HRSA's decision to refer six drug manufacturers to the HHS OIG has elicited a variety of reactions.

Parties at Center of Contract Pharmacy Standoff React to HHS OIG Referral

The decision by the U.S. Health Resources & Services Administration (HRSA) to refer six drug manufacturers to the U.S. Health and Human Services Department of the Office of The Inspector General (HHS OIG) for refusing to offer 340B discounts to covered entities that use contract pharmacies drew praise from 340B provider groups and was roundly criticized by the drug companies and their primary lobbying group.

HRSA made the referrals of AstraZeneca, Eli Lilly, Novartis, Novo Nordisk, United Therapeutics and Sanofi on Wednesday. If the HHS OIG opens an investigation as a result of the referral and finds wrongdoing, the companies could face very steep monetary penalties.

“The safety net hospital community applauds HRSA for taking this crucial enforcement step against drug companies that are denying 340B discounts to covered entities,” said 340B Health CEO and President Maureen Testoni. 

“Despite unequivocal determinations from the government that these drugmaker actions are unlawful, the companies continue to ignore federal law and refuse to offer 340B pricing on drugs dispensed at community pharmacies. We ask the OIG to undertake an expeditious review of the substantial evidence that these companies are knowingly and intentionally overcharging safety-net providers,” Testoni added.

Joe Dunn, a senior vice president of the National Association of Community Health Centers, also welcomed the news.  “It is encouraging to see the Biden Administration following through and protecting the integrity of the 340B program by holding these six drug companies accountable,” he said in a statement. “Health centers reinvest every penny of 340B savings into comprehensive medical care and the continued resistance by these companies has hindered health centers’ ability to care for their patients. It’s long past time for these shipments to resume.”

America’s Essential Hospitals (AEH) and the American Hospital Association (AHA) also praised the decision.  “We thank HRSA for taking a strong stand against these drug companies’ illegal actions,” said Erin O’Malley, AEH senior director of policy. “Manufacturers are skirting the law, putting the health of low-income patients at risk and undermining hospitals that provide safety net care. They must be held accountable, and we are pleased to see this new action by the agency toward that goal.”

AHA General Counsel Melinda Hatton noted that her organization had asked HRSA to make a referral. She urged the OIG “to move swiftly in an effort to provide relief for the hospitals adversely affected by this unlawful conduct.”

Drug Industry Heads Back to Court

Eli Lilly, the first drug manufacturer to restrict access to 340B pricing in the contract pharmacy area, slammed the decision and quickly notified U.S. Judge Sarah Evans Barker of the Southern District of Indiana.  The judge is expected to rule imminently on whether Lilly was justified in cutting off contract pharmacies. According to its scathing notice to the judge, “HRSA decided to take matters into its own hands” by initiating “civil monetary penalty proceedings against Lilly.” The Indiana-based company also noted that “HRSA’s latest maneuver is inconsistent with the government’s representations to this Court,” because the agency’s attorneys had said it would only file for summary judgment against its lawsuit and not take other actions.

“Now, however, HRSA’s apparent view is that Lilly gets no opportunity to vindicate its statutory position in an orderly way; instead, Lilly must either capitulate before obtaining a judicial resolution or be subject to such penalties if it is wrong regardless of the proceedings pending before this court.”

Lilly elaborated on its position to 340B Report: “We disagree with HRSA’s conclusion that we are statutorily obligated to provide 340B discounts to for-profit contract pharmacies, which do next to nothing to guarantee relief to patients,” it said. “We have worked to resolve this dispute through the appropriate legal channels and have presented this issue before the U.S. District Court in Southern Indiana. We are disappointed to see HRSA’s continued attempt to circumvent the legal process.” 

It is likely that all six of the pharmaceutical manufacturers will notify the judges that are overseeing their respective suits and make a similar overreach argument.

“Novo Nordisk disagrees with the claims made by HRSA in its letter, which are also the subject of pending litigation commenced by Novo Nordisk and several other manufacturers,” the company said. “We stand behind the policies we have put in place to address the significant and well-documented abuses in the 340B program, resulting in program intermediaries such as for-profit contract pharmacies profiting at the expense of patients. It is important to reinforce that under Novo Nordisk’s 340B policy, all covered entities continue to have the ability to purchase our products at the 340B price for the benefit of their patients.”

Sanofi’s response to 340B Report did not address the referral directly. It noted that while it supports the 340B program, it had been deluged with duplicate discount payments as a result of the use of contract pharmacies, and that it had enacted an integrity program that involved analyzing de-identified prescription data from pharmacies.

A spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA) noted that discounted purchases under the 340B program topped $38 billion last year, 27% higher than in 2019.

“Despite this growth and the continued concerns raised by stakeholders about the program, there is still a lack of evidence that contract pharmacy participation in 340B has improved patients’ access to medicines.  “This lack of evidence, combined with the fact that contract pharmacies were never authorized by Congress in statute, is why the biopharmaceutical industry’s concerns remain regarding contract pharmacies in 340B.”

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