As anxiety grows over the government’s 340B rebate pilot, and we wait to see whether lawmakers can avert a government shutdown by Oct. 1, it’s important to take a moment to gain some perspective about the state of our safety net drug program.
While things seem gloomy, there is good news about 340B:
- A federal appeals court unanimously upheld Mississippi’s contract pharmacy access law, while federal judges ruled against AbbVie and Novartis in their challenges against laws in both Maine and Rhode Island, allowing them to take effect. “To date, two federal appeals courts and eight federal district courts have ruled against drugmakers in similar cases, while just one federal district court has sided with the drug industry.,” 340B Report
- Thanks to these laws, five more manufacturers — AbbVie, Alkermes, Biogen, Liquidia and Merck — have announced they would exempt covered entities from contract pharmacy restrictions in various states.
- HRSA received 1,243 comments from stakeholders on its 340B rebate pilot, and a cursory review shows roughly 70% completely opposed and 20% had serious questions or concerns while just 10% were supportive. It sends a strong message to the government about how this proposal is being received — and sources on the Hill tell us that key House and Senate committee leaders have no appetite for legislating rebates into the 340B program.
- A bipartisan group of 163 members of Congress signed a letter to HHS urging it to abandon the rebate pilot or, “if the program must move forward, to proceed with the utmost caution and impose stronger guardrails to ensure the 340B program is not entirely dismantled.” That 21 Republicans signed the letter may not sound impressive, but that’s far more votes than the majority party can afford to lose on any potential 340B legislation in the narrowly divided House.
The bottom line: We’re winning some important battles. The 340B program enjoys strong support — and firm legal standing. And Big Pharma may have bigger fish to fry right now, frankly.
Pharma pressure
That’s not to say the drug industry is letting up on its assault on 340B. Drugmakers had to submit their model proposals to HRSA by Sept. 15; we’ll know by Oct. 15 which ones get the green light to start next year and what they’ll look like.
The trade group PhRMA has unveiled a seven-figure ad campaign attacking 340B as “a hidden tax on patients, employers and taxpayers” — typical of how the industry uses its vast financial resources to divert attention from its own high drug prices. The outlet NOTUS reports it’s PhRMA’s biggest anti-340B ad buy ever, adding the organization “sees fresh momentum following state and federal investigations into the program and Republicans’ willingness this summer to cut Medicaid.”
Meanwhile, a new dark money group has emerged and is running ads in Michigan, where state lawmakers are debating contract pharmacy access bills. Community Action for Responsible Hospitals describes itself as a “non-profit organization of patient-focused stakeholders including labor unions, faith leaders, healthcare providers, consumer advocates, and public interest groups.” They’ve been running ads in Axios Detroit alleging that 340B “has fueled massive hospital consolidation” and that “big hospitals have turned a safety-net program into a cash machine.”
It’s not clear who is funding the organization. At least one partnering organization, America’s Agenda, has ties to the drug industry.
There are two notable court cases involving drugmakers:
- The four manufacturers that initially proposed 340B rebates, plus industry vendor Kalderos, are pressing an appeals court to overturn two lower court rulings that upheld HHS’s authority to pre-approve any rebate model. There’s no date yet for oral arguments in the case.
- Four major hospitals filed an emergency appeal to block Johnson & Johnson from auditing their 340B programs. They have alleged in a federal lawsuit that HRSA unlawfully approved J&J’s request to audit their programs without allowing them an opportunity to respond.
Finally, in an unusual move, Bausch Health announced it will remove its GI antibiotic Xifaxan and several other drugs from both the 340B program and Medicaid, effectively requiring covered entities to buy them at WAC or GPO pricing after Oct. 1. Xifaxan is one of the drugs selected for Medicare drug-price negotiations for 2027; as such, observers fear it could spark a trend of manufacturers opting out of 340B discounts and Medicaid rebates as they do the math on Inflation Reduction Act mandates and pressure from the White House to lower drug prices.
Other 340B news
In a controversial new report, the Congressional Budget Office says 340B is driving up costs for the federal government and private insurers. The CBO estimates that two-thirds of the growth in 340B drug purchasing is due to hospitals acquiring off-site clinics, the expansion of hospital and contract pharmacy eligibility made possible by the Affordable Care Act in 2010. However, the report acknowledges that “CBO does not have sufficient data to quantify the effects of those factors,” and it relies on anecdotal evidence for many other claims it makes.
Another high-profile and contentious discussion of 340B took place Sept. 16 in a hearing on hospitals’ tax-exempt status before the House Ways & Means Committee. Chairman Rep. Jason Smith, R-Mo., said many urban hospitals are classifying as rural to gain higher Medicare reimbursement and a lower threshold for 340B eligibility.
In an unfortunate but not unexpected development, CMS has begun contacting hospitals about an upcoming survey on drug acquisition costs set to start in 2026. It’s believed this will be the Trump administration’s second attempt to slash 340B hospital reimbursement under Medicare Part B after the Supreme Court ruled its earlier attempt was unlawful because it did not survey participating hospitals before slashing payments.
Finally, U.S. Reps. Early “Buddy” Carter (R-Ga.) and Diana Harshbarger (R-Tenn.) have reintroduced the Pharma-friendly 340B ACCESS Act, which among other things would prohibit the ability of states to pass laws regulating the program. This time around, the legislation has lost the support of the National Association of Community Health Centers (NACHC), which has said it no longer backs the bill, a move that further raises questions about the organization’s uneasy alliance with PhRMA in ASAP 340B.
Again, the good news is that the safety net’s near-universal rejection of 340B rebates matters. Lawmakers cannot hear enough about how damaging the pilot program will be to the healthcare safety net. HRSA is accepting public comment through Nov. 12 on the operational burden the rebate pilot presents for covered entities — I highly encourage you to add your voice.
Keep up the pressure, and stay focused on the mission.
If you’d like to continue this conversation, please contact me at [email protected].