There has been a troubling new development involving Eli Lilly and the 340B drug pricing program.
For several months, Lilly has been demanding that hospitals submit millions of lines of claims data for drugs dispensed from hospitals’ own retail and mixed-use pharmacies. Now, the company is threatening to soon deny 340B pricing for hospitals that do not comply.
Earlier this month, Lilly informed the federal government that it had begun sending ultimatum letters to selected hospitals. Those letters informed hospitals that they had just five business days to begin submitting claims data to the company, or risk losing 340B pricing on Lilly drugs. We have confirmed that some hospitals received those notices, and Lilly has indicated that more letters will follow in the coming months.
This is a significant, and 340B Health believes, unlawful, threat. The 340B statute requires drug companies to provide discounted pricing to eligible hospitals. It does not require hospitals to hand over large volumes of patient data to drug companies as a condition of receiving those discounts.
Yet Lilly is attempting to create its own reporting requirements and then attach severe financial consequences to hospitals that do not comply.
We urged the government to take enforcement action. If a drug company can decide on its own that hospitals must hand over the data before receiving 340B pricing, it raises fundamental questions about whether statutory discounts remain statutory discounts or become something companies can withhold whenever they choose.
Lilly claims that two appellate court decisions from several years ago permit the company to take this action. We strongly disagree with that interpretation. Those decisions did not give drug companies unlimited authority to impose whatever requirements they want on 340B hospitals, nor did they authorize companies to terminate 340B pricing because hospitals decline to provide data that federal law does not require them to submit.
Lilly’s actions carry implications well beyond a single company. If Lilly succeeds in withholding 340B pricing based on its own claims-data requirements, other drugmakers will have every incentive to adopt similar policies. In fact, a number of large drugmakers have already adopted Lilly policies, and their deadlines are coming up. Hospitals could find themselves responding to different reporting mandates from multiple manufacturers, creating enormous administrative burden and unlawfully increasing costs for 340B-eligible safety-net hospitals.
Drugmakers claim they need the data for program integrity, asserting that 340B providers are misusing 340B. Yet none have released data to prove that point! They claim 340B has grown significantly over the years, but that has nothing to do with alleged misuse of 340B. Quite the opposite, in fact: 340B applies only to outpatient drugs, and outpatient visits have grown tremendously since the program was enacted in 1992. Expensive specialty drugs, which barely existed in 1992, can now replace the need for heart surgery and other invasive procedures, and make up more than half the drug market. 340B hospitals, with their many specialties, are significant prescribers of these drugs to patients, and their patients include a disproportionate share of low-income individuals who would not otherwise have access to this level of care.
For safety-net hospitals and their patients, the stakes are high. Every dollar lost through denied 340B pricing is a dollar that cannot be used to support patient care, expand services, or serve vulnerable communities.
340B hospitals remain focused on their mission, and 340B Health will continue advocating for federal action to ensure that drug companies follow the law – so hospitals can continue serving the patients who depend on them.
