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HRSA Announces Drug Manufacturers in Direct Violation of 340B Statute

May 21, 2021

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CONTACTS
Mary Mullaney, Director, Hospital Payment Policies
Jason Kleinman, Senior Legislative Analyst, Govt. Relations

On May 17, the Health Resources and Services Administration (HRSA) sent letters to six major drug manufacturers that have been withholding 340B discounts on eligible drugs purchased at community pharmacies (i.e., contract pharmacies). These letters followed a letter sent by the AAMC and five other organizations to Health and Human Services (HHS) Secretary Xavier Becerra, JD, on April 20 calling on HHS to take action on this issue [refer to Washington Highlights, April 23].

HRSA informed the manufacturers that they are in “direct violation of the 340B statute” by restricting “340B pricing to covered entities that dispense medications” through community pharmacies. The agency notified the drug manufacturers that they “must immediately begin offering [their] covered outpatient drugs at the 340B ceiling price to covered entities through their contract pharmacies.”

In the letters, HRSA wrote that “Section 340B(a)(1) of the Public Health Service (PHS) Act requires that manufacturers ‘shall…offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price.’” The agency also noted that “nothing in the 340B statute grants a manufacturer the right to place conditions on its fulfillment of its statutory obligation to offer 340B pricing to covered outpatient drugs purchased by covered entities.”

Drug manufacturers that fail to provide 340B discounts to covered entities may result in HRSA imposing civil monetary penalties up to $5,000 for each instance of overcharging. 

In response to receiving the letter from HRSA, Eli Lilly filed a lawsuit on May 20 against HHS to stop the order from HRSA from taking effect.

The AAMC, along with four other hospital organizations, previously filed a lawsuit against the Department of Health and Human Services over the agency’s failure to prevent drug manufacturers from withholding 340B prices when the drugs are distributed at community pharmacies [refer to Washington Highlights, Dec. 18, 2020].

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