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Our Take: Boehringer Ingelheim joins list of drugmakers facing possible penalties for violating 340B statute

Oct 18, 2021

Boehringer Ingelheim is the latest large drugmaker to receive a warning from the Health Resources and Services Administration (HRSA) about its 340B drug pricing policy for drugs dispensed at contract pharmacies.

On Aug. 1, Boehringer Ingelheim implemented a policy under which it stopped shipping drugs purchased at the 340 price to commercial contract pharmacies, with a few exceptions.

AstraZeneca, Eli Lilly, Novartis, Novo Nordisk, Sanofi, and United Therapeutics had already implemented policies of their own that restricted 340B discounts for contract pharmacies. In May, all six companies received a letter from HRSA advising them that their policies were in violation of the 340B statute.

The letters advised the firms to immediately begin offering their covered outpatient drugs at the 340B ceiling price to covered entities (i.e., hospitals and health systems) through their contract pharmacy arrangements. They were also told to credit or refund all covered entities for overcharges stemming from the policies.

HRSA noted that failure to comply could result in a penalty of up to $5,000 per violation.

The initial six companies were given until June 1 to comply with the requirements. Lilly filed a motion seeking a preliminary injunction and temporary restraining order.

When none of the six firms complied, HRSA notified them in September that their cases had been referred to the Department of Health and Human Services’ Office of Inspector General (OIG) to determine if they are liable for the penalties.

Boehringer Ingelheim has until Oct. 18 to comply.

Our Take: This tug of war between the drug companies and the federal government (sort of) began last December, when several hospital groups, 340B Health, and three hospitals filed a lawsuit against the Department of Health and Human Services (HHS).

In the lawsuit, the plaintiffs said that an increasing number of drug companies were refusing to provide the discounts on drugs dispensed at community pharmacies, and that HHS had failed to enforce the 340B program requirements.

But the issue actually goes back to 2018, when HHS reduced the reimbursement rate for covered drugs in the 340B drug pricing program by 28.5%. CMS said at the time that the reduction would help lower the cost of prescription drugs for Medicare beneficiaries, as the savings would be redistributed equally to all hospitals covered under the Outpatient Prospective Payment System.

Naturally, hospitals participating in the 340B program objected. The hospital groups sued, alleging that HHS had overstepped its authority, and won. But then HHS appealed the decision and won the appeal in July 2020. The American Hospital Association recently filed its opening brief in a case asking the U.S. Supreme Court to reverse that decision.

It wasn’t long after HHS won its appeal that several leading drug companies started cutting back on their discounts to contract pharmacies, citing concerns about duplicate discounts.

Then, in January of this year, AstraZeneca, Lilly, and Sanofi sued HHS over an advisory opinion the department released in December stating that the 340B discounts do apply to contract pharmacies.

If all of this seems complicated, that’s because it is. Even industry professionals who navigate 340B pricing on a regular basis can find it challenging to understand all of the moving parts. And it doesn’t help that the lines sometimes blur between payer, pharmacy benefit manager (PBM), hospital/health system/provider, and specialty/contract pharmacy.

Hospitals contract with community-based pharmacies for various reasons. It might be as simple as not having a specialty pharmacy on the premises and needing a way for their patients to get prescriptions for specialty drugs filled. Or, they might have patients who live a long distance away, making it impractical for those patients to have their prescriptions filled at the hospital’s pharmacy. To further complicate matters, a contract pharmacy might be one that a health system actually owns.

If a drug manufacturer’s 340B drug pricing policy restricts which pharmacies can fill a hospital’s prescriptions, then patients may pay the price, quite literally. Some patients may end up not having their prescriptions filled if they can’t afford to pay the “usual” cost of the drug — which is quite likely, since hospitals that qualify to participate in the 340B program serve a disproportionate share of uninsured, underinsured, and low-income patients.

And, the hospital loses out, as well.

We spoke with a specialty pharmacy director from one of the country’s top academic medical centers, and she explained why hospitals lose when drug manufacturers limit the contract pharmacies they can use. She told us that while contract pharmacies benefit from a higher dispensing fee for drugs that are on a 340B contract list, under a typical 340B arrangement it’s the covered entity that reaps the benefit of the discounted price.

So, for example, if physicians at a participating 340B hospital write 100 prescriptions for drug X but just 10 of those prescriptions get filled at the only contract pharmacy the hospital has been permitted to choose because of the drug manufacturer’s policy, then the hospital loses the “revenue” (i.e., the difference between the 340B discounted price and the Medicare/Medicaid reimbursement amount) it would have received on the other 90 prescriptions. That’s money the hospital could have allocated to patient care.

Payers play a role, too, because most of them include only certain pharmacies in their networks. Hospitals commonly use multiple contract pharmacies so that patients can use a pharmacy in their health plan’s network.

“It’s a convoluted process,” the specialty pharmacy director said. “There are a lot of stakeholders and, unfortunately, their goals are not aligned. And everyone has a valid point. I think everything comes down to just the general drug pricing in this country.”

We also spoke with the former pharmacy director of another academic medical center, who was a 340B specialist, and he told us that part of the problem is the lack of a clear and concise way for PBMs to report to drug manufacturers which prescriptions are filled on a 340B basis and which ones are not. Drug companies need that information so they can determine when rebates are appropriate — in other words, to avoid offering a rebate on a prescription that has already been given a 340B discount, he explained.

That’s why some drug manufacturers are requiring that providers report de-identified claims data for commercially insured, Medicaid, and Medicare Pert D patients who fill prescriptions at a 340B contract pharmacy.

It’s all a snarled up mess, and one that most likely won’t be straightened out any time soon. Decisions by the Supreme Court and the OIG may clarify matters to some extent, but they won’t resolve some of the underlying problems.

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