Federal 340B Ruling Underscores Need for Balanced Pharmacy Program

Kristen Dowd
Director, Product Marketing – Specialty Pharmacy Services

Last month, a federal appeals court in Philadelphia sided largely with pharmaceutical companies in the ongoing showdown involving access to 340B discount pricing via contract pharmacies.

The three-judge panel for the U.S. Court of Appeals for the Third Circuit decided that three drug companies – AstraZeneca, Novo Nordisk, and Sanofi – did not violate federal law when they imposed restrictions, conditions, and other limitations on 340B discount pricing on drugs dispensed at community and specialty pharmacies. “Congress never said drug makers must deliver discounted Section 340B drugs to an unlimited number of contract pharmacies,” the ruling noted.  Furthermore, the court ruled unanimously to strike down enforcement actions taken by the Department of Health and Human Services (HHS) to restore these discounts, saying the enforcement actions “overstepped the statute’s bounds.”

What does the ruling mean for 340B?

The ruling by the Third Circuit U.S. Court of Appeals is certainly a blow to Covered Entities seeking unfettered access to 340B discounts. The decision could embolden drug companies covered by the court’s jurisdiction to make their existing 340B conditions even more restrictive. It could also inspire new drug companies to implement contract pharmacy limitations, adding to the 21 manufacturers already restricting access to 340B discount pricing in some capacity.   

However, the court’s decision does not necessarily give drug companies free reign to impose limitations at will. While the judges decided that the drug company’s current exception-based restrictions didn’t break the law, they did suggest that barring all use of contract pharmacies to a covered entity without an in-house pharmacy might violate the statue. This indication suggests that limited access to 340B pricing via contract pharmacies will be preserved – a condition that can be satisfied via a single contract pharmacy or by submitting claims to a manufacturer-funded 340B ESP. 

What does the ruling mean for your hospital pharmacy program?

In light of this recent action, it is imperative for health systems to look at their pharmacy program more holistically. If you haven’t already, now is the time to seriously consider investing in entity-owned specialty pharmacy operations to complement your existing contract pharmacy relationships. This move will ensure a balanced pharmacy program that is well-positioned to optimize medication access and savings, extending the best possible service and affordability to patients.

Contract pharmacies are (and will remain) an integral part of the health system pharmacy ecosystem. However, these entities are currently being targeted by drug makers intent on reigning in a 340B discount environment they view as spiraling out of control. Health systems that rely exclusively on contract pharmacies for drug fulfillment could face discount barriers and dispensing delays that put their operations and their patients at risk. Specialty drugs that are already subject to limited distribution networks are particularly susceptible to access roadblocks going forward.

A health system may, understandably, be hesitant to embark on a specialty pharmacy implementation. Such an undertaking requires time, resources, and specialized expertise that are currently hard to come by given the financial and labor challenges facing healthcare providers today.

An experienced partner like Omnicell Specialty Pharmacy Services can provide turnkey services that combine advanced technology and deep industry expertise to help you set up, manage, and optimize an in-house specialty pharmacy – reducing the burden on your internal teams. Our established manufacturer relationships and Pharmacy Services Administrative Organization (PSAO) help expedite access to limited distribution drugs (LDDs) and payer networks while streamlining the accreditation process. Moreover, our value-based, risk-share model minimizes the upfront capital costs necessary to launch an in-house pharmacy operation.

With support from an experienced partner, your health system can launch an in-house specialty pharmacy in as little as five months. This added layer to your pharmacy operation will not only enable you to better weather the volatile 340B landscape, but will also provide a new, sorely needed, revenue stream for your health system.

There are several variables to weigh to determine if investing in an entity-owned specialty pharmacy is right for your health system. I encourage you to start your journey by reading 3 Considerations to Optimize Your Specialty Pharmacy.

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Disclaimer

The views and opinions expressed in this blog are those of the authors. They do not necessarily reflect the official policy or position of any other agency, organization, employer, or company. Assumptions made in the analysis do not reflect the position of any entity other than the author(s). These views are always subject to change, revision, and rethinking at any time and may not be held in perpetuity.