A ProxsysRx Team Member Speaks Out.

I joined ProxsysRx in early 2021, and I’ve been devoted to 340B program management full-time since early 2022.

I’m no stranger to heavily regulated programs. Nearly my whole professional career has been in some aspect of public health — preclinical, clinical and now post-clinical. I’m currently fully devoted to two of ProxsysRx’s Covered Entity partners, and I’ve had input into the support of several others.

One of the areas I’ve focused-on heavily is manufacturer restrictions. Honestly, it often feels like a breakthrough simply navigating the restrictions successfully. No two manufacturers do things exactly the same, compounding the difficulty of ensuring that all the proverbial T’s and I’s are crossed & dotted — particularly when you’re speaking a different language with each company.

Even more frustrating than trying to play by the manufacturers’ rules is the frequency with which those rules change. As soon as we establish methods to ensure we’re capturing savings for the health systems we serve, manufacturers pull their rugs out from under us — and we have to start over.

I have close working relationships with the health systems I serve. I’ve seen how they’ve used their 340B savings and revenue to help patients. That’s what frustrates me most about the manufacturers’ 340B restrictions. The reason these entities are covered by 340B is because they carry a heavier burden of caring for indigent populations in their communities.

With my background in public health, I know just how heavily the deck is stacked against hospitals in the 340B program, and I’ve seen the impact of manufacturer restrictions first-hand. I’ve watched restrictions weaken an already-fragile system. I’ve seen covered entities’ services reduced, or eliminated altogether. Services like, for instance, free clinics to the public.

So when we received the two most recent restrictions, I decided it was time to speak out.

Novartis introduces a new tactic to evade its 340B obligations.

Novartis states in its restrictions that any contract pharmacy within 40 miles of the covered entity will have pricing added. This sounds great. Most, if not all, of a typical 340B-eligible health system’s retail contract pharmacies — from chains to local independents — will get 340B pricing. The problem with the 40-mile radius, and Novartis knows this, has to do with covered entities’ specialty pharmacy networks.

The number of specialty pharmacies across the country is significantly lower. Why? For starters, they must operate under a strict set of Policies and Procedures to ensure accreditation — and with those stricter policies comes a significantly higher demand on pharmacists’ time and attention to detail. What’s more, specialty pharmacies’ startup costs, operating costs and costs-of-goods are significantly higher.

On top of that, there’s the difficulty of 1) getting PBMs to allow pharmacies to dispense for their patients — other than the pharmacies they own — and 2) getting manufacturers to allow purchase of their specialty meds.

That’s why the number of specialty pharmacies is inherently lower. Hence, the odds of any given covered entity having a 340B-contracted specialty pharmacy within 40 miles of its campus are also significantly lower.

The tactic significantly impacts a covered entity’s 340B savings & revenue.

Naturally, Novartis doesn’t distinguish between retail and specialty pharmacies in its restrictions. When Novartis published this new restriction, we reached-out to them — on behalf of one of the health systems we serve — and pointed-out the problem they’d created (as if they didn’t already know). Novartis responded that it will only allow special exceptions if there are no contract pharmacies within 40 miles of any given 340B covered entity.

Sounds reasonable, doesn’t it? Not in this instance. Novartis lumps all of a covered entity’s contract pharmacies together. So if the covered entity in question has any kind of pharmacy within 40 miles, in Novartis’s eyes, they get pricing. What we’ve tried to explain to them — to no avail — is that the covered entity in question Doesn’t. Have. A. Specialty. Pharmacy. Within 40 miles.

Yeah, they say (as if they really don’t understand), but the covered entity has pharmacies within 40 miles — so this, what did you call it, a “specialty pharmacy?” Yeah, that specialty pharmacy won’t get 340B pricing.

Of course, it makes no difference that the Novartis specialty products in question only come from specialty pharmacies. There will be no 340B pricing for our client, despite the fact that these are 340B-eligible Novartis NDC (National Drug Code) medications.

In short, Novartis is directly violating the 340B statute.

How do they get away with it? The same way all manufacturers get away with unlawful 340B restrictions: The Health Resources and Services Administration (HRSA) lacks the resources to enforce 340B program guidelines. They’ve admitted as much publicly.

We’re still poking the bear — looking for every possible loophole and trying to devise a workaround. But the reality is, there probably isn’t one.

What’s next? We could report Novartis to HRSA, but what’s the point? The likeliest response, if we could even get one, would be something along the order of, “Take a number.” On the bright side, at least Novartis replied to our email. Which is more than we can say for most manufacturers imposing unlawful 340B restrictions — particularly manufacturers using the 340B ESP website. (For an overview of 340B ESP, read our previous post on the topic)

Johnson & Johnson’s new 340B restrictions are even worse.

On February 15, one of the clients I served forwarded me a 10-page, 3914-word letter they’d received from Johnson & Johnson. After they’d spent who-knows-how-many-hours poring over the contents, their email included one genuinely troubled question: “Does this mean what we think it means?”

