A mock-up of Request, one of the modules that make up Kalderos' 340B Pay service to enable drug manufacturers to provide 340B ceiling prices as rebates instead of as discounts.

Kalderos Sues HHS and HRSA, Says Ban on Drug Company Conditions on 340B Sales is Illegal

Pharmaceutical industry vendor Kalderos has asked a federal court to vacate a federal health agency’s policy prohibiting drug manufacturers from conditioning 340B drug discounts on covered entities’ submission of drug claims data.

Kalderos has created a service called 340B Pay to let drug companies provide 340B pricing as a post-purchase rebate rather than as price discount. 340B provider groups say this method of providing 340B pricing is illegal and are fighting against it. In November 2020, a bipartisan group of 217 U.S. representatives asked then-U.S. Health and Human Services Secretary Alex Azar to stop Kalderos and drug companies from changing 340B from a discount to a rebate program.

In an Oct. 6 complaint filed in federal district court in Washington, D.C., Kalderos describes the 340B program as “fundamentally broken…. since duplicate discounts and diversion of 340B drugs represent significant and ongoing problems.” Kalderos said it has communicated with HRSA’s Office of Pharmacy Affairs “over 20 times in a two and a half year span to describe its solution and answer both OPA’s and the [U.S. Health and Human Services] Department’s questions in detail.”

“OPA and the Department assured Kalderos that they were considering Kalderos’ model and would provide their analysis to Kalderos,” the complaint continues. “Kalderos repeatedly stated to OPA and the Department that the manufacturers with which it expected to contract would need an assurance from Defendants that those manufacturers would be permitted, as a condition of making 340B pricing available, to require use of the Kalderos platform. Kalderos repeatedly stressed to Defendants that it was being prevented from launching and effectively marketing its solution because manufacturers had not been advised by Defendants that Kalderos’ conditions of use were permissible.”

Says It Was Told HRSA Backed Allowing 340B Pay

Kalderos said it “was told that OPA had recommended in a memorandum to the Department that the Kalderos model be permitted.”

It repeats later in the complaint, “Kalderos was previously advised that HRSA had recommended to the Department that its model be acknowledged as entirely consistent with the 340B statute.”

340B Report asked HRSA this morning for comment on Kalderos’ statements that it was told that OPA and HRSA had recommended to HHS that 340B Pay be permitted. A HRSA spokesperson said the agency does not comment on pending litigation.

Kalderos says that in May 2021, HRSA began informing manufacturers that are restricting 340B pricing when covered entities use contract pharmacies “that no conditions—no matter how reasonable—could be imposed on the issuance of a 340B price.”

“In light of HRSA’s new blanket policy forbidding manufacturer conditions, Kalderos has largely been unable to move forward with its model, with multiple manufacturers stating that they would contract with Kalderos for services, but cannot in light of Defendants’ policy position,” the company says in its complaint.

The complaint says “Kalderos takes no position as to whether contract pharmacy transactions are contrary to the 340B statute. That issue is being litigated elsewhere by other parties. Kalderos’ solution will permit contract pharmacy transactions to be honored, subject only to reasonable conditions that permit an effective means to address duplicate discounts and diversion.”

Kalderos says HRSA’s “blanket policy forbidding manufacturer conditions” on 340B pricing is unlawful because it exceeds HRSA’s statutory authority. “Apart from requiring that the ceiling price be offered to 340B covered entities, the statute leaves the terms and conditions of 340B sales to the parties,” it says.

Kalderos says HRSA’s policy forbidding manufacturer conditions on 340B sales is arbitrary and capricious because HRSA

  • departed, without explanation, from the agency’s prior guidance and practices on manufacturer conditions
  • failed to provide a reasoned explanation of its policy.

Kalderos says it has standing to sue HRSA because HRSA’s policy causes economic injury to the company’s business. It says HRSA’s May 2021 letters to manufacturers in the disputes over 340B contract pharmacy is final agency action on the matter of whether manufacturers may impose conditions on 340B sales.

Kalderos asks the court to declare that HRSA’s policy precluding manufacturer conditions on 340B sales is unlawful, to issue an order vacating the policy, and to enjoin HRSA and HHS “from taking any enforcement action based on HRSA’s new policy on manufacturer conditions.”

Kalderos Statement

“We have been closely monitoring recent ongoing litigation between drug manufacturers and HHS regarding a change in HRSA policy, in particular the agency’s recent policy statements that 340B prices must be offered to covered entities without any conditions, no matter how reasonable those conditions may be,” Kalderos Vice President of Brand and Marketing Rhiannon Naslund said in a statement last night.

“This is a departure from both the statute and longstanding HRSA guidance, which allowed manufacturers to employ customary business practices, request standard information, and adopt appropriate conditions,” Naslund said. “To fully restore trust and transparency in the program, we must ensure covered entities have confidence that they are offered 340B prices and that drug manufacturers have confidence that they will not be subject to duplicate discounts and errors.”

“Through this litigation we hope to restore confidence that covered entities, in fact, are receiving 340B prices, that manufacturers can require covered entities to provide the necessary claims information to prevent any duplicate discounts, and that integrity can be restored to the 340B Program,” Naslund said.

Kalderos’ lawsuit adds to the heap of litigation over the legality of manufacturers 340B contract pharmacy actions and the legality of HRSA’s 340B program administrative dispute resolution system.

Aaron Vandervelde, a principal of 340B ESP, another drug industry vendor in the 340B contract pharmacy space, has filed friend-of-the-court briefs in AstraZeneca and Sanofi’s contract pharmacy lawsuits.