BREAKING: Developments in 340B Contract Pharmacy Lawsuit
Ryan White Clinics for 340B Access (RWC-340B) late yesterday asked a federal district court to issue a temporary restraining order (TRO) and preliminary injunction requiring U.S. Health and Human Services (HHS) Secretary Alex Azar to issue 340B program binding administrative dispute resolution regulations within 60 days, requiring Azar to declare that federal law entitles covered entities to buy covered outpatient drugs at 340B discounts, and ordering Azar to enforce covered entities’ right to 340B discounts for contract pharmacy orders. (RWC-340B amended complaint and memo in support of motion for TRO). RWC-340B’s court filings come on the heels of drug manufacturers’ Eli Lilly’s and Sanofi’s motions to be allowed to participate in RWC-340B’s lawsuit against HHS, stemming from Lilly, Sanofi, and two other manufacturers’ denials of 340B pricing on drugs dispensed by contract pharmacies (see story below). We will report on this late-breaking news in an extra edition later today.
United Therapeutics, which has co-headquarters in Maryland (above) and North Carolina, joins Eli Lilly, AstraZeneca, Sanofi, and Novartis in imposing conditions on 340B pricing for contract pharmacy drugs and/or denying such pricing.
United Therapeutics Imposes Limits on 340B Contract Pharmacy Pricing
Another pharmaceutical manufacturer, United Therapeutics, has imposed unilateral conditions on its provision of 340B pricing on its products dispensed by contract pharmacies.
The U.S. Health Resources and Services Administration (HRSA) said this morning it “is aware of United Therapeutics’ plan and is in the process of reviewing and determining next steps.”
In a Nov. 18 letter to 340B covered entities, United Therapeutics said beginning Nov. 20, it will accept 340B contract pharmacy orders only if the entity used the pharmacy “for a valid 340B purchase” of a company covered outpatient drug “during the first three full quarters” of 2020. It said it will deny orders not meeting the requirement. The letter directs entities to a web address where they can “identify your contract pharmacies that are eligible under this policy.” It says an entity that “does not have its own on-site pharmacy” may “designate a single contract pharmacy” for which orders will be accepted, and gives an email address for applications for the policy exception.
Beginning May 13, United Therapeutics said will accept 340B contract pharmacy orders from entities only if the entity provides, on an ongoing basis, contract pharmacy claims data for the company’s products via an unnamed vendor’s software platform. It said it will provide more information about the platform before May 13.
United Therapeutics said it notified HRSA’s Office of Policy Affairs (OPA) about the change.
The company, co-headquartered in Maryland and North Carolina, focuses on developing drugs for pulmonary arterial hypertension (PAH). In 2017, it agreed to pay $210 million to resolve claims that it used a foundation as a conduit to pay the copays of Medicare patients taking its PAH drugs, in violation of the False Claims Act.
United Therapeutics said its new 340B pricing policy applies to all its covered outpatient drugs except Adcirca, a PHT medicine it sells under a licensing agreement with Eli Lilly and Co.
Lilly and drug manufacturer AstraZeneca have stopped providing 340B pricing on their drugs shipped to contract pharmacies, letting covered entities without an in-house pharmacy ask to designate just one contract pharmacy. Lilly has been turning down such requests if any entity address is listed as a ship-to address for 340B drugs.
Drug manufacturer Sanofi denies 340B pricing on drugs shipped to contract pharmacies if entities do not upload contract pharmacy claims data to a vendor’s platform every two weeks. Drug company Novartis adopted a similar policy for all covered entities, then relaxed it. Now, it denies 340B pricing to hospital contract pharmacies located more than 40 miles beyond the hospital. Drug manufacturer Merck asks covered entities to provide their contract pharmacy claims data to a vendor. It has threatened to take unspecified adverse action against entities that do not supply the data, but so far has not.
Ryan White Clinics for 340B Access (RWC-340B) and the National Association of Community Health Centers (NACHC) have sued the U.S. Health and Human Services Department (HHS) to force it to respond to Lilly, AstraZeneca, Sanofi, and Novartis’ policies. Lilly and Sanofi have filed motions asking a federal district court to let them participate in RWC-340B’s litigation (see story below).
HRSA last week set in motion a long-delayed final rule to create a binding administrative dispute resolution (ADR) process for the 340B program. RWC-340B and NACHC both are seeking court orders to force HHS to issue the ADR regulations.
