Much-Needed Wins for 340B Providers but Challenges Could Be Lurking

By Ted Slafsky

After a long period in which many 340B providers felt helpless, the last month has brought two major wins.

First, in a key decision on Sept. 30, a federal judge upheld Louisiana’s 340B contract pharmacy access law against lawsuits from the Pharmaceutical Research and Manufacturers of America (PhRMA), AbbVie and AstraZeneca. As my colleague, Will Newton, reported, the summary opinion marks the federal district court’s final ruling on the cases, though the plaintiffs are appealing the order to the U.S. 5th Circuit Court of Appeals.

Louisiana was the second state to enact a law that requires drug manufacturers to provide 340B pricing to its contract pharmacies. Arkansas, the nation’s first state to enact a contract pharmacy protection law, has withstood legal challenges to its law in both federal district and circuit courts. In March, a three-judge panel for the 8th Circuit of Appeals in St. Louis, unanimously upheld the state’s law, and the court rejected PhRMA’s request to have a full panel of judges rehear the case. PhRMA has appealed the case to the U.S. Supreme Court, but the court is highly unlikely to take up the case unless there is split in the circuit courts. 

5-0, So Far 

Arkansas and Louisiana are not the only states that have had success in protecting their contract pharmacy access laws. While none of the drug industry challenges in the six other states that passed similar laws have made it as far in the legal process, the initial decisions have been promising for 340B providers. For instance, in:  

– Maryland: The U.S. District Court for the District of Maryland denied motions for preliminary injunction from PhRMA, AbbVie, AstraZeneca and Novartis (pending appeals to the 4th Circuit); 

– Mississippi: The U.S. District Court for the Southern District of Mississippi denied motions for a preliminary injunction from PhRMA and Novartis, and then later AbbVie (pending appeals to the 5th Circuit). 

With two court wins in Arkansas, and one in each Louisiana, Maryland and Mississippi, states that enacted contract pharmacy laws are 5-0 in defending themselves from legal challenges.   

Considering how difficult it has been for a bipartisan consensus to emerge in Washington, D.C. on the best path for restoring 340B discounts in the contract pharmacy setting, state laws may be the best option for 340B providers considering their game plans for 2025. Regardless of who controls Congress after the November elections, we can once again expect very narrow majorities for either party. 

HRSA’s Courageous Decision 

Meanwhile, in Washington, D.C., a remarkable showdown between one of the world’s largest drug manufacturers and the Health Resources and Services Administration (HRSA) played out before the eyes of every 340B stakeholder. Johnson & Johnson (J&J), which topped all drug manufacturers with over $85 billion in revenue in 2023, in late August told the approximately 1,200 disproportionate share hospitals (DSH) in the 340B program that starting on Oct. 15 they would only be able to access 340B discounts for Xarelto and Stelara after submitting claims data to a third party J&J hired to evaluate the data to ensure compliance. 

HRSA correctly informed J&J’s leadership that the company’s action was unlawful and that the Department of Health and Human Services (HHS) secretary needed to approve a rebate model. As I pointed out in a previous column, 340B has been operated exclusively as a discount program since 1992, with only one very narrow exception to accommodate state AIDS Drug Assistance Programs.   

In a courageous, and what I understand to be an unprecedented move against a major drug manufacturer, HHS warned J&J that it would terminate the company’s contract with the government that enables the drugmaker to access the lucrative Medicare Part B, Medicaid and 340B markets. Fortunately, the New Jersey-based pharmaceutical giant came to its senses and backed off on imposing the rebate model. 

Challenges Ahead 

Despite the victory for the 340B provider community and the government in its battle with J&J, there are potential landmines ahead. William Sarraille, who represented J&J in private practice before his recent retirement and now serves on the board of drug industry third party vendor Kalderos, said we shouldn’t expect J&J to lay down its arms. When speaking on a panel which I recently moderated, Sarraille said he was willing to bet a steak dinner that J&J would sue the government in the coming weeks.  

If J&J sues the government, a number of provider attorneys I have consulted with believe that HRSA has a much stronger case than when it comes to whether the agency can prohibit drug manufacturer limits on contract pharmacy use. Nonetheless, there is no question the drug industry will continue to push its case for 340B rebates and, if former President Donald Trump (R) wins the presidency again, the drug industry is likely to have a much more sympathetic ear. 

Despite the former president’s populist rhetoric, his administration was largely favorable to the drug industry and consistently advocated for policies that would undermine the 340B program.  A new Trump administration would likely continue its attack on the program, from reimbursement cuts to narrowing the patient definition, and scaling back the contract pharmacy program.   

Joe Grogan, a former Gilead Sciences lobbyist who served as Trump’s domestic policy chief, recently told a large audience of industry stakeholders that 340B “is out of control.”   

During a recent keynote talk at a New York City conference I attended, Grogan offered that a back-end rebate model could be a potential way to reform the 340B program. 

Grogan is not the only influential voice in the Trump world that is criticizing the 340B program.  As you may recall from my previous columns, a dark money group led by Katie Miller, who served as former Vice President Mike Pence’s spokesperson, has poured millions of dollars into unfairly trying to connect the 340B program to illegal immigration and abortion. The scare tactics campaign, focused on GOP legislators who support or are considering supporting state laws to protect the 340B program, features imagery of immigrants flowing across the border without legal permission in order to get access to free healthcare and low-cost medications.  Miller, who is married to senior Trump advisor Stephen Miller, is a key player in these efforts.   

As 340B Report has reported, the 501(c)(4) organization Building America’s Future (BAF), which does not have to reveal its funding sources, contributed more than 99% of the $5 million that  the anti-340B group Stand for US PAC has raised since April. BAF has also reportedly funneled tens of millions of dollars into PACs supporting Trump’s 2024 presidential campaign.  

The Wall Street Journal reported that tech billionaire Elon Musk has also made substantial contributions to BAF since 2022. 

Big Stakes  

While anything is possible, you can expect that that those who are funding these efforts will be listened to if Trump gets re-elected.  

Democratic presidential candidate Kamala Harris has not been vocal on the 340B program during her time as vice president, although she was a strong advocate during her time in the U.S. Senate. The Biden-Harris administration has worked hard to defend 340B during a period of relentless attacks, and we can expect continued support if she is elected.   

With a week to go before the elections, there is a lot at stake when it comes to the future of the 340B program. 

Ted Slafsky is the Publisher and CEO of 340B Report, the only news and intelligence service exclusively covering the 340B program.  Slafsky, who has over 25 years of leadership experience with the 340B program, is also Founder and Principal of Wexford Solutions. 

Ted can be reached at ted.slafsky@340Breport.com.

Disclaimer: The views and opinions expressed in this blog are those of the authors. They do not necessarily reflect the official policy or position of any other agency, organization, employer, or company.