Eli Lilly’s deadline for hospitals to submit claims data or lose 340B drug discounts has passed, and with HHS’ Health Resources and Services Administration silent on requests from hospital and pharmacy groups to intervene, noncompliant hospitals are exposed.
Lilly sent the agency a letter June 1 stating hospitals would have five days to comply with its new claims-data reporting requirement or face suspension of 340B pricing on its products.
About 2,350 covered entities, roughly 70% of those purchasing Lilly drugs, had already complied, generating nearly 800,000 claims records since Jan. 1, including two-thirds of critical access hospitals, according to the drugmaker’s letter. The roughly 1,000 holdouts will face suspended 340B pricing on Lilly’s full product portfolio until data is submitted.
In an email to Becker’s, Lilly declined to comment.
Hospitals, pharmacy groups push back
Pharmacy and hospital groups have pushed back on Lilly’s policy, calling it unlawful and warning it will harm safety-net hospitals and vulnerable patients nationwide.
Tom Kraus, chief advocacy officer and vice president of government relations at American Society of Hospital Pharmacists, wrote in a June 2 letter to HRSA Administrator Thomas Engels that nothing in statutes or regulations allows manufacturers to unilaterally impose extra-statutory obligations on covered entities as a condition of accessing 340B pricing, and that Lilly’s demands effectively raise drug costs above the statutory ceiling price the law prohibits. He urged HRSA to take immediate enforcement action — and has not received a response.
Under existing rules, Mr. Kraus said, if a manufacturer has a specific concern about a duplicate discount, it can seek HRSA approval to conduct a targeted audit of specific records.
“It’s not supposed to be a fishing expedition,” Mr. Kraus told Becker’s. “The difference here is they’re saying we want all of your data all the time. You just don’t get to go in and demand that people turn over all their data to you.”
Lilly has argued the data request is both lawful and necessary to root out duplicate discounts and meet its obligations under the Inflation Reduction Act. The company noted that when it expanded the requirement to in-house pharmacies in February, it gave covered entities time to comply, including a two-month runway, repeated reminders and direct outreach to individual holdouts.
“Lilly is collecting claims data to stop the rampant fraud, waste and abuse in the 340B program that is harming employers, state and federal governments, and patients,” the company said in a June 2 statement to Becker’s. “Decades of HRSA guidance and rulings by two federal courts of appeals state that Lilly can lawfully collect this information.”
In a June 1 statement, AHA called Lilly’s policy unlawful, warning the decision “will undoubtedly harm America’s most vulnerable patients and communities, forcing hospitals to divert resources away from care and towards onerous and expensive administrative burdens.” AHA President and CEO Rick Pollack said Lilly did not, as the company stated, take this step “reluctantly” or work “tirelessly” to resolve concerns — noting AHA had sent Lilly a letter proposing a neutral clearinghouse solution two weeks prior and received no response.
At Hershey, Pa.-based Penn State Health, Chief Pharmacy Officer Sam Wetherill, PharmD, told Becker’s the system has been complying since the policy took effect in February — a choice driven by necessity. “We need many of the drugs that are impacted by this change,” he said.
But compliance has not been cost-free. “This does add to our operational burden — it takes time to pull the data and submit,” he said. If Lilly shifts to a rebate model in which hospitals pay full price at the point of purchase and seek reimbursement afterward, the administrative exposure grows considerably and denials become a live financial risk.
“That could lead to substantial financial losses,” he said. “We have not quantified this yet.”
What’s next: HRSA, legal action and the domino risk
HRSA has not responded to letters from ASHP, AHA or member hospitals urging enforcement action. AHA warned that without a federal response, hospitals are left uncertain whether to hold out and hope HRSA eventually acts, or incur “hundreds of thousands of dollars in wasteful compliance costs” on their own.
Mr. Kraus said ASHP is evaluating potential legal action and will continue following up with members to assess the full impact. He noted the stakes extend well beyond Lilly.
“If Eli Lilly gets away with this and HHS doesn’t take enforcement action, there’s a real risk that other manufacturers pile on,” he said. Novo Nordisk already rolled out a comparable program.
On the state level, 11 have laws specifically prohibiting manufacturers from conditioning 340B discounts on receipt of claims-level data: Colorado, Maine, Nebraska, North Dakota, New Mexico, Rhode Island, South Dakota, Tennessee, Vermont, Washington and West Virginia. New Mexico’s law applies only to 340B grantees and excludes hospitals.
Manufacturers are challenging many of these laws in court, but the legal tide has largely run against them. For example, federal courts in Louisiana and Mississippi have rejected manufacturer arguments that state 340B protections are preempted by federal law.
In February, the Department of Justice filed a brief siding with AbbVie in its appeal of Colorado’s 340B Contract Pharmacy Protection Act, arguing the state law is preempted by federal law and violates the Supremacy Clause by interfering with the federal 340B program. West Virginia’s law has similarly struggled in court. Mr. Kraus said that dynamic — states winning in their respective state courts while facing federal court headwinds — emphasizes why HRSA enforcement action remains critical.
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