Merck said in letters to 340B covered entities this week that its approach to solving problems with 340B contract pharmacy transactions "is more streamlined—and less burdensome on covered entities, HRSA, and Merck—than undertaking individual manufacturer audits" of entities and their pharmacy partners.

Merck Pitches Its Voluntary 340B Integrity Initiative to Providers as a Better Option than Audits

Drug manufacturer Merck sent letters to 340B covered entities by email on Tuesday to provide background and answer questions about its request that entities voluntarily upload their contract pharmacy claims to a vendor’s software platform so they can be checked for 340B discounts and Medicaid, Medicare Part D, and commercial rebates on the same Merck drugs.

Merck is one of several manufacturers that have acted in recent months to stem financial losses due to 340B contract pharmacy. Unlike some, Merck has not stopped offering 340B pricing on drugs shipped to multiple contract pharmacies, or conditioned such 340B pricing on entities’ provision of their claims data. Likely as a result, there are no reports that it is being sued, or is suing anyone, over 340B contract pharmacy.

Although Merck has thus far asked for, not demanded, entities’ claims data, it warned when it announced its initiative last July that, if entities did not cooperate, it might take further action to seek 340B claims data “in a manner that may be less collaborative, and substantially more burdensome for covered entities.”

Merck elaborated on that position in its new letter.

“We are working collaboratively with covered entities to improve 340B program integrity and transparency, and to do so in a manner that would involve a significantly reduced burden on covered entities as compared to other possible approaches, such as an exercise of Merck’s audit rights under the 340B statute,” the company wrote. It said “pervasive and widespread” problems with “transactions involving contract pharmacies,” in its view, “underscores the need for an approach that is more streamlined—and less burdensome on covered entities, HRSA, and Merck—than undertaking individual manufacturer audits of each of the thousands of covered entities participating in the 340B program and their numerous contract pharmacy relationships.”

“This initiative is an effort on Merck’s part to work collaboratively with covered entities to help prevent Medicaid duplicate discounts that are prohibited by statute as well as Medicare Part D and commercial duplicate discounts that are excluded from rebate eligibility by our contracts with those payors, and to do so without resorting to the burdensome audit process,” Merck said. “We hope covered entities will join us in these efforts.”

Merck said some communications it has seen refer to its initiative “incorrectly, as ‘audits’ of covered entities.”

“Merck’s initiative is not an auditing initiative,” it said. “The claims data that Merck is seeking for our initiative should be readily available to each 340B covered entity as such data is necessary for such entity’s 340B program compliance and in order to be good stewards of the program.”

The company also noted that “some 340B covered entities have suggested that the initiative raises certain HIPAA-related considerations and contractual issues that covered entities may need to evaluate before deciding whether to participate.”

“Our expectation is that each covered entity will conduct its own legal and compliance analysis of the program,” it said.

Merck said its “is not an attempt to increase the 340B price charged to covered entities or deny 340B pricing to covered entities. We welcome dialogue with any covered entity that has questions or concerns about our initiative, and we are open to working with covered entities and our vendor to address any questions or concerns where feasible.”

Merck did not respond to a request for comment on why it decided to send the letter at this time.

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