In 2010, HRSA issued guidance (PDF) allowing 340B covered entities to dispense discounted drugs through community-based “contract pharmacies.” The purpose of this guidance was to allow covered entities to “more effectively utilize the 340B program and create wider patient access by having more inclusive arrangements in their communities.” A decade later, some drug manufacturers began to restrict covered entities’ use of these arrangements, arguing that the 340B statute does not guarantee the availability of 340B prices for drugs dispensed through contract pharmacies. As of 2026, the number of pharmaceutical manufacturers that have imposed limitations on covered entities’ use of contract pharmacy arrangements has grown to 40.
To remedy this issue, in May 2021, HRSA sent letters to six drug manufacturers that had withheld 340B discounts on eligible drugs dispensed at contract pharmacies informing them that they were in violation of 340B statute. The letters noted that the Department of Health and Human Services (HHS) may charge a penalty of up to $5,000 for each instance of overcharging. In response, several of these manufacturers filed a lawsuit against the HHS to prevent the order from taking effect. The issue has since been tied up in the courts, with two federal courts of appeals ruling in favor of the manufacturers and a third decision still pending from the 7th U.S. Circuit Court of Appeals in the case of Eli Lilly v. HHS. The AAMC joined the hospital community in an amicus brief (PDF) supporting the HHS’ legal position in this case, outlining the damage that these restrictions cause to 340B hospitals and the patients they serve.
The contract pharmacy issue is of particular importance to academic health systems and teaching hospitals, which often serve patients from across their states and regions. Given the wide catchment areas that teaching hospitals serve, it is not feasible to require that their patients travel to a hospital-based pharmacy to fill their prescriptions. The AAMC supports legislation that would amend 340B statute (PDF) to clarify covered entities’ ability to use an unlimited network of contract pharmacies to distribute covered outpatient drugs to patients.
Related Links
- AAMC Endorses Legislation to Protect Use of Contract Pharmacies in 340B (Aug. 2025)
- D.C. Circuit Rules in Favor of Drug Manufacturers in 340B Contract Pharmacy Case (May 2024)
- AAMC joins amicus briefs in contract pharmacy litigation (June 2022):
- Eli Lilly and Co. v. Becerra (PDF). Filed in the U.S. Court of Appeals for the 7th Circuit.
- AstraZeneca Pharmaceuticals LP v. HHS (PDF). Filed in the U.S. Court of Appeals for the 3rd Circuit.
- Novartis Pharmaceuticals Corp. v. Johnson; United Therapeutic Corp. v. Johnson (PDF). Filed in the U.S. Court of Appeals for the District of Columbia Circuit.
- Sanofi-Aventis U.S. LLC v. HHS; Novo Nordisk Inc. v. HHS (PDF). Filed in the U.S. Court of Appeals for the 3rd Circuit.