340B Roundup: Trump-Era Rule Rescinded, Motion to Dismiss Denied & HRSA Advisory Opinion Withdrawn

Health Highlights

The last two weeks of June saw several key developments affecting the 340B Drug Pricing Program—a federal government program created in 1992 that requires pharmaceutical manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices. The debates around 340B are likely to continue—and heat up—with the Supreme Court recently announcing that it will hear the case over cuts to 340B payments to Medicare hospitals in its upcoming term.

The case was brought by the American Hospital Association (AHA) and other national hospital groups seeking to overturn the Department of Health and Human Services’ (HHS’s) decision to reduce Medicare reimbursement to hospitals for drugs purchased under the 340B Program by nearly 30%. The hospital groups challenged the cuts—initially finalized in HHS’s 2018 Outpatient Prospective Payment System (OPPS) rule, and continued in OPPS rules for subsequent years—arguing that reduced drug payments would hinder access to care since the 340B Program includes safety net hospitals. In August 2020, an appeals court had ruled in favor of HHS. Now the Supreme Court has agreed to review that ruling, with a decision expected sometime next year.

With so many crucial developments around 340B, Manatt Health will bring you periodic roundups capturing major news. Below we summarize four 340B headline stories from June. If you have any questions about 340B issues, please contact Helen Pfister at hpfister@Manatt.com.

Biden Administration Proposes Rescission of Trump-Era 340B Rule

The Biden Administration issued a proposal this week to rescind the Trump Administration’s final rule requiring community health centers to pass all of their 340B drug discount savings on insulin and injectable epinephrine to low-income patients. The rule was originally set to go into effect on January 22 of this year. but the Biden Administration had twice delayed its implementation. In its proposal to formally rescind the rule, the Health Resources and Services Administration (HRSA) noted, among other things, that in many cases community health centers are already providing these products to their patients at reduced prices. Comments on the proposed rescission are due on July 16. For an overview of the Trump Administration’s rule, see the Manatt Insights summary.

HRSA Withdraws 340B Advisory Opinion

On June 16, the U.S. District Court in Delaware rejected a motion by HHS to dismiss AstraZeneca’s lawsuit challenging the advisory opinion issued by the HHS Office of General Counsel (OGC) back in December, which held that the restrictions imposed by some pharmaceutical manufacturers on the distribution of 340B drugs to contract pharmacies of 340B covered entities violated federal law. In rejecting HHS’s motion to dismiss, the judge emphatically disagreed with the government’s contention that the OGC advisory opinion merely restated a position that the federal government has held for years, but also noted that the 340B statute “no more compels AstraZeneca’s interpretation than the government’s alternative interpretation.”

Two days later, HHS announced that it was withdrawing the opinion, stating that it was doing so “in the interest of avoiding confusing and unnecessary litigation.” However, on June 30, the court in the AstraZeneca case found that the withdrawal did not render AstraZeneca’s lawsuit moot, noting that HHS had made it clear that the withdrawal would not impact the agency’s ongoing efforts to hold individual pharmaceutical manufacturers liable for restricting the distribution of 340B drugs to covered entity contract pharmacies—including the letters that HHS had sent to the manufacturers on May 17, 2021, directing them to immediately resume shipping 340B drugs to contract pharmacies or face civil monetary penalties.

Appointment of 340B Administrative Dispute Resolution Board

In other 340B news, HHS Secretary Xavier Becerra has appointed the members of HHS’s 340B administrative dispute resolution (ADR) board, which is intended to serve as a venue for resolving disputes between 340B covered entities and manufacturers. The list of members—which include staff from the HHS OGC, HRSA and CMS—is available here. At least three ADR petitions have been filed by covered entities challenging manufacturer restrictions on the distribution of 340B drugs to contract pharmacies. That said, PhRMA and two manufacturers have sued to overturn the ADR regulations, and a court has already enjoined the enforcement of the ADR regulations against one of those manufacturers, so it’s not clear if or when HRSA will seek to use the ADR process to adjudicate the contract pharmacy issue.

Boehringer Ingelheim Restricts Distribution of 340B Drugs to Hospital Contract Pharmacies

Finally, Boehringer Ingelheim became the latest manufacturer to impose restrictions on the distribution of 340B drugs to contract pharmacies. In a letter dated June 30, Boehringer Ingelheim announced that as of August 1, it would no longer ship 340B priced drugs to contract pharmacies, except for a single contract pharmacy for covered entities that do not have an in-house pharmacy. The restriction applies only to covered entities that are hospitals, and not to other categories of covered entities.

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