The key restriction to which they were referring (which Johnson & Johnson announced would go into effect starting March 7, 2023) was as follows:

If a non-grantee Covered Entity does not have an in-house pharmacy, such Covered Entity may designate a single contract pharmacy location registered on the HRSA OPAIS database for delivery of 340B-priced covered outpatient drugs listed on Attachment A if (I) the Covered Entity provides limited claims data with respect to that contract pharmacy location and (ii) that single contract pharmacy location is within 40 miles of the Covered Entity parent site.

In plain English, Johnson & Johnson is telling 340B covered entities, that — starting March 7 — they can designate only one pharmacy as a contract pharmacy in their networks, AND that the pharmacy has to be located within 40 miles of the health systems’ campuses.

Consider the implications for 340B-eligible patients who lack easy access to transportation: For all practical purposes it means that, unless that single contract pharmacy offers prescription-shipping services, they’re either NOT getting their medication — or they’ll be incurring significant personal costs to fill their prescriptions.

In Birmingham, where ProxsysRx is headquartered, the city’s largest hospital system is located in a densely-populated urban location — with virtually zero access to convenient street parking. That’s the challenge which would be facing 340B patients in Birmingham lucky enough to have their own transportation — not to mention the physical capability to walk several blocks to the hospital’s on-campus pharmacy.

I have NO idea what travel time and effort would look like for patients who’d have to rely on public transportation, but I do know that Birmingham’s bus system serves a limited geographical area in the city. So for someone quote-unquote lucky enough to have access to public transport in Birmingham, one trip to fill a single prescription could literally take hours door-to-door.

Worse still, by forcing 340B covered entities to choose a single contract pharmacy, they’re telling hospitals, “You can designate either a retail pharmacy or a specialty pharmacy, but not both.”

Let’s talk about what 340B restrictions are.

By definition, a restriction makes it harder to gain legal access to HRSA-approved 340B pricing. Manufacturers employ feigned rationalizations to explain their intent — IE: “…to ensure that safety net providers and vulnerable patients come first…” — which is how Bayer put it, in one communiqué.

Back to 340B 101: The stated purpose of the program is to stretch scare federal resources for covered entities. All of the health systems we serve use the savings we generate for them to fund patient-focused programs. As we mentioned in a previous post recounting a conversation between two Directors Of Pharmacy, when manufacturers impose unlawful 340B price restrictions, they’re boosting their own profits at the expense of the patients those community health systems exist to serve.

Novartis and J&J’s 340B restrictions violate a core patient right: Choice.

One of the most critical benefits our vast pharmacy industry offers is patient choice. By law, patients have the right to choose where they get their medications. Covered entities don’t dictate which pharmacies their patients use. But when restrictions limit 340B pricing to one contract pharmacy (much less zero pharmacies), they’re robbing patients of their legal right to choose.

And yes, it’s true that some manufacturers (like Bayer —Thank you for that much, Bayer) allow claims submission for additional contract pharmacies to regain pricing. But others, like EMD Serono (and soon J&J), only allow one contract pharmacy by designation. Period. Regardless of how many contract pharmacies are in a covered entity’s entire network.

We’ve already discussed the profoundly negative impact J&J’s “one contract pharmacy” policy will have on patients. So what does EMD Serono have to say about its own policy? In their own words, “It is therefore consistent with the 340B statute’s obligation that EMD Serono offer its products to covered entities at or below the ceiling price.” How can that policy be consistent with the 340B statute when only a fraction of any given covered entity’s network gets access to 340B pricing?

340B violations impact the poorest and most vulnerable patients

Lastly, these manufacturers are utterly inconsistent in what they restrict. Sometimes, only a portion of their NDC portfolio gets restricted. No surprise, the overwhelming majority of 340B-eligible medications under access-restrictions are the proverbial “heavy hitters” in their product line. It makes sense, of course. If you’re going to break the law, get the biggest bang for your buck — then save a percentage of your ill-gotten gains to pay the lawyers.

At the end of the day, covered entities fund programs providing care to the indigent and non-insured only to the extent that they can afford. Drug manufacturers routinely claim their mission is to put patients first. But when they cleave-off 340B pricing to a large portion of contract pharmacies, they’re really serving only a select few patients — generally those who can afford to get their medications in a restricted market. That isn’t really putting vulnerable patients first, is it?
(A ProxsysRx 340B Program Specialist, in his own words)


The good news for covered entities about 340B manufacturer restrictions

Despite the numerous unlawful restrictions imposed on eligible entities by manufacturers — including alliances with 340B ESP — ProxsysRx continues to generate significant savings and revenues for the health systems we serve. With ProxsysRx’s help, many of those health systems are using those savings to fulfill their missions to serve their communities’ poor and uninsured patients.

ProxsysRx is here to help, if you have questions.

There are so many ways to optimize your health system’s 340B drug program savings and benefits, while minimizing the likelihood of noncompliance. For more information, contact Howard Hall. C: 214.808.2700 | howard.hall@proxsysrx.com