Drugmaker Merck today toughened its 340B pricing conditions for hospitals and community health centers.

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Merck Toughens Conditions on 340B Pricing for Hospitals and Health Centers Effective June 12

Drug manufacturer Merck today stiffened its conditions on 340B pricing when hospitals and community health centers use contract pharmacies to dispense most Merck drugs to patients.

Merck told covered entities about the changes in a letter delivered by email this afternoon. They take effect June 12.

Its revisions are in line with seven other manufacturers that have toughened their contract pharmacy restrictions since late January, when a federal appeals court held that the 340B statute does not require drugmakers to deliver drugs to an unlimited number of contract pharmacies. Two other appeals courts are expected to rule on manufacturers’ 340B contract pharmacy restrictions at any time.

Merck’s policy continues to apply to hospital and health center covered entities only. Other grantee entities remain exempt. “Physician-administered drugs continue to be outside the scope of this initiative,” Merck said. Under its changes:

  • Hospitals and health centers lacking an in-house pharmacy may designate just one contract pharmacy and it must be located within 40 miles of the parent site. If the hospital or health center cannot identity one within 40 miles, Merck vendor 340B ESP “will work with the covered entity to identify an available option for a contract pharmacy that is able to dispense covered outpatient drugs to the entity’s patients.”
  • Merck is withdrawing its policy exemption for entities’ wholly owned contract pharmacies. If an entity without an in-house pharmacy wishes to designate a wholly owned pharmacy as its single designated contract pharmacy, it must be located withing 40 miles of the parent site.
  • Merck no longer will honor 340B discounts or chargebacks for multiple contract pharmacy arrangements if a hospital or health center provides 340B claims data to 340B ESP for all claims originating from their contract pharmacies. Merck said it “encourages 340B covered entities designating a single contract pharmacy to voluntarily submit limited claims data for their single contract pharmacy transactions for purposes of 340B program integrity and transparency.”

Merck last year imposed a 45-day time limit on replenishment orders when covered entities used contract pharmacies. That limitation will continue for entities’ single designated contract pharmacy under the update policy.

“Covered Entities must take action by May 26, 2023, in order for single contract pharmacy location designations to take effect on the effective date of these policy updates,” Merck’s letter said. “Covered Entities that have already designated a single contract pharmacy on 340B ESP will need to re-designate a single contract pharmacy on the platform.”

Merck’s conditions originally applied to hospital entities only. It extended them to health centers effective March 31, 2022.