AstraZeneca to Cut Off 340B Pricing for Contract Pharmacies on October 1

As reported by 340B Health on August 18, 2020, drug manufacturer AstraZeneca has sent this letter to covered entities indicating that it will cease providing 340B pricing for 340B-eligible drugs dispensed by contract pharmacies on October 1, 2020.

AstraZeneca has explained its approach as follows:

"AstraZeneca to date has processed chargebacks associated with Contract Pharmacy arrangements consistent with the approach proposed in the Health Resources and Services

Administration’s (“HRSA”) April 2010 guidance. Beginning on October 1, 2020, AstraZeneca plans to adjust this approach such that AstraZeneca only will process 340B pricing through a single Contract Pharmacy site for those Covered Entities[1] that do not maintain their own on-site dispensing pharmacy." (emphasis added)

A close reading of this language suggests that AstraZeneca views the longstanding 2010 HRSA contract pharmacy guidance as a proposal, not a binding regulatory requirement. AstraZeneca's position is the most aggressive test to date of the anecdotal evidence that HRSA no longer considers itself to have authority to issue 340B Program directives outside of the narrow confines of the 340B Program statute.

While this action will no doubt prompt lawsuits and advocacy efforts, there are certain steps that covered entities should consider to attempt to limit the negative impact of this action:

• Implement processes to exclude AstraZeneca drugs from 340B eligibility qualifications for contract pharmacy arrangements—a failure to do so may result in a covered entity paying dispensing fees and administrative fees for drugs which are not ultimately replenished at 340B pricing
• Closely review existing 340B contract pharmacy agreements and 340B administrator agreements to confirm if they will continue to be profitable if AstraZeneca drugs are excluded
• Closely review existing 340B contract pharmacy agreements and 340B administrator agreements to determine the next steps if additional manufacturers follow AstraZeneca in this approach. For example, do certain agreements have fixed monthly fees or would otherwise incur costs even if the arrangement does not result in any 340B-priced replenishment?
• Work closely with your contract pharmacy and administrator contacts to see if there are temporary measures to limit costs to all parties while this situation unfolds
• Pursue any and all advocacy efforts to demonstrate the severe negative impacts of this new position to your political representatives. If HRSA is taking the position it cannot regulate contract pharmacy arrangements, the solution will likely need to be a legislative update clarifying the role of contract pharmacies (or explicitly granting HRSA the authority to regulate the same).

We will continue to monitor this situation as it unfolds. For more information on how this will affect your operations, contact your Quarles & Brady attorney or:

• Brenda M. Maloney Shafer: (602) 229-5774 / brenda.shafer@quarles.com
• Richard B. Davis: (414) 277-5844 / richard.davis@quarles.com