Explanations of the HRSA 340B drug pricing program

The 340B drug pricing program continues to provide critical support to affected companies, although the program faces ongoing scrutiny and pressure from Congress, the judiciary, and industry. Certain key guidance from the Health Resources and Services Administration (HRSA) was recently struck down by the courts, and additional cases are pending. Congress may ultimately decide the direction of the program. Because the 340B program remains a key economic driver for many in the oncology field—as highlighted at the September 2024 Cancer Care Business Exchange meeting in Boston—here are the key things to know in September 2024:

Large pharmaceutical companies restrict the use of contract pharmacies and introduce a discount system for access to 340B

On August 23, Johnson & Johnson (J&J) introduced a new system, set to take effect on October 15, 2024, under which J&J will no longer issue wholesaler chargebacks for the 340B maximum price for purchases of STELARA or XARELTO by 340B DSH hospitals. Instead, the covered companies must purchase these drugs through wholesalers at the retail price and apply for rebates through a new application platform provided by J&J. This is just the latest method drugmakers are trying to change the 340B program. Previously, more than 20 drugmakers had adopted policies restricting the use of contract pharmacies to distribute 340B drugs—these restrictions have been challenged in court and recently upheld by both the Third Circuit and the D.C. Circuit.[1]. The manufacturers successfully argued that the guidelines previously issued by HRSA were not binding and were not based on the 340B Act, which does not specify the methods of distribution of 340B drugs. Another decision by the court is pending, and several cases are still pending in the district courts.

Extension of patient authorization

HRSA's efforts to limit eligibility determinations for 340B patients by restricting program access to situations where “the health care service resulting in the prescription was initiated by the 'covered entity'” were undermined by the 2023 ruling Genesis Healthcare, Inc. v. Becerra.[2] The genesis The court ruled that HRSA's interpretation of the term “patient” contained requirements that were inconsistent with the usual (dictionary) meaning of the term “patient” and thus with Act 340B. Although technically applicable only to the genesis Plaintiff, genesis notes that covered entities have more flexibility to establish policies that define who their patients are and under what circumstances they can receive 340B drugs. The government is currently considering how to change its procedures for reviewing patient eligibility questions for other covered entities.

Repayment of $1.96 billion in previous payment cuts has begun, but Medicare Advantage is excluded

At the conclusion of a years-long legal battle over reductions in Medicare OPPS payments for 340B covered drugs for years 2018 through 2022, the Centers for Medicare & Medicaid Services (CMS) will make $9 billion in lump sum payments to affected 340B hospitals to remedy the unlawful payment reductions.[3] To maintain budget neutrality, CMS will also implement a 0.5% reduction in payments to all OPPS hospitals beginning in 2026. The resolution does not affect payments to 340B hospitals through Medicare Advantage plans. A subsequent lawsuit alleges that CMS breached its obligations by improperly reducing the payments owed to them for nearly five years, giving the plans a windfall.[4]

Delays in adding new 340B eligible hospital sites have been reintroduced

HRSA instructed hospital-covered entities that they must again wait to enroll new outpatient hospital sites until the site is identified in a submitted Medicare cost report. This policy can result in delays in accessing 340B of up to 21 months after the site opens. The policy was suspended during the COVID-19 health emergency and was recently reinstated; the reinstatement of the policy is being challenged in court by a group of 44 health systems.[5]

Increasing litigation likely

Affected companies that have worked to comply with HRSA guidelines should follow these cases, which represent a significant change in the 340B landscape. With the recent Supreme Court decision in Loper Bright Enterprises v. Raimondo[6] Now that agency policies are easier to challenge, expect the courts to continue to play an important role in determining the future of the 340B program. 340B companies should also keep a close eye on HRSA's new Administrative Dispute Resolution (ADR) process for hearing disputes related to the 340B program, which may issue opinions on key areas.[7]

Legislative activity is increasing

Congress and state legislatures are also reviewing the 340B program. The U.S. Congress has held several hearings and is currently considering a number of bills that would impact 340B. Many states have also passed laws to protect 340B entities.

[1] Sanofi Aventis US LLC v. United States HHS, 58 F.4th 696 (3d Cir. 2024); Novartis Pharmaceuticals Corporation v. Johnson and Becerra, 102 F.4th 452 (DC Cir. 2024).

[2] Genesis Health Care, Inc. v. Becerra, 701 F. Supp 3d 312 (DSC 2023).

[3] See 88 Federal Reg. 77150 (Nov 2023)

[4] Baptist Health v. Health Value Management, Inc. et al., Case No. 2:24-cv-00077-SMD (Feb. 2024).

[5] Albany Med System vs Becerra, Case No. 1:2024cv01258.

[6] Loper Bright Enterprises v. Raimondo, No. 22-451 (June 28, 2024), together with Relentless, Inc. v. Department of Commerce, No. 22-1219, 603 U.S. _____ (2024), 144 S. Ct. 2244 (2024).

[7] Dept. of Health and Human Services, 340B Drug Pricing Program; Administrative Dispute Resolution Regulation, RIN 0906-AB28, 89 Fed. Reg. 28643 (April 19, 2024).