hospital cost, Hospital Revenue

Conflict Continues over the 340B Drug Discount Program

Leading industry groups, who are also representing hospitals, as well as pharmacists, have been in touch with the new HHS Secretary, and have asked him to stop six of the major pharmaceutical companies from opposing 340B drug discounts. Newly appointed HHS Secretary Xavier Beccera has also been urged to take action against those companies.

What is 340B?

Section 340B, created under Section 602 of the Veterans Health Care Act in 1992, requires the pharmaceutical companies of the country to enter into an agreement, popularly known as Pharmaceutical Pricing Agreement (PPA), with the HHS Secretary. In exchange, they can have their drugs covered by Medicaid and Medicare Part B.

The agreement helps specific providers, known as “covered entities” enjoy front-end discounts on covered outpatient drugs when purchased directly from the manufacturer. The “covered entities” are responsible for serving the most vulnerable population of the nation.

Drug Discount Program

Back to the Conflict…

The fight is prevalent in the country since May 2020. The companies denying the discounts for certain outpatient drugs are:

  • Eli Lily and Company
  • AstraZeneca PLC
  • Sanofi-Aventis U.S. LLC
  • Novartis Pharmaceuticals Corporation
  • Novo Nordisk Pharma
  • United Therapeutics Corporation

The letter requests the HHS Secretary to put an end to this adverse and illegal conduct. The American Hospital Association (AHA), 340B Health, America’s Essential Hospitals (AEH), the American Society for Health-System Pharmacists (ASHP), the Association of American Medical Colleges (AAMC), and the Children’s Hospital Association (CHA) – all have signed the letter.

The 340 Drug Pricing Program requires the pharmaceutical companies to offer discounts on the outpatient drugs that are provided to safety-net providers, children’s hospitals, and all other organizations which serve most of the Medicaid patients or the uninsured ones. The purpose of the discounts is to help these organizations “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services,” according to their website.

The hospital groups throughout the country are in full support of the program. They feel that the cost-saving benefits have been helping the organizations invest in more comprehensive services for the vulnerable patient population.

However, some of the leading pharmaceutical organizations feel otherwise. They think that the program is no longer serving its mission of helping patients in need. Instead, they have accused some of the large hospital systems, for-profit pharmacies, and other stakeholders of using the program for their financial benefits.

Often, the hospitals make a contract with pharmacies that are outside of their organization to help dispense outpatient drugs to patients. Such pharmacies have been vital to communities where patients face transportation barriers. HHS had provided guidance stating that hospitals under the 340B Drug Pricing Program are still eligible to receive discounted outpatient drugs even while using a contract pharmacy to deliver them to patients.

AHA and other groups have been seeking more action from the HHS authority to stop the pharmaceutical companies from denying the discounts. They also pointed out a law from 2010 which allows HHS to penalize any pharmaceutical companies contradicting discount. The penalty can go up to $5,000 per violation.

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