Drug manufacturer Merck is defending and hospital groups are condemning the drug company's decision to impose mandatory conditions on 340B pricing when hospitals use contract pharmacies.

Merck Defends and Hospitals Slam the Company’s Tougher 340B Contract Pharmacy Policy

Drug manufacturer Merck says it is imposing mandatory conditions on 340B pricing when hospitals use contract pharmacies due to “very low” participation in its voluntary 340B program integrity initiative.

Groups that represent hospitals in the drug discount program say Merck is breaking federal law. The U.S. Health and Human Services Department (HHS) should stop Merck immediately, force it to repay hospitals for overcharges, and punish it with civil monetary penalties, the groups say.

340B Report broke the news about Merck’s new policy last week. It goes into effect on Sept. 1. Merck said in an Aug. 11 notice to covered entities that “we will no longer voluntarily honor 340B discounts or chargebacks for contract pharmacy transactions for hospital covered entities that have not begun to provide 340B claims data for all claims originating from its contract pharmacies, unless the hospital covered entity lacks its own in-house pharmacy and designates a single contract pharmacy site of its choice.”

Merck said its new policy does not apply to U.S. Health and Resources Administration (HRSA) grantee covered entities “at this time,” and that it will “evaluate program participation of federal grantees to determine if further action is warranted.”

In July 2020, Merck asked covered entities to voluntarily supply their 340B contract pharmacy claims data so the claims could be checked for duplicate 340B discounts and Medicaid and commercial rebates on the same products. Federal law protects manufacturers from having to pay duplicate 340B discounts and Medicaid rebates on the same drugs, but not duplicate 340B discounts and commercial rebates.

“Although we had hoped that covered entities would collaborate with Merck through our program integrity initiative, participation to date has been very low, and the Merck Program as originally designed has not achieved that goal,” the company said in its recent notice to entities.

Seven other manufacturers either have ceased providing 340B pricing when covered entities use contract pharmacies, or condition 340B pricing on provision of claims data. Six are suing HHS and HRSA over the agency’s determination that the companies’ policies have resulted in overcharges and violate the 340B statute.

Hospital groups condemned Merck’s decision.

“Merck’s conduct in limiting the distribution of certain 340B drugs through community pharmacies clearly violates it’s 340B obligations,” said American Hospital Association General Counsel Melinda Hatton. “We continue to call on the Administration to enforce the 340B statute, ensure that covered entities are reimbursed for damages caused by the illegal policy, and refer the conduct to the HHS Inspector General for the imposition of civil money penalties. It’s time to stop these harmful actions by drug companies and protect vulnerable patients and communities, many of which have been the hardest hit by the COVID-19 pandemic.”

“Merck’s threat to withhold 340B drug discounts from hospitals partnering with community pharmacies will cause irreparable harm to safety net providers and the patients living with low incomes they serve,” said 340B Health President and CEO Maureen Testoni. “Drug companies should not impose conditions on hospitals eligible for 340B discounts, including demanding access to patients’ drug claims. Merck’s leaders should withdraw their threat and continue to abide by the law.”

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