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Spanberger Leads 226-Member, Bipartisan Effort to Save 340B Drug Pricing Program, Preserve Prescription Drug Discounts for Virginia Hospitals & Rural Healthcare Providers

Potential Changes to the 340B Program Have Forced Price Hikes on Safety-Net Providers & Vulnerable Patients in Middle of the COVID-19 Pandemic

WASHINGTON, D.C. — U.S. Representative Abigail Spanberger led 225 of her colleagues in a bipartisan effort to defend the integrity of the 340B Drug Pricing Program from reckless changes that have led to significant prescription drug cost hikes for Virginia healthcare providers and the people they serve.

The 340B Drug Pricing Program was enacted by Congress in 1992 with bipartisan support and is overseen by the U.S. Department of Health and Human Services (HHS). The program requires that pharmaceutical companies give safety-net and rural healthcare providers discounts on their drugs, in exchange for having their drugs covered by Medicaid. The program has a demonstrated record of protecting patients who are low-income, live in underserved communities, or suffer from serious chronic illnesses from the threat of skyrocketing prices for the drugs they depend on the most.

Last summer, some drug manufacturers stopped honoring 340B discounts for drugs dispensed through pharmacies that contracted with 340B providers, dramatically increasing the price of those drugs for vulnerable patients and providers on the front lines of the COVID-19 pandemic. In December 2020, HHS’s General Counsel published an advisory opinion that the manufacturers’ price hikes on safety net providers are unlawful under the 340B statute.

In a letter sent to Acting HHS Secretary Norris Cochran, Spanberger and 225 of her colleagues called on HHS to take immediate action against manufacturers that refuse to comply with their obligation to provide safety net and rural providers with discounted drugs and require manufacturers to refund the providers for months of unlawful overcharges. Additionally, they called on HHS to preserve covered entities’ access to upfront rebates, which would be consistent would longstanding program guidance.

“Beginning in the summer of 2020, several drug manufacturers began to announce a range of actions to avoid honoring 340B discounts for certain drugs, many with the highest prices, delivered to covered entities’ contract pharmacies,” said Spanberger and her colleagues. “Some manufacturers have announced they will no longer ship discounted drugs to contract pharmacies; others will ship to only one contract pharmacy per covered entity.”

“Many covered entities are struggling with severe financial losses as a result of the COVID-19 pandemic,” their letter continued. “They cannot afford to be unfairly targeted by large pharmaceutical corporations or be forced to pay higher up-front costs for the drugs their patients need.”

“CVHS is pleased to see such significant bipartisan support, particularly amongst the Virginia delegation, urging HHS to take action to protect covered entities participation and fair purchasing in the 340B program. The savings from the 340B program ensure equity in healthcare for all our patients,” said Paula Tomko, CEO, Central Virginia Health Services. “Without action, those most vulnerable in our communities would feel the impact the greatest. We hope HHS will remedy past actions so that covered entities, such as FQHCs, can continue to provide additional services that may be otherwise inaccessible to uninsured patients.”

“A bipartisan majority has spoken loudly and clearly. It is time to stop the unlawful actions of these drug companies at the expense of safety-net hospitals and their patients,” said Maureen Testoni, President & CEO, 340B Health. “We thank Reps. Spanberger and McKinley for their tremendous work leading this effort.”

“The AHA thanks this bipartisan group of representatives for their important effort to protect the 340B program, and the vulnerable communities it benefits, from big drug companies’ efforts to harm the program,” said Tom Nickels, Executive Vice President, American Hospital Association. “The AHA continues to urge the Department of Health and Human Services’ Health Resources and Services Administration to take swift and decisive action to halt these pernicious tactics from drug companies and ensure that 340B drugs remain available and accessible to vulnerable patients and communities across the country.”

“The 340B program is an invaluable resource to Community Health Centers and their patients, allowing them to access low-cost and life-saving prescription drugs,” said Tom Van Coverden, President and CEO, National Association of Community Health Centers. “We applaud the bipartisan work of these leaders in Congress in pressing the Department of Health and Human Services to hold pharmaceutical companies accountable for violating their obligations under the law. The 340B program is a critical lifeline, especially as we continue to fight COVID-19 in hard hit communities.”

“RWC-340B was proud to endorse this letter and thrilled with the bipartisan support from so many members of Congress and the leadership of Rep. Spanberger (D-VA) and Rep. McKinley (R-WV) in asking HHS to stop these manufacturers’ unconscionable attacks on safety net providers,” said Shannon Stephenson, CPA, MBA, President, Ryan White Clinics for 340B Access (RWC-340B).  “These manufacturers’ unilateral actions directly and dramatically undermine the 340B Drug Pricing Program and the vulnerable populations we serve, all while we are fighting not only the HIV/AIDS epidemic but also the COVID pandemic.”

“The AAMC thanks the members of Congress from both sides of the aisle who came together to protect the 340B program and patients who depend on it,” said Karen Fisher, JD, Chief Public Policy Officer, Association of American Medical Colleges. “This is an unwarranted attempt by several major drug companies to undermine this vital program that allows safety net hospitals, including many teaching hospitals, to provide critical health care services to vulnerable patients in communities across the country, and it is particularly concerning as our health care system and our country address the COVID-19 pandemic.”

