AHA Slams Big Pharma Over Efforts to Limit 340B Drug Discounts

The American Hospital Association (AHA) is demanding that five major pharmaceutical companies cease new efforts to curtail 340B drug discounts.

In the past couple of weeks, Merck, Eli Lilly, Sanofi, Novartis, and AstraZeneca have all notified hospitals that they will no longer provide discounts to hospitals in the 340B program if they do not abide by new requirements set by each company.

AstraZeneca, for example, announced earlier this month that, starting October 1, 2020, it would cease distribution of 340B drugs to contract pharmacies if hospitals already had their own in-house pharmacy. Hospitals without an in-house pharmacy would also see their 340B drug shipments decrease.

Effective July 1, 2020, Eli Lilly also stopped shipping erectile dysfunction drug Cialis to pharmacies contracted for use by hospitals in the 340B program.

The other pharmaceutical companies have told hospitals that they want more detailed reporting from hospitals on 340B drugs distributed through their contract pharmacies. The information will be used to verify that the companies are not paying duplicate discounts on 340B drugs, according to recent reports.

In separate letters to each of the five companies, AHA said that it “is an outrage that this action is being taken at a time when hospitals are in the midst of their response to the COVID-19 public health emergency, which has further demonstrated the fractured, inadequate state of the prescription drug supply chain,” and that the pharmaceutical companies’ actions are “attempting to compel hospitals to divert critical resources away from the pandemic.” 

The Association urged the companies to cease implementation of the new requirements on hospitals immediately and work to ensure that 340B drugs are available and accessible to vulnerable patient populations.

“For a drug company to jeopardize hospitals’ ability to care for patients who are already under severe economic, emotional and health-related strain during a public health crisis is unconscionable,” AHA told each of the pharmaceutical companies.

The 340B Drug Pricing Program has been a contentious issue in the healthcare industry for years, with critics of the program oftentimes arguing that hospitals abuse the program to boost profits. A Government Accountability Office report from early this year also found that weak oversight of the program may be giving discounts to hospitals that are not eligible to participate.

But hospitals have praised the program for increasing drug accessibility and affordability.

Under the program, pharmaceutical companies participating in Medicaid must provide discounts on outpatient drugs to covered entities, which include hospitals treating a disproportionate amount of uninsured and low-income patients.

Hospitals and other covered entities can achieve average savings of 25 to 50 percent, which are then be used to for other care quality and affordability improvements, the AHA reports.

Despite these benefits, some stakeholders, including the current administration, have sought to scale back the program.

Just recently, HHS cut Medicare reimbursement rates to 340B hospitals by nearly 30 percent in the 2018 Outpatient Prospective Payment System final rule. Hospitals challenged the rule in court but failed to convince a federal judge to reverse the payment reductions.

The latest hit to the program is from pharmaceutical companies themselves, which have long fought to reform it.

But hospitals are contending that the actions violate federal law.

“It is apparent that these actions are in direct conflict with the statute and the Health Resources and Services Administration’s (HRSA’s) 2010 guidance on contract pharmacy arrangements,” the AHA stated in its letter.

“By any reading, the 340B statute is clear that drug manufacturers participating in the Medicaid program must enter into agreements with the Department of Health and Human Services (HHS) that ‘require that the manufacturer offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price,’” the Association wrote.

Additionally, the AHA cited implementing guidance from the Health Resources and Services Administration (HRSA), which runs the program, that notes: “Under section 340B, if a covered entity using contract pharmacy services requests to purchase a covered outpatient drug from a participating manufacturer, the statute directs the manufacturer to sell the drug at a price not to exceed the statutory 340B discount price.”

According to the AHA, the guidance also clarifies that 340B-covered entities are responsible for ensuring that the entity meets program requirements, including efforts to ensure against duplicate discounts. HRSA is then responsible for ensuring compliance.

Recent reports, however, say HRSA stated that it lacks the authority to legally enforce 340B program guidance.

340B Health, a trade group representing hospitals in the program, said it will pursue legal or legislative action if the administration fails to address the violation of the law.