Federally qualified health centers (FQHCs) and other federal grantees participating in the federal 340B drug discount statute face potentially devastating, practical effects on their ability to serve vulnerable patient populations from a mounting legal battle between drug manufacturers and the federal Health Resources and Services Administration (HRSA).
Since 1992, the federal 340B drug discount statute, 42 U.S.C. §256b, has required drug manufacturers that seek to participate in the Medicaid prescription drug benefit to offer discounts on outpatient prescription drugs purchased by health centers, hospitals, and other 340B "covered entities." Per the statute, that discounted price must "tak[e] into account any rebate or discount, as provided by the Secretary" of Health and Human Services (emphasis added). For over 30 years, HRSA has required drug manufacturers to offer up-front discounts rather than retroactive rebates, in part because HRSA recognized that nonprofit health centers operating on narrow margins cannot afford to provide "float" to multi-billion dollar drug manufacturers while the manufacturers choose whether and when to honor 340B pricing through a retroactive rebate.
As of December 1, however, four prescription drug manufacturers have sued HRSA challenging the agency's ability to review and approve 340B program rebate models those manufacturers have proposed to implement for 340B drug purchases. HRSA sent each of the manufacturers letters warning, per the statute, that the manufacturers could not unilaterally implement a rebate model without first submitting the model to the agency for review and approval. The manufacturer lawsuits challenge both whether they can implement a rebate model of their own choosing, as well as whether they need to obtain prior approval from the federal agency before implementing it.
The position of the incoming federal Administration regarding the manufacturer rebate models is unknown. Even if the new Administration defends HRSA's longstanding position on legal grounds, however, health centers cannot expect the federal government to represent the real-world effects of such rebate models on health centers' operations as effectively as the health centers can themselves. Health centers and others with vested interests in the outcome of these lawsuits have options, including filing amicus (friend of the court) briefs to inform the judges deciding these cases of the real-world effects their decisions will have on the ability of health centers to serve vulnerable patient populations.
On Thursday, December 19, 2024, join Feldesman Partner Steve Kuperberg for his webinar New 340B Manufacturer Lawsuits: What They Mean for Health Centers that addresses this ongoing legal battle in the 340B Program.
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