HHS Confirms Providers’ Right to 340B Discount Pricing for Contract Pharmacies

January 5, 2021 Alerts and Newsletters

As a holiday gift to providers, the U.S. Department of Health and Human Services (HHS) General Counsel recently issued a strongly worded Advisory Opinion indicating that federal law requires drug manufacturers to deliver covered outpatient drugs purchased by providers at 340B discounted rates to contract pharmacies, so that contract pharmacies can dispense such drugs to patients on behalf of providers. See HHS General Counsel Advisory Opinion, dated December 30, 2020. During 2020, several manufacturers refused to deliver 340B discounted drugs to contract pharmacies, though providers had ordered and paid for the drugs. HHS issued the Advisory Opinion in response to numerous requests from both providers and manufacturers regarding the propriety of the manufacturers’ refusal to provide the drugs to contract pharmacies.

In the Advisory Opinion, HHS concluded that the 340B statute could not be “less ambiguous” in requiring that manufacturers offer covered outpatient drugs at no more than the 340B ceiling price for purchase by providers, regardless of how the providers intend to dispense the drugs. HHS also noted that not allowing contract pharmacies to dispense covered outpatient drugs would undercut a main purpose of the 340B Program, which seeks to benefit providers that are remote, small, resource-limited, receiving federal assistance, or serving disadvantaged populations. As HHS put it, “[t]hese are the poster children of providers that one would expect to lack an in-house pharmacy,” meaning contract pharmacies are a necessary link in the 340B distribution chain. HHS noted that denying discounts due to contract pharmacy use would foreclose 95% of all 340B discounts, a nonsensical result.

The Advisory Opinion confirms HHS’s consistent affirmation of the use of contract pharmacies. HHS noted that if manufacturers are genuinely concerned about diversion and duplicate discounts for 340B drugs—the manufacturers’ stated reasons for refusing to provide discounted drugs to contract pharmacies—they can proceed through the available dispute resolution channels, which now include a formal alternative dispute resolution process implemented by the recent adoption of the final rule. See Verrill Client Alert, dated December 14, 2020.

On balance, the Advisory Opinion is a positive development for providers, though it is possible that manufacturers will not view the Advisory Opinion as legally binding, as it is neither law nor regulation. It is also possible that the incoming presidential administration will take a different view of manufacturer requirements vis à vis contract pharmacies, though a pro-manufacturer change in position seems highly unlikely. Still, for now, the Advisory Opinion strongly and unequivocally establishes HHS’s current view that manufacturers must provide 340B discounts for covered outpatient drugs dispensed through contract pharmacies.

Firm Highlights

Publication/Podcast

Maine, New Hampshire, & Vermont Remain DOJ Health Care Enforcement Priorities: Targeted Federal Enforcement Presents Serious Risk

Overview: The United States Department of Justice (DOJ) has recently emphasized that Maine, New Hampshire, and Vermont are priorities for health care investigations and anticipated significant enforcement. Even well-managed (and compliant) organizations and law-abiding...

Publication/Podcast

Comparing US And EU Approaches To Health AI Regulation

Verrill attorney Victoria Larson and paralegal Julia Cotney recently published an article for Law360 entitled, Comparing US and EU Approaches to Health AI Regulation . The article focuses on the U.S. and EU’s ‘approach...

Publication/Podcast

Speaking of Health Law Podcast with David Lazarus

Verrill Partner David Lazarus was a recent guest on the AHLA’s Speaking of Health Law podcast. The episode featured industry leaders discussing some of the key takeaways of the Schutte v. SuperValu, Inc. case...

Publication/Podcast

The PHE is Ending: Do You Know Where Your Waivers Are?

While the pandemic is not over, the COVID-19 public health emergency (PHE) is expected to expire soon, which means that a number of operational, safety, and billing standards that were waived at the beginning...

Publication/Podcast

CMS Proposes to Make Lump-Sum Payments to Hospitals for Underpayments for Drugs Purchased Through the 340B Program During 2018-2022

Last week CMS issued its anticipated proposed rule to implement the Supreme Court’s decision last year which ruled that CMS’ reduction in Medicare payments for Part B outpatient drugs purchased through the 340B program...

News

82 Verrill Attorneys Recognized by Best Lawyers® 2024, Including 10 Named Lawyers of the Year

Event

American Health Law Association's Fraud and Compliance Forum

Verrill's David Lazarus will speaking at the American Health Law Association Fraud and Compliance Forum on September 27-29 in Baltimore, Maryland. David's panel, Enforcement Trends in the AKS, EKRA, FCA and more–plus How to...

Publication/Podcast

Telehealth compliance after the public health emergency

Verrill attorneys David G. Lazarus and Alicia M. Siani recently published an article in Compliance Cosmos titled, “Telehealth compliance after the public health emergency.” In it they discuss how COVID-19 impacted telehealth usage for...

Contact Verrill at (855) 307 0700