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340B Insight provides members and supporters of 340B Health with timely updates and discussions about the 340B drug pricing program. The podcast helps listeners stay current with and learn more about 340B to help them serve their patients and communities and remain compliant. We publish new episodes twice a month, with news reports and in-depth interviews with leading health care practitioners, policy and legal experts, public policymakers, and our expert staff.
Narrator (00:00)
Welcome to 340B Insight from 340B Health.
David Glendinning (00:08)
Hello from Washington DC and welcome back to a new year of 340B Insight, the premier podcast about the 340B drug pricing program. I'm your host David Glenn Denning with 340B Health. Our guest today is 340B Health Vice President of Legal and Policy, Amanda Nagrotsky. There has been a series of major developments recently on 340B rebates, which is one of the top public policy issues for the 340B community of late.
A series of court decisions upended the government's plans to impose a rebate pilot program at the beginning of January. So we thought this was a good time to have the head of our legal team come on the show and let us know where all of us are in the aftermath of these decisions. Here's that conversation. I am speaking with Amanda Nagrotsky, Vice President of Legal and Policy here at 340B Health.
Amanda, the last time we spoke in the podcast booth, you were senior counsel. So I will say congratulations on the promotion and welcome back to 340B Insight.
Amanda Nagrotsky (01:16)
Thank you so much, David. It's great to be here.
David Glendinning (01:19)
In our recent year end episode, we discussed how at that point we were on the verge of the 340B rebate pilot program taking effect. Now it is the new year and we have already seen some pretty big developments in that area. So let's get into it. To start us off, can you just briefly summarize where things stand right now with the HRSA 340B rebate pilot following the recent court decisions that we've all been following?
Amanda Nagrotsky (01:49)
HRSA has paused implementation of its 340B rebate pilot, and HRSA announced the pause on December 31st. So this was the day before the pilot was scheduled to take effect on January 1st. And a few days before that, a federal court in Maine issued a ruling that temporarily blocks HRSA from moving forward with the pilot absent a further court order.
And in light of that preliminary injunction that was issued by the district court, HRSA announced that it was pausing the pilot and instructed all drug manufacturers that had been approved to participate to continue providing 340B pricing to covered entities through traditional upfront discounts rather than back end rebates. The judge's order pausing implementation of the rebate program remains in place, but it's
does not resolve the underlying merits of the case. The hospital's request for additional relief that would permanently block the rebate pilot is still pending, and the litigation is expected to continue in the coming months. HRSA appealed the ruling, and the government recently indicated to the appeals court that HRSA intends to reconsider its rebate approvals. The main takeaway here, though dated, is that
PERSA cannot implement the rebate pilot at this time, but the story, so to speak, is still being written.
David Glendinning (03:24)
Thank you for that summary. Certainly a good amount to unpack there. let's unpack that initial ruling first. So what did the federal district court, you said it was in Maine, what did it find when it blocked the rebate program in late December?
Amanda Nagrotsky (03:41)
The district court sided with the hospital plaintiffs that brought the lawsuit against HRSA to challenge its implementation of the rebate pilot program. The hospitals had argued that HRSA violated administrative law requirements because it did not adequately consider the significant costs and administrative and operational burdens that the rebate pilot would impose on covered entities. And the hospitals
also argued that HRSA didn't provide a sufficient explanation for departing from 340B's longstanding ⁓ history of operating through upfront discounts. And this judge, Judge Lance Walker, who presides over a district court in Maine, he found that the hospitals had demonstrated a high likelihood of irreversible harm if rebates went forward. And he cited...
hundreds of millions of dollars in compliance costs that hospitals would not be able to recover if they ultimately win the lawsuit and that that threatens patient services. The judge also found that based on the information in front of him when he issued his ruling, the hospitals are likely to prevail on their legal claims that HRSA didn't adequately consider the costs of the pilot or provide a sufficient explanation for it.
And I think it's worth noting that preliminary injunctions are just in general hard to obtain because of the very high showing of harm that this type of emergency relief requires. But the judge in this case ⁓ clearly grasped what's at stake here for providers.