Spanberger led the 226-Member letter alongside co-leads U.S. Representatives Cindy Axne (D-IA-03), Doris Matsui (D-CA-06), David McKinley (R-WV-01), Dusty Johnson (R-SD-AL), and John Katko (R-NY-24).

This effort builds on Spanberger’s efforts to prevent prescription drug companies from rewriting the rules in their favor and directly harming Central Virginia health clinics and hospitals.

In November 2020, she led a 217-Member, bipartisan effort pushing HHS to prevent extra-legal changes to the 340B program that would lead to significant cost increases for Virginia healthcare providers. In 2020, private companies began working with large pharmaceutical manufacturers to implement changes to the 340B program — without the approval of Congress or HHS — that would replace the 340B system of up-front discounts with post-sale rebates, resulting in a severe increase in the up-front cost of prescription drugs to 340B-covered providers. A post-sale rebate model would also give massive drug companies tremendous leverage over participating clinics and hospitals — and potentially put manufacturers in violation of their statutory responsibility to provide 340B pricing.

Click here to read the letter with a full list of signatories, and the full letter text is below.

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Dear Acting Secretary Cochran,

We write today as leading congressional proponents of the 340B drug discount program to ask you to take immediate action to ensure that manufacturers are prohibited from imposing unilateral changes to the program in direct conflict with congressional intent and decades of written guidance.

We were pleased to see 28 attorneys general urge former HHS Secretary Azar to protect the 340B program.  We believe that letter and the Department’s Office of General Counsel’s advisory opinion, released on December 30 and described below, represent some of the most compelling legal arguments for the actions we ask you to take.

As you know, Congress enacted the 340B Drug Pricing Program in 1992 following the creation of the Medicaid Drug Rebate Program. In order for their drugs to be covered by Medicaid, manufacturers are required to offer discounts to certain public and nonprofit health care organizations known as covered entities, including Federally Qualified Health Centers, Ryan White HIV/AIDS Clinics, Medicare/Medicaid Disproportionate Share hospitals, rural hospitals, and children’s hospitals. According to the legislative history, Congress’s intent in creating the discount program was to “stretch scarce federal resources to reach more eligible patients and provide more comprehensive services.”

The 340B statute requires drug manufacturers to “offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price.”  There are no provisions in the statute that allow manufacturers to set conditions or otherwise impede a provider’s ability to access 340B discounts. The Health Resources and Services Administration (HRSA), which oversees the program, has indicated on multiple occasions, dating back to the early years of the program, that the 340B statute requires manufacturers to provide 340B discounts to covered entities when covered entities purchase drugs to be dispensed through contract pharmacies on a covered entity’s behalf.

Beginning in the summer of 2020, several drug manufacturers began to announce a range of actions to avoid honoring 340B discounts for certain drugs, many with the highest prices, delivered to covered entities’ contract pharmacies. Some manufacturers have announced they will no longer ship discounted drugs to contract pharmacies; others will ship to only one contract pharmacy per covered entity.

HHS has reviewed manufacturers’ refusals to provide 340B discounts to covered entities’ contract pharmacies and found them to be unlawful. In a December 30th 2020 advisory opinion, then-general counsel Robert Charrow wrote, ““[T]he core requirement of the 340B statute…is that manufacturers must “offer” covered outpatient drugs at or below the ceiling price for “purchase by” covered entities. This fundamental requirement is not qualified, restricted, or dependent on how the covered entity chooses to distribute the covered outpatient drugs.” 

Unfortunately, publishing the advisory opinion has not deterred manufacturers from continuing with unlawful price hikes. Many covered entities are struggling with severe financial losses as a result of the COVID-19 pandemic. They cannot afford to be unfairly targeted by large pharmaceutical corporations or be forced to pay higher up-front costs for the drugs their patients need.

Furthermore, an information technology company has allied with manufacturers to change the 340B program from one of upfront discounts to post-sale rebates, a change that would greatly increase costs for covered entities and give manufacturers tremendous leverage over covered entities. Such action is inconsistent with HRSA’s long-standing guidance that the 340B program is an up-front discount program.

The December 14th letter from the attorneys general called on HHS to “address drug manufacturers’ unlawful refusal to provide critical drug discounts to covered entities.” Consistent with that letter, we urge you to:

  1. Begin assessing civil monetary penalties on manufacturers that deny 340B pricing to covered entities in violation of their obligations under the 340B statute;
  2. Require manufacturers to refund covered entities the discounts they have unlawfully withheld since 2020; and
  3. Halt, through guidance or other means, any attempt to unilaterally change 340B upfront discounts to post sale rebates; and
  4. Immediately seat the Administrative Dispute Resolution Panel to begin processing disputes within the program.

As the attorneys general stated in their December 14th letter, “Each day that drug manufacturers violate their statutory obligations, vulnerable patients and their health care centers are deprived of the essential healthcare resources Congress intended to provide.”

Thank you very much for your prompt consideration of these important matters.

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