Hospital Groups Urge Courts to Enforce 340B Drug Pricing Requirement

Five hospital organizations, including the American Hospital Association (AHA) and 340B Health, have urged two US Courts of Appeals to uphold the 340B drug pricing requirement for pharmaceutical companies to provide discounted drugs to safety-net hospitals through contract pharmacies.

The two groups, along with America’s Essential Hospitals, Association of American Medical Colleges, and Children’s Hospital Association, filed amicus briefs with the US Courts of Appeals for the Third Circuit and the District of Columbia Circuit.

The cases involved drug companies Sanofi, Novo Nordisk, Novartis, and United Therapeutics, all of which are among the 16 pharmaceutical manufacturers limiting 340B drug discounts under the drug pricing program.

The 340B Drug Pricing Program allows healthcare organizations to receive outpatient prescription drugs from participating drug manufacturers at discounted prices. In turn, the drug companies receive coverage for the drugs under Medicaid and Medicare Part B.

Starting in July 2020, several drug companies began imposing restrictions on the drugs that certain public and nonprofit hospitals could purchase through contract pharmacies.

The Health Resources and Services Administration (HRSA) sent enforcement letters to Sanofi, Novo Nordisk, Novartis, and United Therapeutics, ordering them to restore the discounts, but the companies challenged the letters in court.

The amicus briefs from the hospital organizations urged the courts to “hold that drug companies must go back to providing 340B discounted drugs to 340B providers, regardless of whether these vital medicines are being dispensed in-house or through outside pharmacies.”

Most of the drug companies have limited 340B discounts to a single contract pharmacy for hospitals that do not have an in-house pharmacy. Others have refused to provide drugs to contract pharmacies if hospitals have their own in-house pharmacies or are requiring more detailed reporting from hospitals to ensure the companies are not paying duplicate discounts.

The hospital groups asserted that the drug companies have imposed these restrictions for their own personal gain.

“Drug manufacturers are using their contract pharmacy policies to avoid having to pay congressionally imposed penalties they otherwise would (and should) face,” the organizations wrote in the amicus briefs.

The 340B program penalizes companies that raise their drug prices faster than the inflation rate by requiring manufacturers to sell the drugs at a higher discount to eligible hospitals, 340B Health explained. By limiting 340B drug discounts at community and specialty pharmacies, the drug manufacturers avoid these penalties.

Additionally, the amicus briefs stated that the companies are using the policies to avoid providing discounts on specialty drugs. Hospitals must purchase discounted specialty drugs at specialty pharmacies. Only one in five 340B hospitals have their own specialty pharmacy, the brief noted, highlighting the importance of contract pharmacies.

“The discounts at issue cost the profitable drug companies a drop in the bucket, but provide an indispensable lifeline for 340B hospitals,” the briefs stated.

Safety-net hospitals have faced significant financial losses due to the discount limits. A 340B Health report found hospitals lost up to $9 million. Critical access hospitals lost 39 percent of their community pharmacy savings and urban safety-net hospitals lost 23 percent of their savings.

Hospitals reported that these losses negatively impacted patients by forcing some to change medications to continue to afford their treatments.