Novartis is putting conditions on refunds to 340B hospitals for overcharges on its second-best selling drug.

HRSA Posts Novartis Notice About 340B Refunds on a Top-Selling Drug—With Contract Pharmacy Strings Attached (Updated)

UPDATE Tuesday, July 27, 2021, 1:45 p.m. Eastern—Drug manufacturer Novartis provided the following statement:

“Novartis recently notified the Health Resources and Services Administration (HRSA) that we inadvertently neglected to offer the 340B ceiling price to covered entity types added by the Affordable Care Act (ACA) dispensing Gilenya (fingolimod) .5 mg capsules following our voluntary removal of Gilenya from the Orphan Drug Designation List on December 9, 2020. Novartis is now offering refunds to qualified covered entities that purchased .5 mg Gilenya capsules from December 9, 2020, to June 30, 2021, and will make the 340B ceiling price available to such entities on a going-forward basis as well.

Once we became aware of the oversight, the company promptly and proactively corrected the situation and will work with covered entities to identify refund-eligible purchases and issue appropriate refunds in a timely manner. Novartis firmly supports the intent of the 340B program to serve the uninsured and other vulnerable patients.”

The U.S. Health Resources and Services Administration (HRSA) has posted drug manufacturer Novartis’ public notice to certain 340B hospitals that they might be eligible for refunds for overcharges on the company’s second-best selling drug—but only if the purchases comport with Novartis’ 340B contract pharmacy policy, which HRSA has said is illegal.

HRSA posted Novartis’ notice on Friday. It says the company is conditionally offering 340B rural referral centers, sole community hospitals, critical access hospitals, and free-standing cancer hospitals refunds for charges above 340B ceiling price, from Dec. 9, 2020, through June 30, 2021, on its blockbuster multiple sclerosis oral medication Gilenya.

Novartis’ U.S. net sales of Gilenya were $3 billion in 2020. Reuters reported in 2019 that the drug had a list price of $95,594 annually.

Novartis’ notice says hospitals’ eligibility for Gilenya refunds “is determined subject to Novartis’ contract pharmacy policy.” Under that policy, which has been in effect since Nov. 16, Novartis honors hospital 340B contract pharmacy arrangements only if the contract pharmacy is located within a 40-mile radius of its parent facility. It does not restrict contract pharmacy use for other types of covered entities such as community health centers and Ryan White clinics.

On May 17, HRSA sent Novartis a letter informing the drug maker that its contract pharmacy actions “have resulted in overcharges and are in direct violation of the 340B statute.” It said Novartis must credit or refund all covered entities for overcharges that have resulted from its contract pharmacy policy. Novartis is challenging HRSA’s findings in court.

Five other manufacturers also are suing over HRSA’s findings that their contract pharmacy actions violate the 340B statute. Some asked HRSA to post notices to covered entities describing their contract pharmacy policies and announcing the policies’ effective dates. HRSA declined to do so, except for Eli Lilly’s notice last year about its limits on 340B pricing for Cialis. United Therapeutics, for example, asked HRSA last November about its process for having a manufacturer notice posted on HRSA’s website. HRSA answered, “Manufacturers may submit notices to covered entities to for review. If deemed appropriate, HRSA will post to the Office of Pharmacy Affairs website.”

Hard Choice for HRSA?

HRSA’s decision to post Novartis’ notice about conditional refunds for overcharges on Gilenya raises the question whether HRSA, in a roundabout way, has “deemed appropriate” Novartis’ contract pharmacy actions. Novartis might make that argument in its lawsuit against HRSA.

Attorneys whose practices include the 340B program said this morning they believe HRSA faced a hard choice between not posting Novartis’ notice and thus depriving covered entities of information about potentially large refunds for 340B overcharges on Gilenya or posting Novartis’ notice despite its language about eligibility being subject to the company’s contract pharmacy policy.

“I don’t read it as an endorsement, and I think the government will makes this same argument if it comes up in court,” one attorney said.

“I think HHS has made its position clear on the contract pharmacy issue,” another attorney said. “Even as pharma, covered entities, and the government sort out the right answer on contract pharmacy utilization, the program still has to function for everything that is not subject to dispute. Not sure if there was an alternative pathway here.”

Orphan Drug Exclusion

The U.S. Food and Drug Administration (FDA) granted Gilenya an orphan drug designation in 2010. Rural and free-standing cancer hospitals—the types of entities to which Novartis’ notice applies—cannot obtain orphan-designated drugs at reduced 340B pricing. HRSA’s Office of Pharmacy Affairs (OPA) keeps a list of such drugs on its website, updated quarterly.

FDA’s orphan drug database lists Gilenya’s orphan designation status as “Designated/Withdrawn.” Novartis’ public notice to covered entities says, “Gilenya ceased to be on [OPA’s] Orphan Drug Designation List beginning December 9, 2020.” The notice does not explain why Novartis is offering 340B covered entities refunds for overcharges on Gilenya only from Dec. 9, 2020, through June 30, 2021.

Novartis’ notice says an entity “may be eligible for a refund” if it:

  • Was active in the Office of Pharmacy Affairs Information System (“OPAIS”) during the Refund-Eligible Period as one of the following covered entity types: (A) rural referral center (eligible under 42 U.S.C. § 256b(4)(O)), (B) sole community hospital (eligible under 42 U.S.C. § 256b(4)(O)), (C) critical access hospital (eligible under 42 U.S.C. § 256b(4)(N)), or (D) free standing cancer hospital (eligible under 42 U.S.C. § 256b(4)(M)); and
  • Purchased the NDC 0078-0607-15 (Bottle of 30 .5 mg GILENYA capsules) at a price greater than the 340B ceiling price while the entity was so-active on a date during the Refund-Eligible Period.

“Novartis requests that any such entity that made purchases that otherwise would have been eligible for 340B pricing at the time of purchase submit a refund request to the wholesaler from which it purchased Gilenya,” the notice says. “Refunds will be issued in the form of a credit in an amount equal to the difference between the original purchase price, net of any applicable discounts, and the 340B ceiling price.”

The word “eligible” in the first sentence of the passage above is footnoted. The footnote says:

  • “Eligible” is determined subject to Novartis’ contract pharmacy policy, effective 11/16/20.