Eli Lilly and Company said Monday evening that it will soon end 340B discount pricing for some of the hospitals that have not met a claims data submission policy it implemented on Feb. 1, sparking outrage and calls for federal intervention from the hospital industry.
The conflict has been simmering for months, with Lilly first announcing its change-up in January and several other major drugmakers following suit shortly after.
Specifically, Lilly’s policy requires 340B covered entities (excluding some in states with statutory restrictions) to provide claims-level data for all pharmacy and medical dispensations, including in-house pharmacy and contract pharmacy dispenses. Doing so will allow the company to spot instances when a drug purchase is improperly granted multiple discounts under overlapping programs.
The company, in a June 1 letter to Thomas Engels, administrator of the Health Resources and Services Administration (HRSA), which oversees 340B, said that about 70%, or 2,350 distinct entities, had complied with the policy, and has sent two rounds of follow-up reminder letters to those that haven’t (around 1,000 covered entities).
“A minority of entities—led by the country’s largest and best-resourced hospitals and organized through their trade associations—continues to refuse to submit data and are recycling the same pretextual objections,” the letter reads.
Now, an unspecified “initial set” of the holdouts have been notified by Lilly that the company’s wholesalers will pull their 340B pricing eligibility on June 8 if they do not submit the outstanding data. The company added that it intends to do the same for the remaining noncompliant covered entities “in the weeks ahead.”
Lilly, in the HRSA letter and in a statement provided to Fierce Healthcare, said that the broad compliance to date undercuts hospital associations’ argument that providing the data would be unduly burdensome, adding that the industry’s own suggestion of submitting to a government-administered clearinghouse rather than Lilly undercuts its own case.
Lilly’s letter also specified that the holdouts are primarily disproportionate-share hospitals, which “are the largest and most sophisticated participants in the 340B program” and have organized a “boycott … through the same hospital trade associations that have repeatedly run this play against federal transparency initiatives.”
“Hospital groups like [the American Hospital Association (AHA)] have fought every recent transparency measure in the 340B program because transparency would expose hospitals’ abuse of a program meant to help vulnerable patients,” the Lilly spokesperson told Fierce Healthcare.
AHA President and CEO Rick Pollack, in a statement responding to the announcement, again described Lilly’s policy as unlawful and the decision to pull hospitals’ discounts an “extraordinary step.” Mareen Testoni, president and CEO of 340B Health, called it illegal and “a huge kick in the face to the nation’s safety-net hospitals.”
Both called for the administration to immediately intervene.
“If the federal government does not act, hundreds of other drugmakers could do the same, massively increasing costs for those hospitals that devote the most resources to caring for low-income patients,” Testoni said. “The consequences of Lilly’s actions for hospitals and their patients will be severe.”
“With [Monday’s] announcement, [the Department of Health and Human Services] can no longer sit on the sidelines,” Pollack said. “This Administration has repeatedly shown that it is willing to be tough on drug companies to protect America’s patients from profiteering and price gouging. On behalf of the hospitals and health systems that serve America’s rural and most underserved communities, we ask HHS to show that same toughness here and prevent Lilly from moving forward with this illegal and harmful policy.”
Lilly, in its letter, described the policy as lawful and pointed to two recent federal appeals court decisions that found the burden of “a materially identical claims-data condition” to be minimal.
Additionally, Pollack disputed Lilly’s claims that it made a fair effort to resolve hospitals’ concerns before moving forward with its ultimatum. He pointed to an open letter his association sent to the company two weeks ago “offering to work together in good faith on a common solution. Lilly never responded.”
Lilly’s spokesperson, when asked about those claims, countered that AHA hadn’t actually sent that letter directly and described it as a media tactic rather than a genuine offer of collaboration.
The company, in its letter to HRSA, also said in early May it had “individually contacted the fifty largest holdouts, expressly invited them to identify their concerns, and offered live discussions to work through any legitimate issues.” Of these, 11 did not respond and 13 held meetings that yielded no commitments.
The 340B program has proven to be a magnet for industry and policy conflict, particularly in recent years as its scale has ballooned. The divide is most evident in the ongoing clash over a pilot rebate program HRSA attempted to launch at the top of year, but was forced to restart following the hospital industry’s legal pushback.
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