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

Client Alert

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.


“In for a Penny, in for a Pound” is No Longer the Case for Florida Lawyers

On April 1, 2024, newly adopted Rule 1.041 to the Florida Rules of Civil Procedures goes into effect which creates a procedure for an attorney to appear in a limited manner in civil proceedings.  Currently, when a Florida attorney appears in a civil proceeding, he or she is reasonable for handling all aspects of the case for their client.  This new rule authorizes an attorney to file a notice limiting the attorney’s appearance to particular proceedings or specified matters prior to any appearance before the court.  For example, an attorney can now appear for the limited purpose of filing and arguing a motion to dismiss.  Once the motion to dismiss is heard by the court, the attorney may file a notice of termination of limited appearance and will have no further obligations in the case.

Enhancing Privacy Protections for Substance Use Disorder Patient Records

On February 8, 2024, the U.S. Department of Health and Human Services (“HHS”) finalized updated rules to 42 CFR Part 2 (“Part 2”) for the protection of Substance Use Disorder (“SUD”) patient records. The updated rules reflect the requirement that the Part 2 rules be more closely aligned with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) privacy, breach notification, and enforcement rules as mandated by the Coronavirus Aid, Relief, and Economic Security Act of 2020.

Columbus, Ohio Ordinance Prohibits Employers from Inquiries into an Applicant’s Salary History

Effective March 1, 2024, Columbus employers are prohibited from inquiring into an applicant’s salary history. Specifically, the ordinance provides that it is an unlawful discriminatory practice to:

The Ohio Chemical Dependency Professionals Board’s Latest Batch of Rules: What Providers Should Know

The Ohio Chemical Dependency Professionals Board has introduced new rules and amendments, covering various aspects such as CDCA certificate requirements, expanded services for LCDCs and CDCAs, remote supervision, and reciprocity application requirements. Notable changes include revised criteria for obtaining a CDCA certification, expanded services for LCDCs and CDCAs, and updated ethical obligations for licensees and certificate holders, including non-discrimination, confidentiality, and anti-sexual harassment measures.

Governor Mike DeWine and The Ohio State University Introduce the SOAR Study on Ohio Mental Illness

On January 19, Ohio Gov. Mike DeWine and The Ohio State University announced a new research initiative, the State of Ohio Adversity and Resilience (“SOAR”) study, which will investigate all factors influencing Ohio’s mental illness and addiction epidemic.