HHS Releases Advisory Opinion Clarifying that 340B Discounts Apply to Contract Pharmacies

The HHS Office of the General Counsel released an advisory opinion concluding that drug manufacturers are required to deliver discounts under the 340B Drug Pricing Program (340B Program) on covered outpatient drugs when contract pharmacies are acting as agents of 340B covered entities.

The 340B Program requires drug manufacturers (in exchange for coverage of drugs under Medicaid) to offer substantial discounts to “covered entities,” which include safety net hospitals, community health centers, and other institutions that serve vulnerable populations. Estimates suggest that discounts in the 340B Program can range between 25 and 50 percent and that approximately $30 billion of drugs are sold to covered entities each year, representing almost 6 percent of prescription drugs sold in the United States.

HHS has become aware of drug manufacturers refusing to provide 340B discounts to covered entities when covered entities order the drugs themselves but then have the drug physically delivered to patients through “contract pharmacies.” Through the new advisory opinion, HHS has clarified that drug manufacturers must provide 340B discounts when a contract pharmacy is acting as an agent of a covered entity, providing services on behalf of the covered entity.

“President Trump has been steadfastly devoted to lowering drug prices for American patients, and that includes ensuring that drug companies are offering the discounts they’re legally required to give to providers that serve the vulnerable,” said HHS Secretary Alex Azar. “Whether it’s making sure 340B discounts are passed on to patients or ensuring that drug companies are delivering these discounts in the first place, we’ve ensured that the deep discounts offered under 340B are helping the vulnerable populations the program was set up to benefit.”

Although advisory opinions do not carry the force of law, they set out the agency’s current views on issues. Those views may be reflected in the various regulatory, enforcement, and oversight powers the federal government has to run the 340B Program.

Read the advisory opinion here: https://www.hhs.gov/guidance/document/ao-contract-pharmacies-under-340b-program-12-30-2020-2