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BREAKING: Major Developments in 340B Hospital Lawsuit and in 340B Contract Pharmacy Dispute

U.S. Appeals Court Won’t Rehear Lawsuit Over Medicare Payment Cuts for Hospitals’ 340B-Purchased Drugs

The full U.S. Court of Appeals for the District of Columbia Circuit late this afternoon denied a motion to reconsider a three-judge panel’s July 31 decision upholding the U.S. Centers for Medicare & Medicaid Services’ (CMS) nearly 30 percent cut since 2018 in 340B hospitals’ drug reimbursement under the hospital Outpatient Prospective Payment System (OPPS).

The only avenue left for the American Hospital Association (AHA), the Association of American Medical Colleges (AAMC), and America’s Essential Hospitals is to petition the U.S. Supreme Court to hear the case. The three groups and three health systems with hospitals enrolled in 340B sued to have the cuts declared illegal and reversed.

AHA said early this evening it did not have immediate plans to make a statement. AAMC and America’s Essential Hospitals could not be reached for comment. We reached out to the U.S. Health and Human Services Department (HHS) for comment.

In calendar year 2021, CMS proposes either continuing its average sales price (ASP) minus 22.5 percent Part B drug reimbursement rate for 340B hospitals, or reducing it further to an effective ASP minus 28.7 percent rate. AHA told CMS in comments on the proposal that the Part B drug reimbursement cuts since 2018 have cost 340B hospitals about $1.6 billion annually. “This proposal is estimated to take an additional $427 million from 340B hospitals and builds on flawed policy that has already resulted in devastating losses to 340B hospitals and their patients,” AHA said.

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AHA asks HHS to Impose 340B Financial Penalties Against Lilly, AstraZeneca, and Sanofi and Make them Pay 340B Refunds

The American Hospital Association (AHA) today asked U.S. Health and Human Services (HHS) Secretary Alex Azar to “immediately direct” drug manufacturers Eli Lilly and Co., AstraZeneca, and Sanofi “to cease charging hospitals and covered entities more than the 340B ceiling price for drugs being dispensed by a contract pharmacy” and “to issue refunds for each overcharge instance.” AHA also asked Azar to refer the matter to the HHS Office of Inspector General “for assessment of civil money penalties.”

HHS has received the letter and will respond to AHA directly, 340B Report has learned.

We have asked the three manufacturers for comment.

“Despite correspondence to the drug manufacturers from AHA, 340B Health and others affected by this conduct followed by a letter from the Department of Health and Human Services’ (HHS) General Counsel to Eli Lilly expressing ‘significant’ concerns, Eli Lilly, Astra Zeneca and Sanofi have yet to halt their conduct, which is plainly illegal,” the hospital association said.

AHA said the drug companies’ refusal to sell their drugs at 340B pricing to covered entities for delivery to patients through contract pharmacies violates the 340B statute and the 340B pricing agreements with the government that the manufacturers signed.

AHA said “the plain meaning of the 340B statute requires all manufacturers to sell their drugs to covered entities at the 340B ceiling price, regardless of whether the drug is furnished at the entity’s pharmacy or at a pharmacy that has entered into a contract with the covered entity to furnish 340B drugs to the covered entity’s patients.” It said HHS’s Health Resources and Services Administration (HRSA) “has issued guidance on contract pharmacies that provides the correct interpretation of the statute. The statute does bind HHS and HRSA, and even without the guidance the statute would prohibit the manufacturers’ conduct.”

AHA pointed out that, when HRSA in 1996 issued 340B contract pharmacy final guidance, the agency “agreed with comments that ‘[a]s a matter of State law, entities possess[ed] the right to hire retail pharmacies to act as their agents in providing pharmaceutical care to their patients’ and that ‘even in the absence of Federal guidelines, covered entities have the right to contract with retail pharmacies for the purpose of dispensing 340B drugs.’”

AHA said “HRSA also agreed that ‘[b]y issuing the guidelines, [it was] not seeking to create a new right but rather [was] simply recognizing an existing right that covered entities enjoy under State law.’… Finally, HRSA stated that “[u]nder section 340B, we believe that if a covered entity using contract pharmacy services requests to purchase a covered drug from a participating manufacturer, the statute directs the manufacturer to sell the drug at the discounted price….(emphasis added).”

AHA said when HRSA in 2010 published final guidelines regarding covered entities’ right to use multiple contract pharmacies, it again said the 340B statute directs manufacturers to sell products at or below the 340B ceiling price to covered entities using contract pharmacy services.

“Until now, Lilly and all other manufacturers have followed HRSA’s interpretation of the statute,” AHA said. “The refusal to follow the law is harming vulnerable communities and health care providers that the HHS General Counsel noted are already ‘struggling financially.’”

AHA asked to meet with Azar and his staff “to discuss what steps HHS intends to take to address this situation. We believe we can work together with you to halt this illegal conduct.”

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