The Enforcement of 340B Drug Pricing Laws May Change Under the Biden Administration

Pharmacy Times^® interviewed William von Oehsen, JD, principal at Powers Pyles Sutter & Verville, on a lawsuit his firm recently filed against the Department of Health and Human Services (HHS) and Health Resources and Services Administration (HRSA). The suit asks the agencies to take action against drug manufacturers that are refusing to sell 340B discounted drugs to covered entities when ordered via contracted pharmacy arrangements.

During the discussion, Oehsen explained that a recent letter was signed by President-elect Joseph Biden’s pick for HHS secretary, Xavier Becerra, along with other current state attorney generals, and sent to outgoing HHS secretary Alex Azar on the need for greater enforcement of 340B drug pricing laws.

Alana Hippensteele: I understand also that more recently a motion for a temporary restraining order was filed, which asks the court to give temporary relief while the litigation proceeds. How could this action support pharmacies and patients that have been impacted by the COVID-19 pandemic this year?

William von Oehsen: Well, for the very reasons that I've articulated, litigation can take time to resolve. Litigation is often protracted. In this case, even though the case is with the government, the manufacturers involved are trying to intervene, and so there's a whole set of filings relating to just the issue of whether the manufacturers can be part of this lawsuit.

So, this is not a lawsuit that's going to be resolved quickly. Reframing programs is complex. Meanwhile people's lives are in jeopardy everyday. People are not getting their prescriptions filled because they can't afford it, and everyday covered entities are losing more and more revenue, which undermines and threatens their ability to continue providing the services that they provide. So, when a plaintiff needs immediate relief, they can seek a temporary restraining order, basically asking for immediate relief until the case can be resolved, and then adjustments can be made at that time.

So, it's often trying to preserve the status quo. It's like, okay, let's do no harm right now, and give ourselves the time we need to resolve these legal issues, and so that's really what we're trying to do, is just preserve the contract pharmacy program as it has been run. This program has been up since 1996—that’s 24 years. I have to say it's a little shocking that for 24 years, the government felt like it could enforce this program, and now all of a sudden, it's lost its confidence that it can enforce the program. As I say, I’m dismayed by that. But the point is that it's such a vital part of the program—let's preserve it, and then at least patients won't get harmed while they try to work out these issues. So that's really what the temporary restraining order is all about, Alana.

Alana Hippensteele: Okay. There was also a recent letter sent to outgoing HHS secretary Alex Azar asking that he address the need to enforce 340B program drug pricing laws. Why is this letter important and what are the implications of it being sent to the outgoing HHS secretary?

William von Oehsen: Well, I think the entire covered entity community cheered when they saw this letter. It's a bipartisan letter from 28 different attorneys general from red states and blue states, and it expressed the very same issues that covered entities have been expressing to HHS [as] to why the secretary needs take action against these manufacturers and doesn't have the luxury of time to keep evaluating its enforcement authority. So, the letter was very strong in making the case that indeed the secretary does have that enforcement authority.

I think it's particularly powerful because it shows that the states care, and the states care for a number of reasons. One is that a lot of these covered entities are state entities, such as a state health department, a state AIDS drug assistance program, [or] a state hospital—there are lots of state entities that are participating in the program. So, state entities are being directly harmed by these manufacturers.

But again, another reason is that it's hurting state taxpayers and, as I said, essentially 340B is like a taxpayer relief bill. It's requiring manufacturers to lower the cost of drugs, which then frees up resources so that these covered entities can serve more patients and provide more services, without going to taxpayers to ask for additional support. So, the extent that you're taking away the benefit of the 340B program, it’s going to shift the burden to taxpayers, including state taxpayers, so that's another way that states are hurt.

Another area is Medicaid because depending upon the type of drug and the setting, Medicaid pays at actual acquisition cost for drugs. So, if the price has increased because the covered entity and pharmacy are no longer getting the 340B price, that higher price is being passed on to the Medicaid program, and that actually raises the potential of the False Claims Act. I think there's kind of a veiled threat here that there might be a False Claims Act case brought by states. If you look at the OIG letter, actually, that same point is made.

So anyway, it shows that states really care about the 340B program, and manufacturers have been unfairly criticizing the program, saying that these covered entities are somehow unfairly profiting off the program. Well these are again public entities and non-profit entities that are using the savings and revenue to take care of patients, and the fact that states see it that way too is really important because ultimately what we're really trying to do is protect patients.

Alana Hippensteele: Right. So, William, do you have any closing thoughts on the importance of this issue right now and into the future?

William von Oehsen: Well, we are not the only ones who brought this lawsuit. There are 2 other lawsuits that have been filed. One was by the National Association of Community Health Centers, which came 2 or 3 weeks after ours was filed. Then just last week, several hospital associations filed a similar lawsuit in Northern California. So, we've got 3 different lawsuits that have all been filed against HHS seeking immediate relief from these manufacturers’ actions.

Now, we do have a new administration coming in, and it'll be interesting to see. The hope is that the new administration will rediscover their authority to enforce the contract pharmacy program. I think getting back to the letter that you referred to from the state agencies, I mean the lead author was the California attorney general who will be the future secretary of HHS, and so I think that bodes well. Now he'll be wearing a different hat once he arrives at HHS, assuming his nomination is confirmed, but if he feels strongly that these manufacturers actions are improper, perhaps HHS under the Biden administration would be willing to take action against these manufacturers. So, I think the covered entities would be thrilled if that were the case.

Alana Hippensteele: Absolutely. Thank you so much for taking the time to speak with me today, William. Now let’s hear from some of our other MJH Life Sciences brands on their latest headlines.