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“340B Program Covered Entities: Some Items for Your Worry List”

To Be or Not To 340B By Alyce C. Katayama

When 340B covered entities contemplate the future, they can find a number of issues to worry about. Here is a thumbnail on some of them.

Orphan Drugs

There is a possibility that the orphan drug issue will be resolved unfavorably to covered entities. That issue arises out of a 2014 court decision, Pharmaceutical Research and Manufacturers of American v. Department of Health and Human Services (May 23, 2014). In that case, the Pharmaceutical Research and Manufacturers of American (PhRMA) challenged HRSA’s authority to promulgate a legislative rule requiring manufacturers to provide 340B discounts on orphan drugs when used for non-orphan indications. The district court found that HRSA did not have authority to engage in legislative rule-making on that subject. HRSA has since issued a virtually identical interpretive rule requiring manufacturers to provide 340B discounts to covered entities on orphan drugs used for non-orphan indications. To reinforce its position, HRSA has recently posted on its website a list of the manufacturers who are not following this rule, stating that this will assist states in pursuing appropriate rebates, since there is no risk of duplicate discounts.

Meanwhile, back in the courts, PhRMA has again sued HRSA, this time to challenge its interpretive rule. In a motion seeking summary judgment, PhRMA accuses HRSA of “dressing a vacated regulation in the new clothing of an interpretive rule and attempting to circumvent the law.” Covered entity access to orphan drugs for non-orphan indications at 340B discounts continues to hang in the balance.

Enforceability of Administrative Guidance

There is uncertainty about what authority or leverage HRSA may have to enforce its other administrative guidance. A loss of HRSA clout on the orphan drug topic could diminish HRSA’s influence in the other areas where it plans to issue guidance. Manufacturers may not feel bound by guidance, unless the same requirement is contained in the law itself. However, covered entities feel constrained to abide by the guidance since HRSA always has the ability to terminate covered entities from the program and take them off of the OPA website.

Future Legislation

As worrisome as the status quo may be, there could be worse in store if the uncertainty gives Congress reason to legislate. Covered entities and the contract pharmacies with which some of them have relationships are among those at risk in such a process. Of particular concern is the possibility that legislation may limit 340B program patient eligibility to uninsured patients only. Look for more about this topic in a later post.

Contract Negotiations

Another worrisome trend is the efforts by some pharmacy benefit management companies and commercial insurers, including Medicare Part D plans and Title XIX managed care, to recapture a portion of 340B savings from covered entities in the context of contract negotiations. This payor behavior is not prohibited by the 340B statute or any administrative guidance. It would appear to be contrary to the purpose of the 340B program to pass 340B savings on to private insurers. With PBMs, the trend may be occurring because PBMs’ ability to pursue their usual rebates from manufacturers may be limited by the fact that the manufacturer has already discounted the 340B drug. Manufacturers may refuse to provide rebates unless the PBM can sort out the 340B prescriptions. PBMs may be lowering the reimbursement to providers on 340B drugs to offset their own lost rebates.

Stay tuned for further developments on all these fronts.