Lilly and Sanofi File Motions to Intervene in 340B Lawsuit
Drug manufacturers Eli Lilly and Co. and Sanofi-Aventis U.S. on Friday separately asked a federal district court to name them defendants in a lawsuit aimed at forcing the federal government to punish them over their denials of 340B pricing on drugs shipped to contract pharmacies.
Lilly and Sanofi late on Nov. 20 filed separate motions to intervene in the suit Ryan White Clinics for 340B Access’ (RWC-340B) and two of its members filed against the U.S. Health and Human Services Department (HHS) last month. RWC-340B and its members say Lilly, Sanofi, and manufacturers AstraZeneca and Novartis are flouting the 340B statute, and HHS’s inaction weakens their ability to fulfill their safety-net health care mission. They want the court to order HHS to impose civil monetary penalties against the four manufacturers; to revoke their 340B pharmaceutical pricing agreements with the government, which would expel them from the Medicaid and Medicare Part B markets; and to make them pay refunds for 340B overcharges.
Lilly and Sanofi each say the court should let them intervene in the case because they have direct financial and legal stakes in the outcome and could be exposed to significant harm. No current parties to the suit can adequately protect their interests, they each say.
Sanofi said in its filing if the court grants its motion to intervene, it will file a motion to dismiss RWC-340B’s complaint.
Lilly’s longer motion (29 pages, versus Sanofi’s 11) does not just outline its argument for being allowed to defend itself in court. It spells out why Lilly believes it, and not covered entities, are the aggrieved party in the dispute over 340B contract pharmacy.
HHS’s Health Resources and Services Administration (HRSA), Lilly said, expanded the 340B program to contract pharmacy without statutory authority, “unleashing abuses and program integrity concerns, and compounding civil monetary penalty risk and manufacturer burdens.” It said “the 340B statute does not contemplate contract pharmacies, let alone require manufacturers to go along with the co-opting of the program.” Contract pharmacies “flout prohibitions on drug diversion and duplicate discounts, and often do not pass along 340B discounts to patients,” Lilly said. The company said its limitations on 340B pricing “curb unchecked expansion and abuses.”
Finally, Lilly accuses HRSA of initially giving the manufacturer’s new 340B policies “a green light, but it later—and abruptly—changed course.”
Lilly says that in correspondence with HRSA and HHS between May and July 2020, “HRSA gave no indication that it believed” Lilly’s initial policy of denying 340B contract pharmacy pricing only on its drug Cialis “violated the 340B statute, and gave every indication of the contrary.” It said on Aug. 26, five days before Lilly’s planned expansion of its 340B contract pharmacy policy beyond Cialis, HRSA “surprisingly” told the company it was considering whether Lilly’s new proposed policy constituted a violation of the 340B statute and whether sanctions apply, including civil monetary penalties. Lilly said it immediately asked HRSA in a letter to clarify its position. Lilly continued:
Instead of responding to Lilly, HRSA released a public statement to the 340B Report publication on September 2 repeating its threat that it is “considering whether manufacturer policies, including Lilly’s, violate the 340B statute and whether sanctions may apply…HRSA has still not responded directly to the letter. (Editor’s note: You can read our Sept. 2 story here.)
Lilly said it corresponded further with HHS, seeking to know if the department would impose sanctions in response to Lilly’s discontinuation of 340B discounts to contract pharmacies. It said HHS in a Sept. 21 letter declined to say whether the company’s policy would subject Lilly to sanctions.
In the Sept. 21 letter, HHS General Counsel Robert Charrow told Lilly it “cannot and should not view the absence of any questions from the government” about Lilly’s decision to dramatically scale back 340B pricing on its products “as somehow endorsing Lilly’s policy.” Charrow said Lilly was wrong in its correspondence with HRSA over the summer “to impose unilateral deadlines” on the agency to answer whether it approved of Lilly’s proposed actions.
“Lilly cannot and should not seek to impose such deadlines on the government’s deliberations—especially when HRSA is playing a pivotal role in responding to an unprecedented pandemic,” Charrow wrote. He added that “Lilly’s decision to interpret HRSA’s responses as tantamount to definitive agency agreement with Lilly’s position is incorrect….HRSA is still evaluating how to proceed.”
We have asked manufacturers Novartis and AstraZeneca if they, too, will file motions to intervene in RWC-340B’s suit against HHS. The department’s deadline to respond to RWC-340B’s complaint is Dec. 12.
