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Law360 (August 21, 2020, 9:21 PM EDT) -- A health care industry trade group has accused five major drug companies of obstructing the distribution of certain drugs that are bought through a special discount program for hospitals in low-income areas.
In a series of letters, the American Hospital Association said it was worried that AstraZeneca, Eli Lilly, Merck, Novartis and Sanofi were restricting supplies of various 340B drugs to hospitals. One of the drugs referenced by AHA was Eli Lilly's Cialis.
The AHA said in a statement that the companies' actions have included "limiting the distribution of certain 340B drugs" and "demanding, on short notice, superfluous, detailed reporting on 340B drugs distributed through hospitals' contract pharmacies."
"It is an outrage that these actions are being taken at a time when hospitals are in the midst of their response to the COVID-19 public health emergency, which has further demonstrated the fractured, inadequate state of the prescription drug supply chain," the AHA said in a statement. "Instead of supporting the hospitals caring for communities ravaged by the public health crisis, these companies are attempting to compel hospitals to divert critical resources away from the pandemic."
The letters came after the D.C. Circuit ruled in July that the U.S. Department of Health and Human Services lawfully cut billions of dollars' worth of reimbursements for drugs purchased through the 340B discount program.
At the time, a split three-member panel reversed a lower court's finding that HHS exceeded its authority by slashing Medicare reimbursement by nearly 30% for drugs purchased in the 340B program — a reduction worth about $1.6 billion annually. The agency used acceptable data to make the reductions and is entitled to deference, the majority said at the time, adding that HHS understandably decided against continuing to pay more for 340B drugs than hospitals paid to acquire them.
HHS pitched the reduced rates as a reform that would put money in the pockets of Medicare beneficiaries, who are liable for 20% of the government's drug payment rate.
Controversy has swirled around 340B for years as total annual discounts have swelled by billions of dollars. Critics have accused hospitals of violating the program's spirit by not passing along discounts to low-income patients. Hospitals contend that 340B helps them stretch modest resources and serve more people who are poor and uninsured.
"While Novartis continues to support the principles behind the 340B program, we believe — as many other manufacturers do — that the program has grown beyond its original intent," Novartis said in a statement to Law360 on Friday. "As a result, we are transitioning to a new system that will allow Novartis to identify and mitigate the issue of duplicate discounts and ineligible rebates from 340B contract pharmacies. We believe this change is necessary to make the 340B program more sustainable, while ensuring transparency and ensuring minimal impact to program stakeholders.
The AHA declined to comment to Law360 beyond the letters and its press release.
Representatives for the other companies did not immediately respond to requests for comment on Friday.
--Additional reporting by Kevin Stawicki. Editing by Adam LoBelia.
For a reprint of this article, please contact reprints@law360.com.
