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HHS Issues Opinion Regarding Illegal Attempts by Drug Manufacturers to Deny 340B Discounts under Contract Pharmacy Arrangements

The federal 340B discount drug program is a safety net for many federally qualified health centers, disproportionate share hospitals, and other covered entities. This program allows these providers to obtain discount pricing on drugs which in turn allows the providers to better serve their patient populations and provide their patients with access to vital health care services. Over the years, the 340B program has faced intense scrutiny, particularly by drug manufacturers who are required by federal law to provide the discounted pricing.

Ongoing struggles between covered entities and drug manufacturers continued in 2020 when six manufacturers unilaterally decided to deny 340B discount drug pricing to covered entities utilizing contract pharmacy arrangements. This led to lawsuits filed by the American Hospital Association and a national network of HIV/AIDS clinics in the Fall of 2020. The battle between the covered entities and drug manufacturers took a unique twist on December 30, 2020 when the U.S. Department of Health and Human Services issued Advisory Opinion 20-06, which instructed that drug manufacturers were not legally permitted to deny the discounted 340B pricing to contract pharmacy arrangements. 

The HHS Advisory Opinion made three key conclusions:

  1. The plain language of the 340B Statute requires manufacturers to provide the 340B discounted pricing to covered entities independent of whether the covered entity chooses to utilize a third-party contract pharmacy to dispense the drugs.
  1. The purpose and history of the 340B program indicate that contract pharmacies have always been an integral part of the 340B program and HHS’s longstanding interpretation of the 340B statute and regulations has recognized the legitimate use of contract pharmacies.
  1. Manufacturers are inappropriately attempting to circumvent the 340B program’s standing procedures for resolving disputes between manufacturers and covered entities by unilaterally excluding contract pharmacy arrangements from their 340B discount drug pricing.

While the HHS Advisory Opinion does not have the binding effect of law, it should be noted that HHS, through its Health Resources and Services Administration (“HRSA”), oversees the 340B program. Only time will tell if the Advisory Opinion will persuade drug manufacturers to resume 340B pricing to covered entities utilizing contract pharmacy relationships. Stay tuned for future developments.

If you are interested in learning more about the 340B discount drug program or collaborative strategies to enhance patient care opportunities for 340B covered entities, please contact BMD Healthcare and Hospital Law Member Jeana M. Singleton at jmsingleton@bmdllc.com or 330-253-2001, or any member of the BMD Healthcare and Hospital Law group

For an update on actions the state of Ohio is taking to reduce predatory practices of PBMs, see BMD Healthcare and Hospital Law Member Daphne Kackloudis' article, SB 263 Protects 340B Covered Entities from Predatory Practices in Ohio.

Investment Training for the Second and Third Generations

Consider this scenario. Mom and Dad started the business from the ground up. Over the decades it has expanded into a money-making machine. They are able to sell the business and it results in a multimillion-dollar payday for their labors. The excess money has allowed Mom and Dad to invest with various financial advising firms, several fund management groups, and directly with new startups and joint ventures. Their experience has made them savvy investors, with a detailed understanding of how much to invest, when, and where. They cannot justify formation of a full family office with dedicated investors to manage the funds, but Mom and Dad have set up a trust fund for the children to allow these investments to continue to grow over the years. Eventually, Mom and Dad pass. Their children enjoy the fruits of their labors, and, by the time the grandchildren are adults, Mom and Dad's savvy investments are gone.

Provider Relief Funds – Continued Confusion Regarding Reporting Requirements and Lost Revenues

In Fall 2020, HHS issued multiple rounds of guidance and FAQs regarding the reporting requirements for the Provider Relief Funds, the most recently published notice being November 2, 2020 and December 11, 2020. Specifically, the reporting portal for the use of the funds in 2020 was scheduled to open on January 15, 2021. Although there was much speculation as to whether this would occur. And, as of the date of this article, the portal was not opened.

Ohio S.B. 310 Loosens Practice Barrier for Advanced Practice Providers

S.B. 310, signed by Ohio Governor DeWine and effective from December 29, 2020 until May 1, 2021, provides flexibility regarding the regulatorily mandated supervision and collaboration agreements for physician assistants, certified nurse-midwives, clinical nurse specialists and certified nurse practitioners working in a hospital or other health care facility. Originally drafted as a bill to distribute federal COVID funding to local subdivisions, the healthcare related provisions were added to help relieve some of the stresses hospitals and other healthcare facilities are facing during the COVID-19 pandemic.

S.B. 263 Protects 340B Covered Entities from Predatory Practices in Ohio

Just before the end of calendar year 2020 and at the end of its two-year legislative session, the Ohio General Assembly passed Senate Bill 263, which prohibits insurance companies and pharmacy benefit managers (“PBMs”) from imposing on 340B Covered Entities discriminatory pricing and other contract terms. This is a win for safety net providers and the people they serve, as 340B savings are crucial to their ability to provide high quality, affordable programs and services to patients.

DOL Finalizes New Rule Regarding Independent Contractor Status, But Its Future Is In Jeopardy

On January 6, 2021, the Department of Labor announced its final rule regarding independent contractor status under the Fair Labor Standards Act. As described in a prior BMD client alert, this new rule was fast-tracked by the Trump administration after its proposal in September 2020. The new rule is set to take effect on March 8, 2021, and contains several key developments related to the "economic reality" test used to determine whether an individual is an independent contractor or an employee under the FLSA.