HRSA Says Drug Manufacturers Violated 340B Program Statute

On May 17, 2021, the United States Health Resources and Services Administration (HRSA) publicly disclosed letters which were sent to six major pharmaceutical manufacturers. HRSA’s letters expressly state that each manufacturer is currently in violation of the Federal 340B Program statute as a result of policies restricting contract pharmacies and covered entities from access to 340B Program discounted medication. HRSA further states in its letters that each of the subject manufacturers may be liable for civil monetary penalties (CMPs) not to exceed $5,000 per instance of overcharging, as well as for the costs of repayment required under the 340B Program statute. However, despite referencing the imposition of CMPs and repayment liabilities, HRSA also notes it will “determine whether CMPs are warranted” based upon each manufacturer’s willingness to comply with their 340B Program obligations.[1]

HRSA’s action comes nearly a full year after the subject manufacturers implemented policy changes that prohibited covered entities’ contract pharmacies from accessing discounted medication or requiring specific data submissions and compliance demonstrations prior to selling such products. HRSA’s action also follows in the footsteps of multiple legal challenges to the manufacturers’ policy changes, as well as the United States Department of Health and Human Services (HHS) issuing at least one letter advising a pharmaceutical manufacturer of possible false claims act liability related to its 340B Program-related policies.

Although HRSA’s release of these letters is welcome news to 340B Program covered entities and contract pharmacies that have been adversely affected by the manufacturer’s policies, it remains unclear whether the subject manufacturers will comply with HRSA’s requests. While the threat of 340B Program-related CMPs and repayment liabilities is substantial, many of the subject manufacturers have entrenched themselves with the argument that the 340B Program does not permit the use of contract pharmacies. Further, any movement from that position may risk exposure to false claims act liability related to HHS’ previous letter. To this end, it remains unclear whether the subject manufacturers will comply with HRSA’s instructions or if they will challenge HRSA’s decision in court.

HRSA’s release of the letters may also result in covered entities and their contract pharmacies pursuing claims of overcharging against the manufacturers either pursuant to HRSA’s administrative dispute resolution program or alternative means.

Should you or your organization wish to learn more about the effect HRSA’s letters will have on 340B Program affairs, please contact Dinsmore attorney Bryan Murray.