Pill pack.

HHS’s 340B Advisory Opinion: Helpful or Harmful?

By Sravya Chary

A recent advisory opinion released by the Department of Health and Human Services (HHS) left many 340B advocates hungry for answers and pharmaceutical manufacturers frustrated.

The 340B program discounts the price of drugs paid by safety net hospitals to pharmaceutical manufacturers. The program is of critical importance to low-income and uninsured patients, especially during the COVID-19 pandemic.

HHS should take timely measures to resolve the concerns raised by the advisory opinion and resume the free flow of 340B discounted drugs to vulnerable patients.

In mid-to-late 2020, several drug makers withheld 340B discounts on drugs being shipped through covered entities’ contract pharmacies. This was the manufacturers’ attempt to reduce duplicate discounting and the rate at which ineligible patients were receiving 340B discounted drugs.

In response, on December 11, 2020, five hospital groups (including the American Hospital Association) and an organization of hospital pharmacists filed a lawsuit against HHS on behalf of 340B participants, pleading with the agency to enforce 340B program requirements amid pharmaceutical manufacturers’ alleged noncompliance.

On December 30, 2020, HHS released an advisory opinion in response to the lawsuit, in which the department concluded the following:

  • Drug manufacturers participating in the 340B program are required to provide discounted drugs to 340B covered entities at or below the established 340B ceiling price, regardless of the entity’s chosen delivery method.
  • Contract pharmacies are vital to upholding the original intent of the 340B program, which is to adequately serve low-income patients, several of which live in rural areas where hospitals often do not have their own in-house pharmacy.
  • Drug manufacturers must provide 340B discounts even when contract pharmacies are used to deliver 340B discounted drugs to patients.
  • Manufacturers must provide these discounts regardless of suspected duplicated discounts and diversion.

HHS concluded by emphasizing that the advisory “[…] does not have the force or effect of law” but rather, it is the department’s interpretation of the existing statute.

Unfortunately, in this advisory, HHS failed to directly address many of the key facets of the ongoing debate between 340B advocates and pharmaceutical manufacturers, leaving both parties’ main concerns unanswered.

The American Hospital Association (AHA) and 340B Health conveyed overall optimism regarding the opinion. However, both entities questioned whether pharmaceutical manufacturers would be held liable for the actions that spurred this debate in the first place. In a statement released by 340B Health, the organization wrote that it was ready to work with HHS to identify where discounts were withheld from entities to facilitate reimbursement and ensure entities are “made whole” – thus shedding light on a vital component of the debate that was not addressed in the advisory.

Drug manufacturers, on the other hand, felt the opinion was radically unfair.

On December 10, 2020, just weeks prior to the advisory being issued, the Health Resources and Services Administration (HRSA) issued the 340B Drug Pricing Program Alternative Dispute Resolution Final Rule (“ADR Final Rule”), which gave manufacturers and 340B entities an avenue to negotiate disputes. This resulted in the creation of a dispute resolution board, which includes HHS members. Drug manufacturers worry that HHS members sitting on the dispute resolution board will rely on the opinion to enforce the program.

On January 12, 2021, AstraZeneca, Eli Lilly, and Sanofi filed three separate lawsuits. The manufacturers argued that providing discounts for drugs dispensed through contract pharmacies is not covered under the original statute and therefore, HHS exceeded statutory authority. In Sanofi’s suit, the manufacturer argues that HHS representatives will “treat the advisory opinion as binding in any ADR proceeding […] and potentially impose crippling sanctions.”  Further, the manufacturers argue that rather than assisting the vulnerable, the 340B program has turned into an additional revenue stream that benefits for-profit entities such as national pharmacy chains and intermediaries.

In the short term, HHS should promptly take the steps necessary to resume the flow of 340B discounted drugs through contract pharmacies.

In the long term, however, the following measures should be taken to ease tension in the ongoing debate between these two parties and to ensure vulnerable patients are not deprived of access to discounted drugs in the future:

  • HRSA should provide all contract pharmacies with the means to accurately track patient eligibility for 340B discounted drugs.
  • Contract pharmacies should provide manufacturers with claims-level data to ensure duplicate discounts are not being collected on units bought at 340B price.
  • HRSA should investigate if discounts provided to contract pharmacies truly are trickling down to vulnerable patients.

Threats to the 340B program, although always harmful, are especially devastating during the COVID-19 pandemic. But, ultimately, the responsibility to ensure low-income and uninsured patients have access to affordable drugs during the public health crisis lies with HRSA and HHS.


The above opinions are wholly my own and in no way represent the opinions of my affiliated institutions.

Sravya Chary

Sravya Chary is a manager in the pharmaceutical industry, a Master of Bioethics (MBE) candidate at Harvard Medical School, and a Petrie-Flom student fellow for the 2020-2021 academic year.

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