U.S Assistant Surgeon General Krista Pedley (left) and OPA Acting Director Michelle Herzog told health care providers attending the 340B Coalition winter conference they back them in the 340B contract pharmacy fight.

News Alert: At 340B Conference, Feds Laud 340B Providers, Criticize Drug Makers Embroiled in Contract Pharmacy Fight

340B program federal administrators told health care providers attending the 340B Coalition winter conference in San Diego today that they are behind them in the battle with drug manufacturers over accessing 340B pricing in the contract pharmacy setting.

The U.S. Health and Human Services Department (HHS) “knows that your clinics and hospitals work with very limited resources to confront the most intractable health problems facing our most vulnerable and isolated patient populations—as has been evident in response to the COVID pandemic,” U.S Assistant Surgeon General Krista Pedley said during remarks at the 340B Coalition annual winter conference. Pedley, director of the U.S. Health Resources and Services Administration (HRSA) Office of Special Health Initiatives (OSHI), was joined by Michelle Herzog, acting director of OSHI’s Office of Pharmacy Affairs (OPA), the HRSA unit directly responsible for 340B.

Seven drug manufacturers are suing HHS and HRSA over HRSA’s findings that the company’s conditions on 340B pricing when covered entities use contract pharmacies violate the 340B statute. Just before Pedley and Herzog spoke at the conference, hospital group 340B Health President and CEO Maureen Testoni revealed that her association is prepared to move in the direction of a federal legislative solution to the 340B contract pharmacy stalemate. Hospitals historically have opposed re-opening the 340B statute out of fear the drug industry would hijack the process.

Familiar Talking Points

In her talk at the coalition conference, Pedley made points that 340B covered entities often make in their battles with the drug industry, noting for example that the 340B program “spans every congressional district.” None of the $40 billion in 340B drug purchases in 2020 “is directly tied to taxpayer dollars,” she said, and program growth “has brought down the cost of prescription drugs in the safety net community to the tune of a 25% to 50% discount off the regular cost of the drugs—ensuring that the intent of the program is met to stretch scarce federal resources for safety net providers and the safety net has access to discounted drugs for their patients.”

340B program growth also enables covered entities “to expand the reach of the safety-net and accomplish many key priorities—such as battling the COVID-19 pandemic on the frontlines and working toward ending the HIV/AIDS epidemic,” Pedley said.

Herzog’s remarks

Pedley introduced her long-time civil service deputy Herzog, whom Pedley said “has capably and admirably stepped into the role” of OPA acting director “until we complete our search for a new director of OPA.”

Herzog told conference attendees that OPA has “received hundreds of complaints from covered entities regarding their inability to obtain 340B pricing on products purchased from manufacturers with restrictive policies in place and dispensed through their contract pharmacies.”

She noted that HRSA issued 340B program violation letters to six manufacturers in May 2021. “After being given the opportunity to come into compliance with the 340B statute, the manufacturers refused” and filed lawsuits against HRSA, she said. “HRSA then referred them to the Office of the Inspector General” for possible imposition of civil monetary penalties, she said.

“HRSA remains steadfast in administering the program within our full authority and we will continue to work tirelessly alongside you to increase access to healthcare and lifesaving drugs for those that otherwise could not afford it,” Herzog said. “We will also continue to message to Congress the need for additional HRSA regulatory authority, as we have done in each president’s budget since fiscal year 2017, so that we can ensure program effectiveness for covered entities and the patients to whom they provide care.”

Covered entity groups have been lukewarm about giving HRSA broader regulatory over the 340B program. Several years ago, HRSA proposed omnibus 340B program guidance (ultimately withdrawn) that would have narrowed the 340B patient definition, disallowed 340B discounts on infusion services, put the onus on covered entities to prevent duplicate 340B discounts and Medicaid managed care rebates on the same drugs, and made other changes strongly opposed by 340B covered entity stakeholders.

Herzog told conference attendees that since OPA began requiring drug manufacturers to submit their calculated 340B ceiling prices for review, “HRSA has had a significant reduction in allegations of incorrect 340B prices in the market.” Since January 2019, manufacturers have had to submit their prices to HRSA as part of a transparency initiative spelled out in the Affordable Care Act. Spot checks of manufacturers’ 340B prices during that time “have resulted in refunds to covered entities,” she said. Earlier today, 340B Health’s Testoni cited the requirement of the publication of 340B prices to be an important factor in the high number of manufacturer refunds that have occurred over the past few years.

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