340B Discounts Apply to Contract Pharmacies, Too, HHS Says

Drug companies must provide 340B discounts on covered outpatient drugs even when 340B-eligible providers use contract pharmacies, the Department of Health and Human Services has said in an advisory opinion.

Among other observations, the advisory opinion notes that the requirement that drug companies participate in the 340B program “…is not qualified, restricted, or dependent on how the covered entity chooses to distribute the covered outpatient drugs;” that “The notion that the legitimate transfer of drugs to contract pharmacies so that they can be dispensed to patients of the covered entity constitutes diversion not only ignores the realities of accounting, but also that the covered entity and contract pharmacy are not distinct, but function as principal-agent;” and that “…the argument that use of contract pharmacies constitutes an illicit ‘transfer’ leads to absurd results.”

HHS advisory opinions do not carry the force of law.

The 340B program, which enables hospitals that serve especially large numbers of low-income patients to purchase prescription drugs at a discount to dispense to such patients on an outpatient basis, has long been a vital tool in the ability of private safety-net hospitals to serve their community.  NASH has long supported the program, doing so most recently in a September letter to members of Congress.

For more information about HHS’s response to the attempts of pharmaceutical companies to avoid providing 340B discounts, see HHS’s news release on its advisory opinion and read the advisory opinion itself.