Health care nonprofit files to intervene in suit on drug-pricing law

A state health care organization has asked to intervene in a federal lawsuit filed last year that challenges a new state law that requires drug manufacturers to provide drug discounts to contract pharmacies participating in a federal drug-pricing program.

Community Health Centers of Arkansas said in its filing Monday that if the law is overturned, it will negatively impact the ability of its member community health centers to provide care to the approximately 240,000 low-income patients it serves on an annual basis.

The nonprofit organization that represents 12 community health centers filed its request in federal court Monday to intervene in the lawsuit filed last October by Pharmaceutical Research and Manufacturers of America (PhRMA).

The lawsuit seeks to overturn a state law passed in 2021 that requires drugs discounted under the federal 340B Drug Pricing Program to be extended to contract pharmacies. Named as defendants in the lawsuit are Alan McClain, commissioner of the Arkansas Insurance Department, and Arkansas Attorney General Leslie Rutledge. McClain and Rutledge have entered filings denying the state law violates federal law or infringes upon congressional authority.

In its filing, Community Health Centers of Arkansas said the outcome of the lawsuit has significant implications for health care providers across Arkansas as well as patients who cannot afford lifesaving drugs without significant discounts. In a news release, the organization said most community health cen

ters don’t have in-house pharmacies and must rely on contract pharmacies to dispense medications to their patients.

Arkansas Act 1103 of 2021 — the 340B Drug Pricing Nondiscrimination Act — requires drug manufacturers to provide 340B pricing to any Arkansas pharmacies that enter into contractual agreements with entities covered under 340B, regardless of whether those pharmacies are in-house or third-party pharmacies contracting services to providers.

The 340B Drug Discount Program was created by Congress in 1992 to protect hospitals providing free or discounted care to low-income patients from escalating drug prices. The program allows hospitals to purchase outpatient drugs at a discount from manufacturers at no cost to taxpayers, which are then required to pass those savings on to their patients.

Community Health Centers of Arkansas said Monday that restrictions placed on the program by the drug manufacturers starting in the summer of 2020 have made it harder for patients who are uninsured or underinsured to obtain the medicines they need.

“Manufacturers are literally making profits on the backs of our most vulnerable and financially burdened patients,” Community Health Centers of Arkansas Chief Executive Officer Lanita White said in a news release issued Monday. “Their actions are making it much more difficult to keep our clinics open. And, they’re doing this in the middle of a pandemic, which is just awful.”

PhRMA said in its complaint that its members believe the program is being abused by for-profit pharmacy interests who have leveraged the program to obtain discounts but pocket the savings instead of assisting patients the program was designed to help. The lawsuit seeks to exclude contract pharmacies from discount drug pricing under 340B and restrict the benefit to hospitals that maintain inhouse pharmacies.

In 1996, the Health Resources and Services Administration issued guidance on 340B, saying that covered entities could have the option of contracting with one pharmacy of its choice to purchase covered outpatient drugs. In issuing the guidance, agency noted that only 500 0f the then 11,500 covered entities used in-house pharmacies. In 2010, the agency expanded upon that guidance by allowing covered entities to enter into more complex arrangements that include multiple pharmacies.

An advisory ruling issued Dec. 30, 2020, by the U.S. Department of Health and Human Services reiterated the department’s position that the use of contract pharmacies by covered entities is permissible and said that if such arrangements were not allowed, Congress “would have used language affirmatively precluding the use of contract pharmacies as arms in the distribution channel, but it did not.”

The Department of Health and Human Services ruling sparked a number of lawsuits around the country from pharmaceutical companies that said the department’s latest advisory opinion exceeded its authority.

In its lawsuit filed in Arkansas, PhRMA asks the federal court to strike the section in Act 1103 pertaining to contract pharmacies, saying that by seeking to regulate the 340B program the state has exceeded its authority and is attempting to regulate at the state level the participation of drug manufacturers in a federal program.

PhRMA contends that provisions in the legislation violate the commerce clause of the U.S. Constitution because it would project Arkansas’ regulatory regime into other states’ jurisdictions.

Joining Community Health Centers of Arkansas in the request is Piggott Community Hospital, a critical access hospital dependent on contract pharmacies to serve its patients. Intervention in the case will allow parties directly affected by the 340B restrictions to more fully present their points to the court.

A bench trial has been scheduled for Jan. 3, 2023, before U.S. District Judge Billy Roy Wilson.