National Pharmaceutical Group Files Federal Complaint Against Arkansas Drug Prices Act


A lobby group for the pharmaceutical industry filed a lawsuit last week in federal court to block an Arkansas law passed this year that the organization says illegally compels drugmakers to supply pharmaceuticals at a reduced price under the Federal Drug Pricing Program 340B to contract pharmacies.

Pharmaceutical Research and Manufacturers of America (PhRMA) on Wednesday filed a lawsuit to block the implementation of Arkansas Law 1103 of 2021 – the Drug Pricing Non-Discrimination Law 340B – which it said would require drugmakers to provide a $ 340 billion price tag to all Arkansas pharmacies that enter into contractual agreements with entities covered by 340B.

The complaint says that the requirements of Law 1103 for manufacturers directly conflict with federal regulations governing 340B and drug price agreements negotiated on behalf of covered entities.

The 340B Federal Drug Pricing Program was created in 1992 to protect specified clinics and hospitals – called “covered entities” – from drug price increases and to provide access to price reductions. The program requires drugmakers participating in the Medicaid program to enter into drug pricing agreements with the government to offer discounts on covered outpatient prescriptions purchased by covered entities serving vulnerable patient populations. The covered entities are then able to distribute the drugs at a reduced price to uninsured patients and Medicare covered patients.

The Health Resources and Services Administration, an agency of the United States Department of Health and Human Services responsible for administering the program, issued guidelines twice during the life of the program – in 1996 and in 2010 – regarding pharmacies under contract.

In 1996, the HRSA, noting that only 500 of the 11,500 then-covered entities were using in-house pharmacies, issued guidelines that covered entities could have the option of contracting with a pharmacy of their choice to purchase covered outpatient drugs. In 2010, the HRSA expanded this guideline by allowing covered entities to enter into more complex agreements that include multiple pharmacies.

On December 30, 2020, the HHS issued an advisory opinion on the law reiterating its position that the use of contract pharmacies by covered entities is permitted and said that if such arrangements had not been authorized, Congress “would have used language affirmatively excluding the use of contracting pharmacies as weapons in the distribution channel, but this is not the case.”

According to the complaint, 340B does not contain any provision allowing third-party pharmacies to be included in the law and it claims that Law 1103 creates this provision in state law in violation of federal law.

The complaint alleges that federal law requires manufacturers to offer discounts to 15 types of covered entities, such as certain hospitals and clinics, and that Law 1103 seeks to add contract pharmacies as the 16th entity. The complaint says the law adds additional and conflicting requirements related to the dispute resolution of the 340B program and interferes with the federal regulatory framework.

The law, which was passed in May, is yet to come into force due to a July suspension order issued by the Arkansas Department of Insurance, suspending the law for 90 days, until the 27th. October.

A litigation summary provided by PhRMA said state law seeks state-level regulation of drugmaker participation in a federal program and the provisions of the law violate the commerce clause of the Constitution. the United States as it would project the Arkansas regulatory regime. in jurisdictions of other states.

The issue of contract pharmacies sparked a wave of litigation across the country over the HHS Dec. 30 advisory opinion, most of which was aimed at the federal government.

A complaint filed in the Delaware District U.S. District Court by AstraZeneca Pharmaceuticals LP in January asked the court to declare that AstraZeneca is not required to offer $ 340 billion in discounts to contract pharmacies and that HHS overstepped its authority by issuing the December 30 notice. opinion.

In June, U.S. District Judge Leonard P. Stark dismissed both the government’s request to dismiss the case and AstraZeneca’s motion for summary judgment, allowing the case to move forward. Similar cases were also filed in January by Eli Lilly & Co. in Indiana, Sanofi-Aventis in New Jersey and by Novo Nordisk Inc. in New Jersey following the HHS advisory opinion. Lawsuits filed in the U.S. District Court for the District of Columbia by Novartis and United Therapeutics are also pending.

Litigation is also pending in Maryland in a case filed by Pharmaceutical Research and Manufacturers of America against HRSA and HHS alleging that the 340B program is “plagued by diversion and duplicate delivery issues” that are “directly attributable to decisions that HRSA has made to oversee the program over the course of two decades. “

The Arkansas lawsuit is the only one filed to challenge a state law, according to an email from PhRMA.

Nicole Longo, spokesperson for PhRMA, said in the email that “the evidence suggests that patients who show up to contract pharmacies at Hospital 340B generally do not benefit from the reduced price.” She referred to a 2018 report by the United States Government Accountability Office following a review of 55 covered entities which found that 30 of those entities reported offering discounts to low-income and uninsured patients on 340B of drugs in some or all of their contract pharmacies.

Of the 30 covered entities that provided rebates, according to the report, 23 said they passed the full $ 340 billion rebate on to patients. Of these 30 covered entities, 14 reported basing eligibility for discounts on their patients’ income, 11 reported passing discounts on to all of their patients, and 5 reported making these decisions on a case-by-case basis.

The report says GAO found weaknesses in HRSA oversight “that hamper its ability to ensure compliance with program 340B requirements at contract pharmacies.”

Amanda Priest, spokesperson for Attorney General Leslie Rutledge, said the office has yet to consider the lawsuit.

“Upon receipt of the complaint,” Priest said in an email, “the office will investigate the complaint and respond accordingly.”

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