- Drugmakers are allowed to restrict healthcare 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 Sanofi, Novo Nordisk and AstraZeneca. The drugmakers had sued the Department of Health and Human Services 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 from three federal appeals courts that are considering lawsuits over the pharmaceutical companies’ 340B restrictions.
Healthcare providers and drugmakers 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 prices for safety-net providers, can be a financial boon.
However, in 2020 some drugmakers stopped giving the 340B ceiling price on 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.
Drugmakers argued the increase in covered entities using contract pharmacies was leading to illegal drug diversion and duplicate discounts on the same drug.
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 permitted the use of multiple pharmacies in some cases — Sanofi, if the covered entity provided claims data, and Novo Nordisk at its own discretion.
HHS ordered the drugmakers to stop, saying the restrictions were illegal under 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 states.
Hospital groups including America’s Essential Hospitals and 340B Health criticized 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 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 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 backed 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.