The Biden administration has alerted six drugmakers that they are violating federal law by restricting safety net providers’ access to products discounted under the 340B program.
The Health Resources and Services Administration (HRSA) sent letters Monday to the six drugmakers that sought to restrict access to 340B-discounted products to contract pharmacies, which are third-party entities that dispense drugs on behalf of 340B-covered entities. The letters are a major win for the hospital industry, which has been clamoring for the federal government to step in.
The manufacturers also must “immediately begin offering its covered outpatient drugs at the 340B ceiling price to covered entities through their contract pharmacy arrangements,” the letters said.
The letters appear to bring an end to an escalating feud between drugmakers and hospitals that started back in July 2020.
Major drug companies such as AstraZeneca and Eli Lilly announced they would no longer provide 340B-discounted products to contract pharmacies. Other drug companies aimed to limit sales unless the 340B-covered entity provided data on claims to assuage concerns over duplicative discounts.
Under 340B, a drug company agrees to give discounts on products to safety net providers such as rural hospitals or community health centers in exchange for participation in Medicare or Medicaid.
Overall, HRSA sent letters to AstraZeneca, Eli Lilly, Novartis, Novo Nordisk, Sanofi and United Therapeutics.
If the drug companies do not halt the moves, they could face a $5,000 penalty for every violation. HRSA wants the drug companies to provide an update on the situation by June 1.
The letters earned major plaudits from hospital groups.
“We continue to urge HRSA to ensure that the drug companies that denied appropriate discounts since these illegal practices began last year make impacted hospitals whole for the benefit of the vulnerable communities they serve,” the American Hospital Association (AHA) said in a statement Monday.
The AHA sued the federal government last year to spur federal action to clamp down on the restrictions, arguing that they blatantly violated the federal statute that governed the 340B program.
America’s Essential Hospitals, which represents safety net providers, also praised the move and pressed for drug companies to refund any overcharges made associated with the policies.
The pharmaceutical industry has criticized the 340B program as being too large and worries the benefits of the program do not go to patients. Hospital and provider groups counter that the program is vital to help safety net providers, which operate on thin margins and handle massive drug price increases.
Eli Lilly told Fierce Healthcare that it is in the process of reviewing the letter.
“Lilly 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,” the company said in a statement.
The other drugmakers did not immediately return a request for comment as of press time.