Could We Have a Breakthrough in the Contract Pharmacy Battle?

By Ted Slafsky

As we reach the third-year mark since pharmaceutical manufacturers began to restrict access to 340B pricing in the contract pharmacy setting, we recently experienced a watershed moment that I believe will lead to an end of the standoff between the government and the pharmaceutical industry.

Earlier this month, 340B Report broke the news that national hospital groups have reversed course and now are actively lobbying Congress to pass legislation that would prohibit drug companies from limiting access to 340B discounts at contract pharmacies.  The hospital organizations’ reluctance to back legislation to resolve the impasse was a strategic mistake, giving PhRMA an opportunity to fill the void and form a partnership with the National Association of Community Health Centers (NACHC).

NACHC told 340B Report that hospitals’ disinterest in legislation to end drug manufacturer 340B contract pharmacy limits motivated it to reach a separate deal with PhRMA. NACHC was publicly calling for such legislation as long ago as June 2022. NACHC says it told hospital groups, to no avail, that its members needed immediate relief from manufacturers’ limits on 340B pricing in the contract pharmacy setting.  The hospital groups’ stance was particularly puzzling since their members are experiencing the most draconian contract pharmacy restrictions.

Current Situation is Untenable

Over the past three years, a growing number of 340B hospitals and other covered entities have reached out to me in despair.  As drug manufacturers continue to tighten access to 340B discounts, patients no longer have access to affordable medications such as insulin.  Meanwhile important services for poor and rural patients such as transportation and mobile clinics have been cut back or have disappeared.

Unfortunately, challenging the manufacturers in court has turned out to be a long and arduous route.  In late January, a federal appeals court in Philadelphia ruled that the 340B statute does not require Sanofi, AstraZeneca, and Novo Nordisk to distribute drugs to an unlimited number of contract pharmacies. Since then, nine manufacturers have drastically tightened their conditions on 340B discounts and I anticipate more will follow.

Court Battle Likely to Drag on for Years

We are eagerly awaiting decisions from two other federal appeals courts in similar drug company challenges to the Health Resources and Services Administration’s attempt to sanction the companies.  After listening to the oral arguments in the two remaining cases, I am not confident that we will have a quick end to the impasse.  Two of the three appeals court judges in the Washington, D.C. case were sympathetic to the drug industry’s argument that they should have the right to impose at least some conditions on the offer of 340B pricing.  Meanwhile, the senior judge in the appeals court case in Chicago questioned whether the case was even ready for appellate review.

When we finally have a decision in these two cases, it may not be the last word as either party may request that a full panel of judges review the decision.  Whether the contract pharmacy matter makes it the U.S. Supreme Court will depend partly on whether at least one of two remaining appeals courts rules in favor of the government.  Even if one of the courts decides in the government’s favor, there is no guarantee the Supreme Court will take up the case.

Important Momentum Boost

Fortunately, with the hospital groups’ decision to back legislation to address the contract pharmacy stalemate, 340B providers who have been working to resolve the matter through Congress no longer will have to feel like they are fighting with one hand tied behind their backs.   A legislative solution will not be easy.  Hospitals, in particular, will need to be prepared to make compromises.

Nonetheless, I am confident that any final deal will preserve the contract pharmacy program for all covered entities even it is not as robust a program as it was prior to 2020.  New reporting requirements are inevitable considering that both HRSA and the House Republicans, which control the House agenda, support this effort.  However, hospitals have enough allies in Congress to ensure that the additional requirements will be manageable.

While enacting 340B legislation will take some time, it looks like there is finally a light at the end of the tunnel.

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.