"Our hospitals have been very concerned about this for a long time, since the beginning, obviously, but we started to hear towards the end of last year real panic from a number of our members, with the companies that were starting to announce that they were going to be going in the same direction," Testoni said.
The federal 340B program requires pharmaceutical companies participating in Medicaid or Medicare to discount products for safety-net providers. But in 2020, companies began limiting discounts on outpatient drugs, including by prohibiting hospitals from using the discount at multiple contract pharmacies or requiring entities to submit significant data in order to receive discounts. Some drugmakers imposed restrictions on community health centers and other 340B entities as well.
HHS said in late 2020 that manufacturers must offer covered drugs at no more than the 340B price, even if a hospital or other 340B entity uses contract pharmacies to distribute drugs. HHS' Health Resources and Services Agency began sending letters to manufacturers last year, saying their policies went against the 340B statute and could be subject to fines.
Manufacturers sued HHS, and federal judges are split on whether the agency acted within its bounds. Both the government and manufacturers have appealed the decisions.
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The effect of these discounts isn't just getting worse because more companies are imposing limits, Testoni said. It's also due to the specific drugs they're restricting. Manufacturers are increasingly limiting 340B discounts for specialty drugs that may only be dispensed at contract pharmacies.
"Some of these medications we're not even able to give them our own," UW's DasGupta said. "Patients are getting their medications, but we don't have any 340B benefits to be able to help coordinate that care, or in cases where patients may have uncompensated care, we're evaluating where our abilities are to be sure that we can continue providing that."
The loss of hospital savings may also trickle down to patient care, said Shahid Zaman, policy manager at America's Essential Hospitals. Contract pharmacies help hospitals expand access, since some patients can't travel to a hospital's in-house pharmacy to pick up their prescriptions, he said.
Plus, member hospitals have used 340B savings to fund health services like trauma, oncology and stroke care; medication management; sexual assault response teams and more. The administrative difficulties of navigating different 340B discount restrictions are grating on hospitals too, Zaman said.
Five manufacturers have restricted discounts to community health centers as well as hospitals, per 340B Health. Drugmaker Gilead most recently announced that it will limit discounts for its popular hepatitis C drugs starting May 2 by requiring claims level data for prescriptions dispensed at contract pharmacies.
"Sharing of claims level data with manufacturers is a necessary step toward achieving greater transparency in the 340B program and will help Gilead address duplicate discounts and diversion while also bolstering the integrity and sustainability of the program," the company's March 15 notice said.
Mary Elizabeth Marr, CEO of Thrive Alabama, said it's difficult to quantify how much her community health center will lose in savings because of Gilead's announcement but that the action represents a "slippery slope."
"We've built sustainable programs around having this money. If the money went away, we literally would cease to exist," Marr said.