National pharmaceutical group files federal lawsuit over Arkansas drug-pricing law - Arkansas Online

A lobbying group for the pharmaceutical industry filed a lawsuit last week in federal court seeking to block an Arkansas law passed this year that the organization says illegally requires drugmakers to provide pharmaceuticals discounted under the federal 340B Drug Pricing Program to contract pharmacies.

Pharmaceutical Research and Manufacturers of America (PhRMA) filed the complaint Wednesday seeking to block implementation of Arkansas Act 1103 of 2021 -- the 340B Drug Pricing Nondiscrimination Act -- which it says would require drug manufacturers to provide 340B pricing to any Arkansas pharmacies that enter into contractual agreements with entities covered under 340B.

The complaint says that Act 1103's requirements related to manufacturers is in direct conflict with federal regulations that govern 340B and the pharmaceutical pricing agreements negotiated on behalf of the covered entities.

The federal 340B Drug Pricing Program was created in 1992 to protect specified clinics and hospitals -- known as "covered entities" -- from drug price increases and to provide access to price reductions. The program requires drug manufacturers participating in the Medicaid program to enter into pharmaceutical pricing agreements with the government to provide discounts of covered outpatient prescriptions purchased by covered entities serving vulnerable patient populations. Covered entities are then able to dispense the discounted medications to uninsured patients and to patients covered by Medicare.

The Health Resources and Services Administration, an agency within the U.S. Dept. of Health and Human Services responsible for administration of the program, has issued guidance twice during the life of the program -- in 1996 and in 2010 -- regarding contract pharmacies.

In 1996, HRSA, noting that only 500 of the then 11,500 covered entities used in-house pharmacies, issued guidance that covered entities could have the option of contracting with one pharmacy of its choice to purchase covered outpatient drugs. In 2010, HRSA expanded upon that guidance by allowing covered entities to enter into more complex arrangements that include multiple pharmacies.

On Dec. 30, 2020, HHS issued an advisory opinion on the statute reiterating its position that the use of contract pharmacies by covered entities is permissible and said that if such arrangements were not allowed, Congress "would have used language affirmatively precluding the use of contract pharmacies as arms in the distribution channel, but it did not."

According to the complaint, 340B contains no provision for third-party pharmacies to be included under the statute and it claims that Act 1103 creates that provision in state law in violation of federal law.

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

The law, which was passed in May, has not yet gone into effect due to a suspension order issued in July by the Arkansas Insurance Department placing the law on hold for 90 days, until Oct. 27.

A summary of the litigation provided by PhRMA said the state legislation seeks to regulate at the state level the participation of drug manufacturers in a federal program and that provisions in the legislation violate the Commerce Clause of the U.S. Constitution because it would project Arkansas' regulatory regime into other states' jurisdictions.

The issue of contract pharmacies has set off a wave of litigation around the country in the wake of the Dec. 30 advisory opinion from HHS, most of it directed at the federal government.

A complaint filed in the U.S. District Court for the District of Delaware by AstraZeneca Pharmaceuticals LP in January asked the court to declare that AstraZeneca is not required to offer 340B discounts to contract pharmacies and that HHS had exceeded its authority in issuing the Dec. 30 advisory opinion.

In June, U.S. District Judge Leonard P. Stark denied both the government's motion 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 in the wake of 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 problems of diversion and duplicate discounts" that are "directly attributable to decisions that HRSA has made in overseeing the program over the course of two decades."

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

Nicole Longo, a spokesperson for PhRMA, said in the email that "evidence suggests that patients who show up at 340B hospital's contract pharmacies generally do not benefit from the discounted price." She referenced a 2018 report from the U.S. Government Accountability Office following a review of 55 covered entities that found 30 of those entities had reported providing low-income, uninsured patients discounts on 340B drugs at some or all of their contract pharmacies.

Of the 30 covered entities that provided discounts, the report said, 23 said they pass on the full 340B discount to patients. Of those 30 covered entities, 14 said they based eligibility for the discounts on their patients' income, 11 said they pass on the discounts to all of their patients, and 5 said they make those determinations on a case-by-case basis.

The report said the GAO found weaknesses in HRSA's oversight "that impede its ability to ensure compliance with 340B Program requirements at contract pharmacies."

Amanda Priest, a spokesperson for Attorney General Leslie Rutledge, said the office has not yet reviewed the lawsuit.

"Upon receipt of the lawsuit," Priest said in an email, "the office will review the complaint and respond accordingly."

source: https://www.arkansasonline.com/news/2021/oct/06/national-pharmaceutical-group-files-federal/

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