Dive Brief:
- Hospitals are urging the government to intercede after Eli Lilly followed through with a controversial plan to halt drug discounts to providers that didn’t comply with the drugmakers’ paperwork requirements.
- Lilly cut off select hospitals’ 340B savings on Thursday, according to multiple hospital lobbies. The drugmaker argues it’s a necessary step to ensure hospitals aren’t double dipping on discounts in federal programs.
- But hospitals slammed the move as illegal, and a thinly veiled attempt to boost Lilly’s profits that will undermine access to care for U.S. patients. The American Hospital Association and the lobby 340B Health called on federal regulators to overturn the policy.
Dive Insight:
In January, Lilly said it would begin requiring providers to submit claims data for all of its drugs dispensed in 340B, but the drugmaker didn’t start enforcing the policy until earlier this month.
It was a “crucial step” to root out 340B fraud and abuse that Lilly took “reluctantly,” after a small group of well-resourced hospitals refused to voluntarily comply, the company said in a letter to the Health Resources and Services Administration, the HHS agency that oversees 340B.
Lilly declined to name hospitals that refused to share the data. But on Thursday, the drugmaker followed through on its ultimatum, cutting off 340B pricing for noncompliant facilities, according to the AHA and 340B Health.
It’s a major loss for affected hospitals, which now have to purchase eligible Lilly drugs at wholesale prices instead of getting them at a 20% to 50% discount. That goes directly against the intent of 340B, which was established in the early 1990s to help cash-strapped providers afford pricey prescription drugs, according to the hospital lobbies.
And it’s a policy that Lilly doesn’t have the authority to enact, given that the 340B statute doesn’t allow drugmakers to make discounts conditional on hospitals sharing the data that Lilly wants, they said.
Lilly says that its data submission policy is consistent with decades of guidance from regulators allowing manufacturers to request information to prevent drug diversion and duplicate discounts.
But “we believe Lilly’s actions violate the law and are an unprecedented attempt to rewrite the 340B rules without congressional approval,” said Maureen Testoni, the president and CEO of 340B Health, which represents more than 1,600 hospitals participating in the drug discount program.
A big concern for hospitals is that other drugmakers will enact similar policies if regulators fail to oppose Lilly’s policy. Novo Nordisk is already implementing its own data sharing requirements.
“HRSA and HHS cannot continue to stand by while Eli Lilly and others rewrite the rules for their own benefit and skirt their obligations,” said Rick Pollack, the president and CEO of the AHA.
Hospitals and drugmakers have found themselves arguing the fine points of 340B statute before, after a number of major drugmakers tried to overhaul how 340B discounts were paid.
Historically, pharmaceutical companies have issued 340B savings as upfront discounts. But in 2024, a cadre of developers — including Lilly — said they would instead require hospitals to pay full price for 340B drugs and then divvy out savings in the form of rebates later on, after they verified the medications were eligibile for 340B.
Drug companies argued the move was necessary to ensure that hospitals weren’t gaming 340B in order to inflate their discounts. But no such programs went into effect, after federal judges agreed with HRSA and the hospital industry that Congress didn’t give drugmakers the authority to tweak 340B’s payment structure on their own.
HRSA declined to comment on the record about Lilly’s new policy and whether regulators planned to intercede.
But under the Trump administration, the agency has proved more open to reinterpreting the status quo in 340B. HRSA planned to pilot a rebate program in 340B, but scrapped the idea in February after hospitals sued to block it.
Spats over 340B between hospitals and drugmakers are nothing new. But the disagreements have increased in scope and intensity in recent years as 340B has grown exponentially, lending more heft to arguments from pharmaceutical companies, lawmakers and health policy experts critical of the program that it’s spiraling out of control.
Roughly 3,000 hospitals benefit from discounted drugs under the program, which accounted for a record $66.3 billion in purchases in 2023, according to government data. That’s up more than 50% from $43.9 billion just two years prior.
Much of that snowballing growth is fueled by hospitals acquiring clinics, contracting with more pharmacies and prescribing higher cost drugs in order to inflate their discounts in the program, according to the Congressional Budget Office. Lawmakers have highlighted issues with 340B in congressional hearings, including how 340B statute doesn’t put any parameters around what providers have to do with the savings or require them to report that information.
