Eye on Enforcement / 340B Drug Pricing Program Developments

REGULATORY UPDATE

Drug Companies Continue to Restrict Pricing Access, Financial Impact to Hospitals Increases

SNAPSHOT

Public and non-profit hospitals participating in the federal 340B Drug Pricing Program continue to face financial and operational challenges related to drug manufacturer policies that restrict access to 340B prices.

A recent 340B hospital survey showed the median annual losses due to the restrictive policies have more than doubled from December 2021 to March 2022 and average from roughly half a million to $2.2 million.

BEHIND THE HEADLINES

Manufacturer Policies: A 340B Timeline

Since the early 1990s, under the 340B program, hospitals can dispense drugs purchased at 340B-discounted prices in various settings contracted with the hospital, such as hospital outpatient and mixed-use areas.  

In July 2020, drug companies began implementing new policies for drugs dispensed through contract pharmacies:

  • Either eliminate access to 340B prices altogether for drugs ordered by 340B providers
  • Or require providers to share pharmacy claims data to access 340B pricing
Restrictive Manufacturer Policies’ Impacts on Hospitals: Cost + Compliance Concerns

A recent survey conducted by 340B Health, an association representing over 1,400 340B hospitals, showed the median annual losses due to the restrictive policies have more than doubled from Dec. 2021 to Mar. 2022. The following types of hospital systems reported expected annual losses, including:

  • Medicare disproportionate share hospitals, rural referral centers or sole community hospitals – $2.2 million
    • 10% of these hospitals –  >$21 million
  • Median critical access hospitals – $448,000
    • 10% of these hospitals –  >$1.3 million

Many of the restrictive manufacturer policies allow hospitals to continue accessing 340B pricing if they agree to register in an online platform and upload 340B claims data to be shared with manufacturers. Hospitals must also agree to terms of use associated with the online platform. This raises legal compliance questions related to HIPAA and data privacy as well as policy concerns regarding use of the data and future financial impact to hospitals.

Hospital Considerations + Next Steps

The growing financial impact of the manufacturer restrictive policies is causing hospitals to think through the implications of sharing claims data.

According to Bass, Berry & Sims attorney Jeff Davis, who counsels hospitals on 340B compliance and policy issues, there are several actions hospitals can consider to help evaluate next steps. For example:

  • Review terms of use associated with online data-sharing platforms
  • Work with legal counsel to evaluate HIPAA and data privacy risks associated with sharing claims data
  • Review written agreements to verify the hospital is authorized to share claims data
  • Consider potential policy consequences related to sharing claims data, including possible impact on payor reimbursement rates
  • Continue reporting 340B overcharges to HRSA
  • If a hospital agrees to share claims data, explain the decision to HRSA
  • Ask members of Congress to oppose manufacturer restrictive policies and urge HHS to take enforcement actions
Keep on Your Radar: Government Enforcement Actions + Legal Challenges

The U.S. Department of Health and Human Services (HHS) has taken the position that manufacturer restrictive policies are in violation of the 340B statute, which requires manufacturers to offer 340B pricing to providers regardless of how they dispense drugs. The Health Resources and Services Administration (HRSA) has issued enforcement letters to eight drug companies, informing them their actions are illegal.

HRSA has referred seven of these companies to the HHS Office of the Inspector General (OIG) to consider whether to impose civil monetary penalties (CMPs). The 340B law authorizes HHS to impose CMPs against manufacturers that knowingly and intentionally overcharge 340B providers.  

Six manufactures have filed lawsuits against HHS challenging their enforcement actions, with the courts consolidating the lawsuits into four cases. The manufacturers take the position that the 340B statute doesn’t require drug companies to offer 340B pricing for drugs dispensed through a contract pharmacy, as opposed to a 340B provider’s entity-owned, in-house pharmacy.

So far, two federal district courts have ruled mostly in favor of the manufacturers, while two others ruled mostly in favor of the government. All four decisions have been appealed and are pending review in the courts.

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These materials are for general informational purposes only. These materials do not, and are not intended to, constitute legal or compliance advice, and you should not act or refrain from acting based on any information provided in these materials.Neither Ensemble Health Partners, nor any of its employees, are your lawyers.Please consult with your own legal counsel or compliance professional regarding specific legal or compliance questions you have.