David Glendinning (05:27)
that all happened at the tail end of December that kept all of us here at 340B Health and many in the broader 340B community very busy during the time between Christmas and New Year's. As you alluded to before, the government moved fairly quickly to try to keep the rebate program on track. So walk us through how the courts responded to those efforts to try to allow the rebate pilot to proceed as scheduled.
Amanda Nagrotsky (05:53)
So there has been a flurry of legal activity over the last few weeks. And part of that is the timing of all of this. And again, the rebate pilot was scheduled to take effect on January 1. But the government immediately appealed the preliminary injunction and asked the district court that granted it to allow HRSA to proceed with rebates during the appeal, or at least until the appeals court could rule.
on the emergency request that the government would later file with that court, asking it to pause the preliminary injunction. And Judge Walker denied those requests. And the three judges on a panel in the appeals court denied them as well. And that panel concluded that the government had not demonstrated that HRSA had considered the significant costs that 340-D hospitals would incur under the rebate
program or that it provided a well-reasoned explanation for its decision to replace upfront discounts with rebates. And the appeals court rejected the government's arguments that delayed implementation of the rebate pilot would irreparably harm the government. Instead, the judges said that not allowing HRSA to proceed with the rebate pilot during the appeal
actually preserved the status quo of upfront discounts. And they noted that any impacts stemming from a pause on the pilot would be felt primarily by drug manufacturers and not by the government. And finally, the appeals court pointed out that as the government even acknowledged themselves, manufacturers have alternative ways to address deduplication under the Medicare.
⁓ maximum fair pricing provisions.
David Glendinning (07:45)
Since I've started working with you, Amanda, I've gotten the chance to read a lot of interesting legal decisions. The First Circuit's ruling was a very interesting read for me. As an attorney, what stood out most to you from the appeals court analysis?
Amanda Nagrotsky (08:01)
I would say the first thing that stood out to me was the consistency of the decision with Judge Walker's decision. The appeals court in its ruling described Judge Walker's decision as careful and thoughtful. And like the district court, the appeals court also took issue with what they called a threadbare administrative record that
did not demonstrate that HRSA had considered the significant financial costs of the rebate pilot and the impact to hospitals. And the panel noted that at this point in the case, the record contained almost no contemporaneous explanation from the government for the rebate program, which again is a key requirement imposed on federal agencies under the Federal Administrative Procedures Act.
So the appellate court also rejected the government's claim that HRSA was subject to less strict requirements because it used a quote informal process to approve the rebate program. And the panel concluded that the government had effectively waived this argument, but went on to explain that agencies
are not exempt from reasoned decision-making obligations just because they use a less formal process. And the court noted in its decision that it had accepted an amicus brief that 340B Health had jointly filed with other national hospital and pharmacist associations to refute the government's argument on this point.
David Glendinning (09:41)
Shortly after that appeals court decision came out, a little bit surprising, I think, to some people, the government said it was dropping its appeal. I'll reiterate, as I always do, that things can move pretty quickly in the courts and in 340B. But given that development, what do we know about the current situation as of today?
Amanda Nagrotsky (10:03)
So we do know that the government has voluntarily dismissed its appeal. And we know that the government has indicated that HRSA is reconsidering the approvals at issue in the litigation. It is not clear what exactly this means. And frankly, there are a range of possibilities for what it could mean.
including a total reconsideration of the rebate pilot by HRSA, or it could mean that HRSA would make changes that are geared toward addressing some of the deficiencies cited by the court around HRSA's consideration of costs and the explanation that the agency provided for the rebate pilot.
We also know that the underlying case at the district court level, even though the government has voluntarily dismissed its appeal, is still ongoing. And again, the district court has granted the hospitals a preliminary injunction, but that case is going to continue as the hospitals seek more permanent relief against the rebate pilot.
David Glendinning (11:17)
Even with the 340B rebates being on hold, at least for the time being, you had said the IRA's Medicare Maximum Fair Price or MFP provisions still took effect at the beginning of January. These are price caps that we've covered on the show before because they will have an effect on 340B savings. How do those MFP policies that are in place intersect with all of the issues that are at the heart of this ongoing litigation?
