340B Health

The growing drug discount program for low-income Americans, known as the 340B program, has “transparency and oversight concerns” and needs to be reformed, Sen. Bill Cassidy (R-LA), chair of the Senate Health, Education, Labor and Pensions Committee, said in a sweeping new report released Thursday. The report is the result of an investigation that began in 2023 on how 340B operates, and it calls for wider congressional reforms to ensure 340B discounts translate to better access and lower costs for patients. Annual reporting on how hospitals’ 340B revenue is used to ensure patient savings is among the transparency reforms Cassidy proposes. In response to Cassidy’s inquiries from last September , the report states that Eli Lilly, Amgen and Johnson & Johnson said they’ve provided billions of dollars in discounts on drugs through 340B. All critiqued the program for parts of what it’s become, although none called for the elimination of 340B. Amgen and Lilly took issue with the way pharmacies can dispense the steeply discounted drugs to non-340B patients — even as the program says they should be only provided to 340B patients — under what’s known as “the virtual inventory/product replenishment model.” Lilly alleges the model creates “an unlawful diversion” of 340B drugs because the drugs with various prices all end up in a pharmacy’s general inventory. A growing reliance on new contract pharmacies has also caused the 340B program to grow significantly in recent years, leading to litigation between drugmakers and the federal Health Resources and Services Administration. “The data produced by Eli Lilly and J&J show that both drug manufacturers have seen a significant increase in 340B sales to contract pharmacies compared to direct sales to hospitals and grantees,” the report says, echoing similar prior reports that 340B is ballooning . From 2018 to 2023, Lilly’s data show total 340B sales to contract pharmacies (including entity-owned contract pharmacies) have grown 206%, from $706 million to $2.16 billion, while from 2019 to 2021, J&J’s 340B sales to contract pharmacies have grown 114%, the report says. Antonio Ciaccia, CEO of 46brooklyn Research — which works on drug pricing — told Endpoints News that questions remain over whether the return on investment from the “societal good side” of 340B is there, given how much the program has changed and grown over the years. He said the report is “a good table-setting” for what may be significant changes. Since 2020, at least 20 drug manufacturers have enacted restrictions on contract pharmacies under 340B, but the result of the various lawsuits over these restrictions remains mixed, the report says. Even still, the restrictions put in place by Lilly, Amgen and J&J “did not substantially impact long-term 340B utilization of their drugs,” the report adds. Maureen Testoni, president and CEO of the hospital group known as 340B Health, said in a statement, “We have concerns with several aspects of the report that may not fully reflect the purpose or implementation of 340B,” noting that it “overlooks a substantial body of research showing that 340B hospitals are responsible for delivering 77% of all Medicaid hospital care and 67% of the nation’s unpaid care.”

Eli Lilly, Bristol Myers Squibb, Sanofi and Novartis are seeking to block a major hospital trade group from intervening in court cases over their proposed 340B drug rebate models. 340B Health and two of its member hospitals argued earlier this month that they would be “severely harmed” by the drugmakers’ models, which would require hospitals to purchase 340B-eligible drugs at market price and recoup the discounts via rebates. The hospital group asked the US District Court for the District of Columbia to join the lawsuits that the drugmakers each brought against HHS for rejecting their models. But lawyers representing the four drugmakers said in a Wednesday court filing that the hospitals and 340B Health lack standing to intervene. “Proposed Intervenors give no reason for this Court to believe that Manufacturer-Plaintiffs’ models will result in covered entities receiving fewer payments than they are entitled to under the 340B statute,” the drugmakers wrote. They added that the hospitals’ alleged injuries rely on “several speculative links.” One of the hospitals, UMass Memorial Medical Center, said it would have to divert hundreds of thousands of dollars from its annual operating budget to comply with the requirements of the 340B rebate models, including certain legal fees and hiring and training at least one new employee to handle the requests. But the drugmakers argued on Wednesday that their models “require only commercially standard claims data that covered entities already maintain and submit to payors in the ordinary course of their business.” Five drugmakers are suing the federal government for rejecting their proposed rebate models. The hospital group also asked to join Johnson & Johnson’s case, but attorneys for J&J similarly argued last week that it lacks standing to do so.

A trade group representing 1,600 hospitals says 340B rebate models proposed by multiple drugmakers would be a “significant burden” to its members, and wants to intervene in the companies’ lawsuits against the federal government. 340B Health and two of its member hospitals said Wednesday that they would be “harmed by the time and expenses incurred” if they are forced to comply with proposed new models from Eli Lilly , Sanofi , Novartis and Bristol Myers Squibb , which would require hospitals to purchase 340B drugs at market price and recoup the discounts later via rebates. UMass Memorial Medical Center and Genesis HealthCare System also joined the motions. Five drugmakers in total are suing the federal government over its tough stance against proposed new models for distributing 340B discounts. The hospitals and 340B Health also filed a motion to intervene in Johnson & Johnson’s case last month. The potential intervenors said now is a “particularly important” time to join the lawsuits, as government agencies and the justice department typically reevaluate their positions amid changes of administration. They also argued that they have “experience and data” that the government doesn’t have access to. “A program that requires 340B hospitals to pay the full price for 340B drugs and then wait to possibly be reimbursed for the discounts to which they are entitled will have significant, adverse effects on 340B hospitals,” the hospitals and 340B Health wrote in nearly identical motions, which were filed on Wednesday in the US District Court for the District of Columbia. UMass estimates that it would have to divert hundreds of thousands of dollars from its annual operating budget to comply with the requirements of these new models, including certain legal fees and hiring and training at least one new employee to collect the requested data, submit rebate claims, reconcile payments, dispute denied rebates and perform regular financial reporting. Doing so would “significantly undercut its ability to support crucial community services and drug discounts to eligible patients,” the motions state. If the entire 340B program shifted to a similar rebate model, Genesis said it would likely spend an additional $5.2 million per month in upfront costs. A Lilly spokesperson told Endpoints News on Thursday that the motion to intervene “is designed to mislead the court and the public about Lilly’s cash replenishment model, which will pay providers cash directly, improve their cash flow, increase transparency, curb for-profit corporations’ abuse of the program, and ensure compliance with existing laws.” HHS declined to comment. Editor’s Note: This story has been updated to include information about other motions filed by 340B Health in cases brought by Novartis, Sanofi, Bristol Myers Squibb and Johnson & Johnson.