Pharma Companies Making 340B Restrictions Continue to Pile Up

Johnson & Johnson and Gilead became the 15th and 16th companies to cut back on discount drug pricing.

The number of pharma companies that have announced restrictions on their 340B discounts has been growing, creating financial problems for U.S. hospitals.

Johnson & Johnson (J&J) and Gilead were the latest to join their peers recently, totaling 16 companies that have rebelled against providing pricing discounts as required by federal law.

Section 340B of the Public Health Service Act imposes a ceiling price that limits the rates that pharmaceutical manufacturers may charge for prescription drugs sold to specified healthcare facilities and entities, known as 340B entities, to manage rising prescription drug costs.

The 340B drug pricing program requires drugmakers participating in Medicaid to sell outpatient drugs at discounted rates to healthcare organizations that serve vulnerable communities, or many uninsured and low-income patients. The program has seen significant growth since it was first signed into law in 1992. The March 15 enactment of the Consolidated Appropriations Act of 2022 permitted certain hospitals to be reinstated into the program if they met specified criteria.

Drugmakers have reworked their 340B operations over the last few years as lawsuits target constraining them from what they see as a ballooning portion of the prescription drug market.

The number of hospitals participating in the 340B drug pricing program increased from 591 in 2005 to 2,479 in October 2017. IQVIA reported that the program grew by $13 billion, or 16%, to $94 billion in 2021. "Contract pharmacy slowed but didn’t stop out-of-control program growth," said Adam Fein, CEO of the Drug Channels Institute, which delivers timely analysis on issues in the pharma industry. "Beware when 340B Health claims 'financial duress.' "

The reportedly unlawful restrictions come as a new report of more than 500 U.S. hospitals participating in the 340B program demonstrated that all the used savings these hospitals received through the federally mandated drug discounts benefited patients in need in 2021.

Gilead announced on March 15 that it will stop offering 340B drug pricing program discounts to safety-net hospitals, health centers, and clinics if the providers do not submit the patient claims data that the company is demanding. Its policy initially targets discounts on its brand-name hepatitis C drugs Epclusa, Harvoni, Sovaldi, and Vosevi, which are some of the most costly and top-selling drugs used to treat the 4.7 million patients in the U.S. who are living with hepatitis C.

J&J then announced its plans to limit 340B discount pricing for safety-net hospitals that partner with community pharmacies. The policy, which will begin on May 2, covers 29 of its best-selling drugs treating conditions ranging from psoriasis to schizophrenia, multiple myeloma, and HIV.

When its policy takes effect May 2, Gilead will become the 15th company to date to impose 340B pricing restrictions on drugs dispensed at community pharmacies. And J&J the 16th.

Yet 340B Health, a membership organization of more than 1,400 public and private nonprofit hospitals and health systems participating in the 340B drug pricing program, recently reported that the first 14 drug companies that imposed or announced restrictions on safety-net hospital access to 340B drug pricing program discounts collectively brought in more than a half-trillion dollars in revenues in 2021. "The banner year for the drugmakers occurred as hospitals reported increasing losses of 340B savings from the cuts," the organization said.

Tax-exempt hospitals participating in the 340B drug savings program in 2018 provided $67.9 billion in total benefits to their communities, according to the Federation of American Hospitals.

Other pharma companies that have made restrictions of their own include Boehringer Ingelheim (BI), Eli Lilly, AstraZeneca, Novartis, Novo Nordisk, Sanofi, United Therapeutics, and more. The Health Resources and Services Administration (HRSA), however, has gone after all these companies for making these decisions, notifying them that their case has been referred to the Department of Health and Human Services Office of Inspector General. "HRSA informed BI that continued failure to provide the 340B price to covered entities utilizing contract pharmacies could result in civil monetary penalties," the agency wrote in its March 29 referral notice to BI. The rest of the companies received similar referral notices from HRA last year.

The contract pharmacy restriction policies pharma companies have implemented have "limited the number of contract pharmacies that could be used by covered entities to deliver 340B product to patients and the circumstances under which this occurred," IQVIA said.