Manufacturers Push Back on the Use of Contract Pharmacies by 340B Covered Entities

King & Spalding

Manufacturers and providers participating in the 340B Drug Pricing Program have entered into a new phase of tensions this summer, as manufacturers push back on the use of contract pharmacies by providers. At least one major manufacturer published a letter stating that providers will be able to purchase the manufacturer’s drugs only when shipped to an in-house pharmacy, prompting HRSA to consider regulatory action against the manufacturer. Additionally, beginning in June, some manufacturers sent letters to providers, directing them to upload contract pharmacy claims data for 340B-eligible prescriptions to the vendor 340B ESP to minimize duplicate discounts for claims that are submitted to Medicaid, Medicare Part D, and commercial payors. 340B administrator entities responded by sending communications to the same providers, reminding them of the confidentiality and data privacy obligations governing the claims data, and refusing to provide authorization to disclose data for payors other than Medicaid.

One manufacturer’s announced refusal to sell drugs for shipment to contract pharmacies is the strongest stance on this issue so far. This announcement will require a response from HRSA (the agency endorsed the use of contract pharmacies in a 2010 regulatory notice), which may ultimately lead to a court battle on the question whether the use of contract pharmacies is permissible under the 340B Program.

Manufacturers’ demand for claims data may also ultimately lead to litigation. The June letters from manufacturers explained that sharing contract pharmacy data with vendors such as 340B ESP would minimize inadvertent duplicate discounts for claims that are submitted to Medicaid, Medicare Part D, and commercial payors. The letters did not point to any legal authority authorizing or requiring the sharing of the claims through a vendor, or the legal authority prohibiting duplicate discounts for payors other than Medicaid. Neither did the letters discuss the confidentiality or data privacy considerations involved in sharing the claims data. Some of the letters threatened to take further, potentially more burdensome, action if providers refused to cooperate.

The responses from the 340B administrators aim to counter the manufacturer requests and block the disclosure of data. These letters remind providers that the data requested is governed by the terms of the agreements between the providers and the 340B administrators and stake the administrators’ position on the disclosure. The issue invites HRSA to opine on whether the use of a verification vendor is permissible or required and whether duplicate discounts from payors other than Medicaid are permissible within the 340B Program.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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