROPRIATIONS COMMITTEES, right here (final visited Sept. 2020).
11 See Letter from 340B Well being et al. to Alex M. Azar, Sec’y, U.S. Dep’t of Well being & Hum. Res., right here (final visited Sept. 2020).

12 See Letter from Rep. David B. McKinley et al. to Alex M. Azar, Sec’y, U.S. Dep’t of Well being & Hum. Res., right here, (final visited Sept. 2020).
13 See Press Launch, Home Power & Commerce Comm., E&C Leaders to Azar: Shield the 340B Drug Pricing Program, right here, (final visited Sept. 2020).
14 See Press Launch, Senator John Boozman, Boozman Urges HHS to Shield 340B Prescription Drug Pricing Program, right here, (final visited Sept. 2020).
15 See Letter from Rep. Richard Blumenthal et al. to Stephen J. Ubl, President, PhRMA, right here, (final reviewed September 2020).
16 See HEALTH RES. & SERVS. ADMIN., HHS LETTER TO LILLY, right here, (final reviewed Sept. 2020).
17 Id.
18 Id.