The National Association of Community Health Centers (NACHC) also has sued HHS over the manufacturers’ 340B actions. Its suit seeks only to compel HHS to publish a long-delayed final rule to establish a binding 340B administrative dispute resolution system, under which covered entities could bring claims against manufacturers and vice versa. Because NACHC’s suit would not subject manufacturers to HRSA 340B enforcement action, it is not clear if a manufacturer has grounds for a motion to intervene in the case.
“If Eli Lilly and Sanofi were genuinely concerned with 340B program compliance, they too would be insisting on the implementation of the mandated ADR process,” said Jason Reddish, NACHC’s attorney in the lawsuit. “But instead they chose self-help and their own profits at the expense of safety-net providers and vulnerable patients.”
More Criticism for Trump’s Most Favored Nation Drug Pricing Rule
Hospital and oncology groups and key congressional Democrats have joined the drug industry in condemning a Trump administration rule that slashes what Medicare pays for 50 expensive physician-administered drugs. Pharmaceutical Research and Manufacturers of America (PhRMA) said Friday it is exploring all options to stop the rule. President-elect Biden is expected initially to place the rule on hold, and he could ultimately rescind it.
The Trump administration said its “most favored nation model” (MFN) rule, announced Nov. 20, will lower Medicare Part B drug reimbursement next year by 16 percent below the current average sales price (ASP) plus 6 percent default rate, before dropping to 65 percent below the current default rate in 2024.
Part B drug reimbursement for 340B disproportionate share (DSH), children’s, free-standing cancer, and non-rural sole community (SCH) hospitals is already ASP minus 22.5 percent—almost 30 percent below the current default rate—and could drop to an ASP minus 28.7 effective rate under a separate hospital Outpatient Prospective Payment System (OPPS) rule expected to be issued by the end of the month.
Children’s and free-standing cancer hospitals are exempt from the MFN rule; DSH and non-rural sole community hospitals are not. For the latter, Part B reimbursement would be whichever is worse—the current rate or the new MFN rate. (Critical access hospitals, Indian Health Service facilities, rural health clinics, and federal qualified health centers also are exempt from the MFN rule.)
Cindy Williams, Vice President and Chief Pharmacy Officer of Riverside Health System in Newport News, Va., told 340B Report yesterday her system is still evaluating the rule’s potential impact. She said there is concern it “would put our organization in a loss situation.”
With Part B payments to hospitals for 340B-purchased drugs already reduced nearly 30 percent since 2018, “there are some medications today where [the U.S. Centers for Medicare & Medicaid Services] CMS reimburses below our cost, so this would worsen that situation and may impact our ability to continue to provide services for our patients,” Williams said. “While the [rule] would lower cost to Medicare and reduce copayments for patients without co-insurance, it will also limit care options as I anticipate organizations will no longer offer services where they will operate at a loss.”
The American Hospital Association (AHA) said Friday it has “very deep concerns” about the MFN rule’s substance, legality, and impact on 340B. “By cutting drug reimbursements to hospitals—by an average of 65% when fully phased in—hospitals will have to absorb losses while drug companies are free to continue their trend of charging exorbitant prices,” AHA said. “This will put hospitals in the terrible position of having to divert resources from other patient care simply to buy the drug therapies they need for their patients.”
“We urge the Administration to withdraw this rule immediately and replace it with a serious effort at drug pricing reform,” AHA said.
Community Oncology Association (COA), which represents independent oncology practices, said the rule is “brazen and unhinged,” and throws private oncologists “under the bus.” Reducing private cancer physicians’ Medicare drug reimbursement “will further fuel” the shift of cancer care to health systems, ultimate increasing what Americans pay for cancer care, COA said.
Biotechnology Innovation Organization (BIO) called the rule “ill-considered, legally suspect, and operationally unworkable.”
“We have repeatedly warned that price controls will handicap future medical innovation and endanger our most vulnerable Americans,” BIO said. Democrats and Republicans, it said, must reject “this fatally flawed regulation.”
Democratic congressional leaders on health care policy delivered harsh judgements on the rule.
