There’s an old saying that it’s better to be rich and guilty than poor and innocent. It’s a sad truth that accurately reflects the current state of 340B manufacturer restrictions, particularly in the wake of the January 30, 2023 decision by the U.S. Court of Appeals for the Third Circuit — which was largely in favor of three drug companies that have imposed harmful limits on safety-net hospitals’ access to 340B drug pricing program discounts.

As the advocacy group 340B Health reported in a post that day, “The three-judge panel concluded that the Department of Health and Human Services (HHS) cannot require AstraZeneca, Novo Nordisk and Sanofi to deliver 340B-discounted drugs purchased by hospitals to an unlimited number of community and specialty pharmacies. This is the first decision coming out of the three federal appeals courts that are considering multiple lawsuits over drug companies’ 340B restrictions, including cases in which lower courts ruled that such restrictions are unlawful.

An ever-decreasing list of 340B-covered drugs

We’ve already reported, in multiple earlier posts, the myriad abuses of the 340B law established by Congress in 1992, perpetrated by the drug manufacturers since the June 2020 introduction of the 340B ESP website. In a recent post, we noted that the overwhelming majority of 340B-eligible medications under access-restrictions are, not coincidentally, the most expensive and profitable drugs in the restricting manufacturers’ product lines — which makes perfect sense. After all, if you’re going to break the law, why not get the biggest bang for your buck — then save a percentage of that dirty money to pay the lawyers.

Openly flaunting 340B program requirements and intent

The tragedy for patients that 340B program requirements were specifically created to protect is that these restrictions are literally enriching the drug manufacturers at the direct expense of the poorest and most vulnerable among us — who are either grossly under-insured, or uninsured altogether. Moreover, without the 340B savings they’ve relied-on for decades, many of the clinics serving those patients have, or will, close down — further cutting off those patients from access to health care.

Since the January court ruling, not only has the pace of new manufacturer 340B restrictions accelerated, but the restrictions themselves are becoming increasingly stricter, and more egregiously in violation of the intent and (in our opinion) the letter of the 340B law.

The impact of 340B ESP and other manufacturer restrictions

For 340B covered entities operating without the sophisticated processes and advanced analytical software developed by ProxsysRx, the impact of manufacturer restrictions has been devastating. 340B revenues for numerous covered entities has plummeted. Many of those Disproportionate Share Hospitals rely on 340B revenue to help fund their Uncompensated Care and Community Outreach efforts. And as we reported in a previous post, when it comes to uncompensated care, the term Disproportionate Share couldn’t be more accurate. In 2020, the average 340B DSH hospital provided $38 million in uncompensated care — while the average non-340B hospital provided just over $14 million (Source: 340B Health).

Dealing daily with 340B ESP and other manufacturer restrictions

For ProxsysRx’s 340B team, those restrictions have meant an exponential increase in the time involved to ensure that the health systems we serve get the 340B savings to which they’re legally entitled. One ProxsysRx 340B Program Specialist estimates that he spends the first two to three hours of every day on the job dealing with manufacturer restrictions — and that’s before he’s submitted the first 340B claim for one of the three covered entity accounts he manages.

“The first thing I do,” he says, “is to check 340B ESP for any new restrictions imposed by the existing manufacturers since the day before. Then I have to check if any new manufacturers have come online with ESP. When I check the manufacturers, I have to determine which 340B drugs are still designated eligible on 340B ESP, and which ones have been restricted since the day before.

“After checking for all overnight drug manufacturer restriction changes on 340B ESP, I review current 340B pricing with the wholesalers — to make sure the new 340B prices have been loaded. If they’re not loaded, I have to provide, to the wholesalers, pricing for all of the NDCs (National Drug Codes) which have been newly impacted. Thankfully I don’t have check every NDC every day, but I do have to spot-check them.” (NOTE: As of April 10, 2023, there were 1628 individual NDCs under one form of 340B drug manufacturer restriction or another).

“After that, I check with the TPAs supporting the covered entities I serve, for the individual prescriptions they need to block or unblock. If there’s a new eligibility claim, I have to go to the TPAs and let them know to unblock it, going back 45 days, so that we can replenish the claim — and it’ll become eligible on ESP. Once it becomes eligible, I have to check and see if pricing is available in the wholesaler. And then, once it becomes available in the wholesalers, I have to go back to the TPAs and tell them to unblock it from 45 days prior.”

