- Drugmakers are allowed to restrict providers’ use of community and specialty pharmacies to dispense drugs in the 340B drug discount program, a federal appeals court ruled Monday.
- The decision is a win for drug manufacturers Sanofi, Novo Nordisk and AstraZeneca. The companies sued the HHS after regulators ordered them to stop restricting sales of 340B drugs to contract pharmacies.
- The three-judge panel’s decision reverses a previous ruling in New Jersey against Novo Nordisk and Sanofi, and upholds one from Delaware in favor of AstraZeneca. It’s the first decision of three federal appeals courts considering multiple lawsuits over the pharmaceutical companies’ 340B restrictions.
Providers and drug manufacturers have been at odds for years over the 340B drug discount program, which requires pharmaceutical companies to give discounts on outpatient drugs for providers serving low-income communities.
Such providers usually have narrower margins, meaning the drug discounts from the program, which was established in 1992 to lower drug prices for safety-net providers, can be a financial help.
However, in 2020 some drugmakers stopped giving the 340B ceiling price on their products sold to such providers and dispensed through contract pharmacies. Others limited sales by selling products only after a covered entity demonstrated 340B compliance or shared specific data with them.
Drugmakers argued that the increase in covered entities using contract pharmacies was leading to illegal drug diversion and duplicate discounts on the same drug.
For their part, Sanofi, Novo Nordisk and AstraZeneca all allowed 340B providers to use a single contract pharmacy if they didn’t have a pharmacy in-house. Sanofi and Novo Nordisk also allowed the use of multiple pharmacies in some cases — Sanofi if the covered entity provided claims data, and Novo Nordisk at the drugmaker’s discretion.
The HHS ordered the drugmakers to stop, saying restricting the use of contract pharmacies was illegal in the 340B program. However, the U.S. Court of Appeals for the Third Circuit disagreed on Monday.
“The Department of Health and Human Services claims that drug makers must deliver certain discounted drugs wherever and to whomever a buyer demands. But the relevant law says nothing about such duties,” the decision reads.
Hospital groups including America’s Essential Hospitals and 340B Health decried the decision, arguing the limits harm safety-net hospitals’ access to 340B drug pricing program discounts.
“We respectfully disagree with the Third Circuit’s decision,” 340B Health President and CEO Maureen Testoni said in a statement. “Amid high prescription drug prices and limited federal resources, 340B hospitals rely on access to discounts through community and specialty pharmacies to care for their patients in need.”
A 340B Health hospital survey from last year estimates that the annual financial impact from drug company restrictions doubled from the end of 2021 through May 2022, costing hospitals millions of dollars each year.
But pharmaceutical groups have been increasingly critical of the 340B discounts, which can range from 25% to 50% of the cost of the drugs, cutting into profits. Drugmakers say that the program doesn’t require hospitals to account for their savings or a mechanism to ensure they go toward patient care, a complaint shared by some lawmakers.
Drug lobby PhRMA has fronted research showing the program doesn’t save patients money in the long run, and that 340B hospitals have higher drug spending than hospitals not in the program. However, a Medicare Payment Advisory Committee report concluded the program’s effect on pricing was modest.