Drug manufacturer Lilly will let 340B covered entities buy medicines for shipment to an unlimited number of contract pharmacies if entities agree to provide claims-level data associated with such orders.

Breaking News: Lilly Will Honor Unlimited 340B Contract Pharmacy Arrangements in Exchange for Entities’ Claims Data

Drug manufacturer Lilly will let 340B covered entities buy medicines for shipment to an unlimited number of contract pharmacies if entities agree to provide claims-level data associated with such orders, a company spokesperson said late today.

340B hospitals and health centers late this afternoon reported receiving a letter and related FAQ from Lilly by email describing the change. In response to a request for comment, Lilly called the change a voluntary expansion of its existing policy.

Drug wholesaler AmerisourceBergen has posted another version of the letter, dated Dec. 10, on its website.

Lilly was the first manufacturer to deny 340B pricing on a covered outpatient drug shipped to contract pharmacies. Its original policy, effective July 1, 2020, applied only to its drug Cialis.

On Sept. 1, 2020, Lilly expanded the policy to all its covered drugs. It lets entities lacking an in-house pharmacy designate a single contract pharmacy. It continues to allow shipment of 340B-purchased insulin products to contract pharmacies only if eligible patients can buy the products at point of sale at the 340B price, if neither the entity nor the pharmacy charges a dispensing fee, and if no insurer or payer is billed.

On May 17, the U.S. Health Resources and Services Administration (HRSA) informed Lilly its policy violated the 340B statute and resulted in overcharges that had to be repaid or the company could be subject to civil monetary penalties. Lilly sued in federal district court in Indianapolis. A judge on Oct. 29 struck down HRSA’s finding against Lilly on procedural grounds. But she said HRSA’s finding that Lilly has broken the law “neither exceeds the agency’s statutory authority nor is contrary to law.” She also said “the fairest and most reasonable interpretation of the 340B statute” would not let manufacturers unilaterally restrict drug distribution in ways that frustrate 340B’s purpose.

Lilly has appealed the judge’s ruling to the U.S. Third Circuit Court of Appeals in Chicago.

Lilly is one of 10 manufacturers to impose conditions on 340B pricing when covered entities use contract pharmacies. In addition to Lilly, six other companies—AstraZeneca, Boehringer Ingelheim, Novartis, Novo Nordisk, Sanofi, and United Therapeutics—have sued the government over findings that they too have violated the 340B statute.

Lilly’s New Letter to Entities

“Pending finality of the ongoing litigation over contract pharmacy arrangements, Lilly has elected to expand its 340B Distribution Program,” the company said in its new letter to covered entities. “Going forward, and in addition to [Lilly’s] existing criteria for delivering 340B medicines to contract pharmacies, Lilly will also permit covered entities to purchase and distribute 340B medicines through an unlimited number of contract pharmacies, where the covered entity agrees to provide, and does provide on an ongoing basis, claims-level data associated with such contract pharmacy orders.”

Lilly said it is using manufacturer vendor Second Sight’s 340B ESP platform to implement its new policy, and “will voluntarily honor contract pharmacy purchases for prescriptions dispensed to eligible 340B patients on or after October 29, 2021,” provided that they are submitted through Second Sight “no later than March 15, 2022.”

Lilly said in the letter it will use the data it collects “to monitor diversion and duplicate discounts and promote program integrity.” It said in the related FAQ it will use the claims data “to monitor for and avoid duplicate discounts and to ensure the eligibility of certain contract pharmacy replenishment orders.”

Lilly’s Statement

Lilly gave 340B Report the following statement this evening:

The Southern District of Indiana Court’s opinion confirmed that the government’s enforcement decision against Lilly was improper. The court set aside and vacated the agency’s actions, finding them “arbitrary and capricious” in violation of the Administrative Procedure Act. The court agreed with Lilly that the 340B statute is “silent as to contract pharmacy arrangements” and “does not unambiguously require drug manufacturers to deliver drugs to an unlimited number of contract pharmacies.” The court also called out the government’s “failure to acknowledge, never mind explain” its shifting positions and “about face” concerning the use of contract pharmacy arrangements in the 340B program.

Lilly has appealed portions of the decision where we believe the court erred in its analysis as to certain claims. A different federal judge has already agreed, noting in a parallel case that she “does not find the reasoning” of the Southern District of Indiana Court “persuasive” and expressly “rejects” it.

In the meantime, and pending finality of the litigation and judicial resolution of the parties’ legal obligations under the 340B statute, Lilly has elected to expand its Distribution Program prospectively to permit 340B purchases by, and distribution through, an unlimited number of contract pharmacies if the covered entity also agrees to provide claims data associated with such contract pharmacy orders. This expansion of the Distribution Program supplements and is in addition to the existing criteria for delivering 340B drugs to contract pharmacies as described in Lilly’s August 2020 Distribution Program.  It also aligns with requirements that Judge Friedrich recently observed could “enable [manufacturers] to better utilize the anti-fraud audit and ADR procedures that Congress established for manufacturers in Section 340B” and combat “the potential for fraud in the 340B program.”

As we have been seeing for some time, the status quo of the 340B program remains unworkable and unsustainable, with “inconsistent messaging” preventing the program from being “implemented fairly for all concerned.” Resolution of remaining legal issues will undoubtedly benefit efforts to build a sustainable 340B program that ensures patients benefit fully from 340B discounts.

Government and 340B Provider Groups’ Likely Responses

The federal government and groups that represent 340B entities will likely reject Lilly’s offer to resume shipments to contract pharmacies in exchange for entities’ contract pharmacy claims data.

The federal district judge in Sanofi and Novo Nordisk’s 340B contract pharmacy lawsuits, for example, on Nov. 5 upheld the government’s finding that the two companies cannot unilaterally impose restrictions on offers of 340B pricing to covered entities and that their policies must cease. She also, however, vacated the government’s May 17 findings that the companies owe credits or refunds to covered entities and face civil monetary penalties “to the extent that such determinations may depend on the number of permissible contract pharmacy arrangements under the 340B statute.”

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