This program limits the prices drug manufacturers can charge for therapies sold to specific healthcare facilities, including public hospitals and community health centers.
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On December 30, 2020, the Department of Health and Human Services (HHS) issued an advisory opinion on the 340B Program, which was established by section 340B of the Public Health Service Act.
This program limits the prices drug manufacturers can charge for therapies sold to specific healthcare facilities, including public hospitals and community health centers. The opinion was designed to address whether drugmakers could refuse to sell drugs to those pharmacies at the “ceiling price.”
In short, the act was forcing drug companies to offer significant discounts on their drugs to contract pharmacies that work with specific hospitals that usually treat primarily low-income patients. The companies affected were concerned that 340B was overextending its original goal, and how it was basically putting money into hospitals, which were themselves criticizing efforts by drug companies to stop offering the decreased prices to contract pharmacies.
HHS has now withdrawn the advisory opinion “in light of ongoing confusion.”
On May 17, Health Resources and Safety Administration (part of HHS) Acting Administrator Diana Espinosa issued letters to AstraZeneca, Eli Lilly and Company, Novartis, Novo Nordisk and United Therapeutics threatening fines for restrictions on 340B pricing to hospital pharmacies covered by the 340B Program. The letter stated they “must immediately begin offering its covered outpatient drugs at the 340B ceiling price to covered entities through their contract pharmacy arrangements, regardless of whether they purchase through an in-house pharmacy.”
The letters quoted Section 340B(a)(1) of the Public Health Service Act that say drugmakers “shall…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.”
They went on to say that the requirement was not qualified, restricted, or dependent on how the covered entity, in other words, hospital or community health centers and their pharmacies, chose to distribute the outpatient drugs in question. “Nothing in the 340B statute grants a manufacturer the right to place conditions on its fulfillment of its statutory obligation to offer 340B pricing on covered outpatient drug purchased by covered entities.”
In other words, in a disagreement between drug companies and hospitals over 340B, HHS was siding with hospitals.
AstraZeneca, Eli Lilly, Novo Nordisk and Sanofi turned around and sued HHS over the issue.
Lilly stated it “has continued to offer 340B ceiling prices to all covered entities, and believes that patients — not large, for-profit contract pharmacies — should benefit from those 340B drug discounts.”
In an Endpoints News report, HHS responded saying it “never intended to do what plaintiffs in those suits allege: to create new, binding obligations on plaintiffs or to serve as the predicate for enforcement against those plaintiffs.”
The entire issue underlines an ongoing tension between drug companies, the government, and the role of pharmacy benefit management (PBM) organizations. PBMs typically act as middlemen between drug companies and pharmacies.
In theory, PBMs contract for lower rates with drug companies for drug, then passes that savings onto the pharmacies via rebates. These rebate deals often include 40% decreases in drug prices that the PBMs are expected to pass on to customers. But those savings, claim drug companies, are not consistently passed on to patients in the form of lower deductibles, co-payments, or coinsurance amounts.
In February 2019, when members of the Senate Finance Committee interrogated top executives at seven top drug companies, AbbVie, AstraZeneca, Sanofi, Merck, Pfizer, Johnson & Johnson, and Bristol Myers Squibb Company. All the drug companies pushed back on the drug-pricing issue by pointing at the roles of PBMs and contract pharmacies. They all suggested that if PBM rebates were eliminated, drug list prices would be drop.
