Hospital Groups Seek Action on Drug Company Violations of 340B Law

The leaders of six major organizations representing hospitals and pharmacists today sent a letter to U.S. Health and Human Services (HHS) Secretary Xavier Becerra urging him to halt the actions of six drug companies that are denying 340B discounts on prescription drugs sold to hospitals treating a large percentage of low-income urban and rural Americans.

The letter – signed by 340B Health, the American Hospital Association (AHA), the American Society for Health-System Pharmacists (ASHP), America’s Essential Hospitals (AEH), the Association of American Medical Colleges (AAMC), and the Children’s Hospital Association (CHA) – asks the Secretary “to halt this detrimental and illegal conduct.”

The 340B law requires drug companies to offer discounts on outpatient drugs to hospitals and other providers that serve patient communities in need, including patients in rural areas. These savings enable hospitals to provide more comprehensive health care and support to patients – including free or no-cost care – at no cost to taxpayers.

Beginning in July 2020, six major drug companies – Eli Lilly, Sanofi, AstraZeneca, Novartis, United Therapeutics, and Novo Nordisk – began denying 340B discounts for drugs purchased by hospitals, community health centers and public health clinics that partner with community pharmacies to dispense certain outpatient drugs. Those denials have sapped resources from safety-net hospitals that are used to care for patients with low incomes and those in rural communities during the COVID-19 pandemic. 340B hospitals provide a large proportion of hospital care for Americans in Medicaid and uncompensated and unreimbursed care.

In December, the HHS General Counsel issued an Advisory Opinion stating that drug manufacturers must provide 340B discounts for drugs dispensed through hospitals’ eligible contract pharmacies. However, HHS indicated it plans to use a new administrative dispute resolution (ADR) process to adjudicate the claims, but this is not a reasonable solution. The process has yet to be implemented and it currently is undergoing legal challenges while the harm to hospitals and the patients they serve continues.

The letter to Becerra stresses the urgent need for action, including imposition of financial penalties on the drug companies. “The General Counsel’s advisory opinion agreed with us that the 340B law requires drug companies to offer 340B discounts to participating hospitals for drugs dispensed through community pharmacies,” the letter notes. “Moreover, HHS has the tools to address this illegal behavior. To that end, we are respectfully requesting that the Department immediately and definitively state that these refusals to provide discounts are illegal and take the action Congress specifically prescribed to address this type of situation – civil money penalties.” A 2010 law provides for penalties of up to $5,000 per violation for any instance of a drug company denying a required discount.