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January 26, 2021

Despite Good Progress, Don’t Expect Immediate Resolution to Contract Pharmacy Battle 

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

After a close look at the recent legal actions related to the contract pharmacy battle, I have concluded that it is unlikely we will see an immediate resolution to the matter.  

While 340B providers welcomed the December 30 advisory opinion from outgoing Health and Human Services Department (HHS) General Counsel Robert Charrow and have reason to be excited about the incoming Biden administration and the Democratic takeover of the Senate, it will likely take some time for the legal process to play out. 

Several drug manufacturers have filed suits against the government in multiple federal courts throughout the country, and key provider groups have paused their suits against HHS.  However, it could be at least a few months before we see concrete action in the case. On the first day that they were permitted to do so, health centers filed multiple claims against drug manufacturers for denial of pricing in the contract pharmacy setting under the Health Resources and Services Administration’s (HRSA) new 340B program administrative dispute resolution (ADR) process.  

The ADR board consists of at least six voting members, with equal representation from the Centers for Medicare & Medicaid Services (CMS), HRSA, and the HHS Office of General Counsel. According to the ADR website, the ADR panel must consist of individuals with complex litigation, drug pricing, drug distribution and other relevant 340B expertise.  

Just a few hours before leaving office, HHS Secretary Alex Azar appointed the board members, all of whom are career officials. The Biden administration quickly rescinded the appointments, although that may be just a routine purge of last-minute Trump administration pronouncements rather than a significant delay. 

Nonetheless, considering the national attention that the contract pharmacy matter has received, I don’t expect it to languish for too long. In addition, the 340B provider plaintiffs in two of the three federal court cases have put a pause on their suits to let the ADR process move forward. They believe that by going through the formal dispute resolution process, it will strengthen their hand once the board makes a final agency decision in their favor. Drug manufacturers will not be able to argue later, in an appeal to the courts, that HRSA bypassed the process, and courts generally defer to final federal agency determinations.  

Hospital groups have taken a different approach. They are moving full steam ahead with their suit in federal district court in the Northern District of California. They argue that the ADR process on its own can’t rectify the harm to covered entities and that the undertaking will take too long. Their first hearing is scheduled for February 23. Interestingly, hospitals did not oppose a motion by the drug industry to intervene as defendants in the case – as long as the court “takes steps to ensure that such intervention does not unnecessarily delay resolution of this matter.” Ryan White Clinics for 340B Access (RWC-340B) has opposed pharmaceutical manufacturer intervention in their suit. 

The recent decision by drug manufacturers to sue HHS could further delay a resolution. Either way, we can expect manufacturers to be back in court once they lose the ADR rulings. I also would not be surprised to see more manufacturers enter the fray to restrict 340B pricing in the contract pharmacy setting. 

All of this means more months of chaos, uncertainty and financial loss to safety net providers and their patients. 340B providers will need to be innovative to offset the significant financial loss they will continue to incur. They will also have to devote more resources and time to help patients who are the ultimate causalities of this needless attack on the contract pharmacy program. 

I invite you to join me and Omnicell’s Jeff Spencer for the next Omnicell Live webinar, View from Capitol Hill: An Inside Look at the Latest Developments Shaping the 340B Program, on Wednesday, Jan 26 at 10 am PT/1 pm ET. 

You can also learn more during the upcoming 340B Coalition Winter Conference, February 16-24. 


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.

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