House Energy and Commerce (E&C) Committee Chair Frank Pallone (D-N.Y.) and Ways and Means Committee Chair Richard Neal (D-Mass.) said the rule was “half-baked” and “will likely face serious legal challenges before it ever goes into effect.” Senate Health, Education, Labor, and Pension (HELP) Committee ranking Democrat Patty Murray (Wash.) said the rule “shows…how unserious President Trump’s efforts to rein in drug prices have been, and how poorly he used the opportunities he had to make meaningful progress with Democrats who have been pushing for impactful steps like Medicare negotiation.” She said her party “will be ready and willing to work with” the GOP and the Biden administration “on bold health care solutions.” Senate Finance Committee ranking Democrat Ron Wyden (Ore.) said, “Instead of working with Congress to reach a bipartisan deal to lower drug prices, Trump has continued to chase headlines while families get clobbered at the pharmacy counter.”
House E&C ranking Republican Greg Walden (Ore.) issued a statement Friday on the administration’s efforts to lower health care costs. Walden welcomed the administration’s rule to stop drug manufacturers from offering rebates to pharmacy benefit managers (PBMs) and Medicare Part D plans. But he was silent on the MFN rule, which the president announced in tandem with the rebate rule.
STAT Washington correspondents Nicholas Florko and Lev Facher reported Friday that former Biden and Obama health care policy advisers think Trump did his successor a favor by issuing the MFN and drug rebate rules. The rules are conceptually alike to the House-passed drug pricing bill, H.R. 3, and Biden’s own drug pricing campaign promises, the advisers point out. Trump’s regulations, they say, could give Biden political cover to advance his versions of both policies.
In addition to issuing the MFN and rebate rules, the Trump administration on Friday announced it will withdraw Food and Drug Administration guidance issued in 2006 and revised in 2011 to reduce the number of drugs being sold that pre-date the 1938 law requiring manufacturers to obtain FDA approval before marketing a drug.
The FDA guidance gives companies that obtain approval for previously unapproved drugs “a period of de facto market exclusivity before other products obtain approval.” Some drug manufacturers have used the guidance to obtain the exclusive right to sell a drug used for generations and then mark up its price aggressively.
Hospitals Ask Biden to Reverse Part B Reimbursement Cuts for 340B Drugs
Hospital group America’s Essential Hospitals is urging President-elect Joe Biden and his incoming administration “to protect the 340B program and reverse detrimental policies that have undermined the program.” The group made the appeal in a Nov. 20 letter recommending policies on COVID-19, the health care safety net, structural racism, and immigration.
Regarding 340B, the group said Biden specifically should reverse the Trump administration’s nearly 30 percent reduction in hospitals’ Medicare Part B drug reimbursement for 340B-purchased drugs that has been place since 2018 (see story above).
“This policy is on tenuous legal grounds and violates the intent of the 340B program, which was designed for hospitals to realize savings through discounted drugs,” America’s Essential Hospitals said. “By reversing these cuts, the administration will preserve the benefit of the 340B program for the hospitals most in need—those treating high levels of vulnerable, low-income patients.”
PhRMA Sues HHS, FDA to Block Drug Importation from Canada
Pharmaceutical Research and Manufacturers of America (PhRMA) yesterday sued the U.S. Health and Human Services Department (HHS) and the U.S. Food and Drug Administration (FDA) to block implementation of the Trump administration Oct. 1 final rule letting states and American Indian tribes import prescription drugs from Canada. The rule is scheduled to take effect Nov. 30.
In issuing the final rule, the FDA declined several commenters’ requests to answer how imported drugs would be treated under the 340B and Medicaid drug rebate program. It said HHS “may issue further guidance or rulemaking as appropriate.”
“It is alarming that the administration chose to pursue a policy that threatens public health at the same time that we are fighting a global pandemic,” PhRMA said in a news release about the lawsuit. FDA has noted it is struggling to keep up with approving medicines while working around the clock to support COVID-19 therapeutics and vaccine development. Despite this, the administration is willing to divert precious FDA resources away from these efforts and to expose Americans to the risks that come with drug importation schemes.”
The Partnership for Safe Medicines (a group reported to have deep ties to PhRMA), and the Council for Affordable Health Coverage (which represents drug companies, insurers, pharmacy benefit managers, and employers) joined PhRMA in the lawsuit.
BMS Posts Supply Allocation Notice to 340B Entities
Bristol-Myers Squibb has posted a notice to 340B covered entities on the U.S. Health Resources and Services Administration (HRSA) website that its supply allocation program for its leukemia treatment Vidaza will continue through Sept. 30, 2021. It said “any changes to the allocation program will be communicated at that time.”