Amanda Nagrotsky (11:45)
That is a very important question because even though the rebate pilot is paused, you're exactly right that the Medicare maximum fair price requirements, MFP requirements, did take effect as planned on January 1st for the 10 selected drugs when those drugs are dispensed and paid under Medicare Part D. And these are the same drugs that were approved for 340B rebates, though the rebates would have applied
across all payers and all uses of those drugs. Under the law, 340B can still be used for these drugs, but covered entities are not entitled to MFP refunds from drug manufacturers in those scenarios. And to date, just one manufacturer has announced its plans for preventing payment of an MFP refund.
on a 340B claim in the absence of the 340B rebate program, but other manufacturers, again, to date, have not publicly disclosed what those plans are. 340B Health recommends that hospitals closely track expected MFP rebates to identify any missing refunds for claims that did not use 340B drugs. The concern is that manufacturers
could incorrectly assume that all claims from covered entity pharmacies pertain to 340B drugs, because again, they're making assumptions, reasonable assumptions, but those assumptions may result in the manufacturer failing to issue an MFP refund for claims that did not use 340B. And hospitals should also closely monitor receipt of any MFP refunds.
provided for 340B claims because that is revenue that the drug companies will expect to be given back to them. And we ask the hospitals, please contact us at 340B Health if their pharmacies are not receiving or do not receive an MFP refund that they are owed for non-340B claims or about receipt of any MFP refunds for 340B claims.
David Glendinning (14:07)
You've made it clear that the rebate fight is not over, not by a long shot. So looking ahead, what are some of the key things that hospitals should be watching for in the coming months?
Amanda Nagrotsky (14:18)
The government has indicated that HRSA is reconsidering the approvals at issue in the litigation. And we talked earlier about how we just don't know what that truly means. So if HRSA is reconsidering the approvals at issue in the litigation, what does that look like and how does it happen? And would that result, this is hypothetical, but.
Would that result in HRSA issuing some sort of new notice on the rebate pilot? Also following the hospital's lawsuit against HRSA on the rebate pilot as it progresses in the district court, because again, Judge Walker's order granting the preliminary injunction temporarily blocks HRSA from moving forward with rebates until a decision is issued on the merits.
David Glendinning (15:12)
Amanda, know this has kept you and your whole team and all of us very busy lately. How is 340B Health engaging on behalf of hospitals as this whole litigation and policy debate continues?
Amanda Nagrotsky (15:25)
So we continue to engage on various fronts to oppose rebates. On the legal front, with the front of the court briefs, with our national hospital and pharmacist partners that we filed in this case in support of the hospital's lawsuit to stop the rebate pilot, 340B Health also remains involved as a party.
in separate lawsuits and drug makers lawsuits against HHS and HRSA on the rebate issue. We are awaiting a decision in that case, which the manufacturers appealed to the DC circuit following decisions from two federal courts in Washington DC that prohibit manufacturers from unilaterally implementing rebate models without ⁓ government approval.
On the advocacy front, we will continue engaging with HRSA and policymakers about our member hospitals' concerns pertaining to the rebate pilot, and if needed, about any MFP refund denials for non-34EB claims. And please continue to stay engaged with us on these issues. I want to thank and commend our member hospitals for
the outstanding work that they do and the time that they have given to us, especially this past year navigating the rebate pilot. We at 340B Health would not be able to do what we do without your expertise and support. So thank you.
David Glendinning (17:11)
We thank them and I thank you so much to keep track of and so much to do. And we're so glad to have you here to keep us all informed about all that activity. So Amanda, thank you again for being here today.
Amanda Nagrotsky (17:23)
Thank you very much, David.
David Glendinning (17:25)
Our thanks again to Amanda Nagrotsky for walking us through all the year end holiday excitement on the 340B rebate issue and setting the stage for where the debate on this key issue goes from here. As always, please be sure to check the show notes for any additional updates we might have been able to provide since the recording. And if you are a 340B health member, those updates will already be in your inbox. And we will be back to you in a few weeks with our next episode. In the meantime, as always,
Thanks for listening and be well.
Narrator (17:58)
Thanks for listening to 340B Insight. Subscribe and rate us on Apple Podcasts, Google Play, Spotify, or wherever you listen to podcasts. For more information, visit our website at 340bpodcast.org. You can also follow us on Twitter @340BHealth and submit a question or idea to the show by emailing us at podcast@340bhealth.org.