Manufacturers jumping on the 340B restriction bandwagon

A primary catalyst for the recent increase in pace and severity of manufacturer 340B restrictions has been the impunity with which Johnson & Johnson introduced its restrictions on February 15, barely two weeks after the appeals court decision. The key restriction the company imposed (in a 10-page, 3914-word letter sent to covered entities) is 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.

What that means, in plain English, is that 340B covered entities working with J&J can now designate only one pharmacy as a contract pharmacy in their networks, AND that the one pharmacy has to be located within 40 miles of the health systems’ campuses.

Taking their cue from J&J, three more manufacturers — AbbVie, Amgen and GSK — promptly imposed 40-mile restrictions on 340B-eligible claims for their drugs. Then, on April 3rd, Novartis implemented its own “single pharmacy within 40 miles” drug manufacturer restriction policy.

Manufacturers currently imposing unlawful 340B program price restrictions

As of this post’s publishing date (April 10, 2023), there were 21 manufacturers imposing restrictions — either through 340B ESP, or independent of the website:

Of the 21, nine currently promise to uphold one of the standards established by the 340B program requirements — enabling covered entities to designate and supply claims for an unlimited number of contract pharmacies. That means 12 (or 57%) of those manufacturers are in open violation of the intent of the 340B program — which was created to enable covered entities to use multiple contract pharmacies.

Why are we so confident in our opinion on this issue? Let’s look at a common scenario described by one of ProxsysRx’s 340B Program Specialists in a previous post, considering the implications of the “single pharmacy within 40 miles” policy for 340B-eligible patients who lack easy access to transportation:

For all practical purposes this 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.”

Incidentally, there were 19 manufacturers imposing restrictions by December, 2022 — of which, 12 (or 63%) upheld the “unlimited contract pharmacy” standard established by the law. Which means that the percentage of manufacturers honoring the 340B law’s intent decreased by one-third in just 4 months’ time.

How ProxsysRx Maintains A Constantly Updated List Of 340B Covered Drugs

Describing just one aspect of his own experience with manufacturer restrictions, Chance notes, “Because they’re so ambiguous, and changing so quickly, the restrictions force our team to review all of the restricted NDCs on a daily basis. Every pharmacy we serve has to be cognizant of all 1628 restricted NDCs when submitting prescriptions for 340B savings. And when a covered entity has multiple contract pharmacies, there’s a multiplier in tracking NDC’s and prescriptions.

“Each one of our team members is literally monitoring thousands of prescriptions on a daily basis. Which is one reason our team continues to grow. And why our clients have benefited so greatly from the 340B PRO software we’ve developed, which has enabled us to grow and scale. Because you don’t just have a single question needing answers on every prescription. It’s not just about the NDC’s. There are layers and layers of problem-solving involved.

“And God forbid pricing goes missing. Which happens routinely. Whenever a manufacturer updates their policies, they have to redesignate pricing. It’s really interesting how often prices ‘coincidentally’ go off the wholesale list when manufacturers update their policies — which means we have to alert them to get those new prices listed. That’s one of the things that makes ProxsysRx different. We’re tracking literally down to the NDC level, making sure every single prescription we’re sent is covered, or not.

“Here’s the bottom line,” Chance concludes. “In addition to all of the unlawful restrictions they’ve imposed, the manufacturers are making matters with unrestricted drugs as complicated as possible. It’s a blatant effort by drug manufacturers to trip-up covered entities, and make it ever more complicated to identify eligible prescriptions. At the same time, in their public statements, they consistently claim they’re imposing restrictions to help patients. Honestly, the hypocrisy is staggering.”

The good news about 340B manufacturer restrictions for covered entities

Despite the numerous unlawful restrictions imposed on eligible entities by manufacturers — including alliances with 340B ESP — ProxsysRx has generated more than $500 million in 340B 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. Click Here for a post discussing how two of the 340B-eligible systems we serve are doing just that.

The outlook for 340B restrictions in 2024

As Chance Spivey notes in another post offering 340B forecasts for 2024, “There’s a lot going on in the regulatory area at the state level.” Arkansas, for instance, recently struck a deal with Novo Nordisk — restoring 340B contract pharmacy discounts while both sides await a forthcoming Appeals Court ruling. “I know other states, including Louisiana, have moved to shut down manufacturer restrictions. Which means we may see a lot more states putting manufacturers in their place, in 2024. If not, it’s likely we’ll see manufacturers taking advantage of the legislative inaction by adding even more restrictions.

“Either way, I see even more confusion coming, where 340B manufacturer restrictions are concerned.”

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 |