On Friday, the American Hospital Association sent letters to the heads of U.S. operations for five large drug companies – Merck, Eli Lilly, Sanofi, Novartis and AstraZeneca – expressing "profound concern" over what the hospital group says are actions they are taking to limit the distribution of certain 340B drugs to hospitals and health systems. The AHA is asking them to "cease this conduct immediately."
The actions cited by AHA range from limiting the distribution of certain 340B drugs to demanding, on short notice, detailed reporting on 340B drugs distributed through hospitals' contract pharmacies – reporting the AHA calls "superfluous."
The group said these actions are being taken at a time when hospitals are in the midst of their response to the COVID-19 public health emergency, which has "further demonstrated the fractured, inadequate state of the prescription drug supply chain." Instead of supporting the hospitals caring for communities ravaged by the public health crisis, the AHA alleged these companies are attempting to compel hospitals to divert critical resources away from the pandemic.
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WHAT'S THE IMPACT?
In one of the letters, the AHA accused Merck of collecting data intended to limit the distribution of certain 340B drugs to hospitals and health systems – which the group says violates statutory and ethical guidelines, and will negatively impact participating hospitals' ability to provide care for vulnerable communities.
"The ostensible reason for these actions is to investigate whether Merck is providing duplicate discounts – one through the 340B program and another through a state Medicaid program," wrote AHA President and CEO Richard Pollack. "However, your company has not provided the targeted 340B hospitals with evidence to support the validity of such a concern nor has your company apparently explored less burdensome ways to obtain such information if this is, in fact, a valid concern."
The letters to Sanofi, Novartis and AstraZeneca echoed many of the same concerns.
In its letter to Eli Lilly, the AHA accused the company of ceasing distribution of Cialis through 340B contract pharmacies and leaving the door open to expand this action to its own products, claiming this will strain hospitals' ability to obtain drug therapies.
In each letter, the hospital group claimed these various actions conflict with the statute and the Health Resources and Services Administration's 2010 guidance on contract pharmacy arrangements.
THE LARGER TREND
As the hospital industry criticizes drug companies, the federal government is criticizing the hospital industry. In particular, the Department of Health and Human Services, which pays all hospitals for Medicare Part B drugs, has alleged hospitals of exploiting reimbursement discrepancies when it comes to 340B. In short, HHS said that hospitals that receive 340B drugs at a discounted price are being reimbursed for the drugs' full price, and then using those profits to cover operational expenses.
On August 3, a federal appeals court ruled that 340B hospitals will now be subject to Medicare cuts in outpatient drug payments by nearly 30%, reversing an earlier ruling calling those cuts illegal. The 2-1 decision by the U.S Court of Appeals for the District of Columbia Circuit essentially gives the Trump Administration and the Department of Health and Human Services the legal authority to reduce payment for Medicare Part B drugs to 340B hospitals.
Hospitals have pushed back and hinted that they might appeal the ruling, saying they've used the additional resources to provide critical services to underserved communities during a dangerous pandemic.
ON THE RECORD
The AHA implored the drug companies to "cease this conduct immediately and to work to ensure that 340B drugs are available and accessible to vulnerable communities and populations.
"340B hospitals serve communities with a high volume of low-income patients," wrote Pollack. "For a drug company to jeopardize hospitals' ability to care for patients who are already under severe economic, emotional and health-related strain during a public health crisis is unconscionable."