Merck joins other drugmakers in cutting off sales to 340B contract pharmacies

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Merck became the latest drugmaker to cut off sales of 340B-discounted products to contract pharmacies, despite warnings from the federal government that similar moves by other companies violate the program’s statute.

The drug giant wrote to 340B entities last week that if they do not join the company’s program integrity initiative then it will cut off sales to most contract pharmacies starting on Sept. 1. The decision comes more than a year after Merck called for 340B entities to provide claims data in a bid to prevent duplicative discounts for 340B and Medicaid.

“Although we had hoped that covered entities would collaborate with Merck through our program integrity initiative, participation to date has been very low,” according to a notice from the company to 340B entities. “If 340B claims data are provided as required under the updated Merck Program, we will again voluntarily honor 340B discounts or chargebacks for contract pharmacy transactions.”

Merck said the requirement is to ensure that it doesn’t provide duplicative discounts for both Medicaid and 340B, which are prohibited under the program’s statutes. It will still offer sales to one contract pharmacy if the hospital doesn’t have its own in-house pharmacy.

RELATED: Supreme Court agrees to hear lawsuit challenging HHS’ 340B cuts

But 340B advocates called the change an attempt to avoid offering the discounts.

“Drug companies should not impose conditions on hospitals eligible for 340B discounts, including demanding access to patients’ drug claims,” said Maureen Testoni, CEO and president of the advocacy group 340B Health. “Merck’s leaders should withdraw their threat and continue to abide by the law.”

Merck, however, argues that the 340B statute does not require it to offer discounts to contract pharmacies. The drugmaker did not immediately return a request for comment on the decision.

Drugmakers agree to offer discounted products to 340B-covered entities, which encompass safety-net providers and hospitals, in exchange for participation in Medicare and Medicaid. Contract pharmacies dispense discounted drugs to patients on behalf of the 340B entity. 

Drugmakers have argued that the contract pharmacies are profiting off the discounts and that patients are not benefiting from the discounts. But 340B advocates charge the program is vital as drugmakers have hiked prices over the years. 

But the Health Resources and Services Administration, which oversees the 340B program, argues that the drugmakers do have to offer such discounts.

HRSA warned six drugmakers—Eli Lilly, AstraZeneca, Novartis, Novo Nordisk, Sanofi and United Therapeutics—back in May that the restrictions violated federal law.

The warning though did not deter the drugmakers, several of which have sued the federal government to argue that the restrictions don’t violate the statute.

A separate class-action lawsuit was filed against four drugmakers to restrict sales of insulin to contract pharmacies.

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