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1 1 (May 8, 2024)

handle is hein.crs/govepdp0001 and id is 1 raw text is: Litigation Continues Over Use of Contract Pharmacies in 340B Drug Discount Program May 8, 2024 The 340B Drug Discount Program enables eligible hospitals and other safety net providers to purchase outpatient prescription drugs at discounted prices. The Health Resources and Services Administration (HRSA), an operating division of the U.S. Department of Health and Human Services (HHS), administers the program. In recent years, both legal and policy disagreements have arisen between HHS, drug manufacturers, eligible providers (known as covered entities), and other stakeholders about the size of the program, how it should function, and who should benefit from it. For example, disagreements about covered entities' use of retail pharmacies to distribute 340B drugs to patients has led to a number of lawsuits that challenge both the Secretary of HHS's and states' authority to regulate the program. This Legal Sidebar discusses recent judicial opinions ruling on HHS's and states' ability to regulate the 340B program. The U.S. Court of Appeals for the Third Circuit (Third Circuit) in Sanoti-Aventis U.S. LLC v. HHS and the U.S. Court of Appeals for the Eighth Circuit (Eighth Circuit) in Pharmaceutical Research and Manufacturers ofAmerica (PhRMA) v. McClain both addressed interpretations of the 340B statute, and the decisions of both courts focus on the lack of statutory language around contract pharmacy use while addressing different legal questions associated with the same. According to the Third Circuit, the statute restricts HHS from taking certain actions to address covered entities' use of contract pharmacies, which has enabled some drug manufacturers to effectively create 340B pricing restrictions for their drugs. The Eighth Circuit, assessing a different legal question, upheld an Arkansas law that prohibited such manufacturer restrictions, finding that the state prohibition was not preempted by the 340B statute. Background The 340B statute requires the Secretary of HHS to enter into purchase price agreements (PPAs) with drug manufacturers who participate in federal health care programs. The PPAs require manufacturers to offer to sell certain outpatient prescription drugs at a ceiling price, which is calculated based on a statutory formula. The statute provides a list of covered entities that may purchase drugs from manufacturers at the discounted ceiling price, including Federally Qualified Health Centers (FQHCs), Rural Referral Centers, and some hospitals, such as Disproportionate Share Hospitals and Children's Hospitals. Covered entities can generate revenue from 340B (known as 340B savings) by dispensing these lower-cost drugs to patients and receiving list price reimbursement from third-party payers (e.g., insurance companies). Congressional Research Service https://crsreports.congress.gov LSB11163 CRS Legal Sidebar Prepared for Members and Committees of Congress

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