Hospitals sue to require drug pricing transparency in 340B

Dive Brief:

Four industry associations sued HHS for the second time over its delay in adding regulations to the 340B Drug Pricing Program that would require pricing transparency for drug manufacturers and penalties for overcharging hospitals covered under the program.
Filed by the American Hospital Association, the Association of American Medical Colleges, America's Essential Hospitals and 340B Health, the lawsuit asks the court to declare the department's delay in implementing those regulations unlawful. The groups are also asking the court to order HHS to make the final rule that implements those regulations effective in 30 days.
HHS delayed putting in place ceiling prices for the fifth time in June. Secretary Alex Azar has defended these delays by signaling the implementations will be rolled into the administration's larger plan to cut drug costs.

Dive Insight:

In its current form, 340B does not require hospitals to pass on savings from drug discounts directly to the patients who qualify for them, leading some drug manufacturers to charge more for their product out of a belief that hospitals are pocketing the extra cash. Hospitals, on the other hand, argue that the discounts are vital to their ability to provide quality services to low-income patients.

Independent experts and lawmakers from both parties say key problems with the program stem in part from lack of transparency around ceiling prices for drugs and the level of oversight granted to the Health Resources and Services Administration. The program has only grown in size since its creation in 1992, and has subsequently been subject to more scrutiny from hospitals that say they're being overcharged for drugs and pharmaceutical companies that say they're being duped.

If the court requires HHS to implement the proposed regulations, the federal government could impose fines on drug manufacturers that charge 340B hospitals more than the ceiling price.

"While hospitals routinely meet rigorous requirements for accountability in the 340B program, the government has failed to hold manufacturers to the same standard," AEH President Bruce Siegel said in a statement. "We must have a level playing field to ensure this program works as Congress intended, which is to help hospitals and other covered entities give vulnerable patients greater access to affordable drugs and health care services."

PhRMA spokesperson Nicole Longo told Healthcare Dive that the pharmaceutical association "supports regulations on ceiling price calculations and civil monetary penalties that are in line with the 340B law and eliminate needless regulatory burdens on manufacturers." In July, PhRMA urged HRSA to finalize and issue regulations quickly. Longo emphasized that stance again, adding that PhRMA encourages the administration to make the 340B ceiling price database operational "as soon as possible."

Ann Maxwell, assistant inspector general for evaluation and inspections at the HHS Office of Inspector General, told the Senate earlier this year that while OIG has evidence that drug manufacturers have overcharged entities covered by 340B, no manufacturers have been penalized for overcharging hospitals or clinics.

Last week, AHA refiled a separate, $1.6 billion suit against HHS over Medicare Part B cuts to 340B hospitals. The lawsuit had previously been denied because the cuts hadn't yet taken effect, and, in July, the group's appeal was denied for failing to meet certain requirements laid out by the court.