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April 06, 2022

17 Different Contract Pharmacy Policies and Counting

Ted Slafsky
Founder and Principal of Wexford Solutions, Publisher, 340B Report

In the past 18 months, the 340B contract pharmacy program has seemingly fractured into 17 programs, one governed by the federal government and 16 others with their own standards determined by pharmaceutical manufacturers. Frustrated by program growth and other concerns, pharmaceutical companies have taken matters into their own hands in an attempt to scale back this vital program. They have placed various restrictions on access to 340B discounts in the retail and specialty pharmacy setting.

The federal government believes the companies are breaking the law, and it has tried to discipline them. However, it has been stymied by federal district courts that have issued mixed decisions on the legality of the contract pharmacy program. All six courts asked to decide on 340B contract pharmacy cases have vacated the letters the government sent to the drug companies ordering them to restore the discounts and return things to normal.

In the meantime, as of this publication date, 16 drug manufacturers have announced different policies ranging from highly restrictive ones like Astra Zeneca's to more permissible ones like Novartis. Some of the policies exempt federal grantees from the restrictions. Some place restrictions on only certain drug products. Others allow the continuation of the current contract pharmacy program if 340B providers submit a broad set of patient claims data to the manufacturer. Some have even more nuances and rules.

What does this mean for safety-net healthcare providers already burned out from over two years of fighting the worst pandemic in history? It means more paperwork, more time figuring out how to help patients access affordable medications, more worries about compliance and less time focusing on patient care. Providers' costs are higher, and they need to spend more to keep track of a system that has turned into the wild west. According to trade group 340B Health, on average, 25 percent of 340B hospital savings come from contract pharmacy partnerships. For rural hospitals, a striking 52 percent of their savings are derived from the contract pharmacy program.

Ultimately, the financial costs will become so high that hospitals and clinics will have no choice but to cut back on services. Some (particularly in rural and high-poverty urban areas) will be forced to close. Meanwhile, it becomes harder and harder for the government to police a program where the private sector makes the rules.

Unfortunately, we cannot count on the court system to resolve the impasse soon. The first six cases are just beginning to undergo review by various federal appeals courts throughout the country. Decisions are at least several months and possibly years away, and there is a decent chance that they will result once again in mixed decisions, resulting in additional appeals.

Many federal district judges who have ruled on the cases have asked Congress to intervene to clarify the rules. A growing number of 340B provider groups have acknowledged that federal legislation may be the only viable solution to ending the impasse. In its recent budget request to Congress, HRSA also calls on lawmakers to act.

As I have said previously, the time is now for a full-court press for a legislative fix to this growing plight. Time is simply running out to resolve this matter.

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      The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer, or company. Assumptions made in the analysis are not reflective of 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.