Advocates from AIDS Healthcare Foundation protest against drug giant Amgen for its announced refusal to sell so-called 'orphan drugs'—expensive drugs for rare diseases—at the legally required reduced prices under the 340B Drug Discount Program. Amgen joined eight other drug companies in declaring they will also no longer offer drugs at the reduced 340B price as required by section 340B of the U.S. Public Health Services Act. (Jordan Strauss/AP Images for AIDS Healthcare Foundation)

Medical organizations across the country are going to bat for rural hospitals to ensure they have access to the discounted drug pricing. 

In letters sent to major pharmaceutical companies on January 14, the American Hospital Association, along with several other organizations and hospital systems, demanded that drug companies adhere to federal guidelines that provide rural hospitals with discounted drug prices, or they will file suit. 

At issue is the controversy around the federal 340B Drug Pricing Program, which requires drug companies to sell discounted prescription drugs to critical access hospitals as a condition of their Medicaid and Medicare coverage. Critical access hospitals are small institutions that serve primarily rural areas.

As previously reported in the Daily Yonder, in September, several drug companies said they would stop providing those discounts to hospitals that have contract pharmacies – or pharmacies that contract with a hospital to provide services and save the hospital money. 

The move would have hurt many rural hospitals that use contract pharmacies to cut costs. Additionally, in some rural hospitals, one hospital may serve several different communities, so having multiple contracted pharmacies improve patients’ access to prescription services. 

“These critical access hospitals are in [areas] where one hospital may provide care to four or five communities,” said Brock Slabach, senior vice president for member services at the National Rural Health Association (NRHA) in September. “If they have to limit it to one, how do they choose which community they locate their pharmacy in?” 

Not having the discounted drug prices affects patients’ bottom line and the financial health of the hospital, he said. 

As a result, organizations like NRHA and others, as well as about 30 members of Congress, initiated letter-writing campaigns asking U.S. Department of Health and Human Services Secretary Alex Azar to intervene. 

On December 30, 2020, Azar issued his advisory opinion on the stance drug companies had taken. 

“For the reasons set forth below, we conclude that to the extent contract pharmacies are acting as agents of a covered entity, a drug manufacturer in the 340B Program is obligated to deliver its covered outpatient drugs to those contract pharmacies and to charge the covered entity no more than the 340B ceiling price for those drugs,” the opinion said. 

With Azar’s opinion in hand, the AHA-led group asked drug companies  AstraZenecaEli Lilly and CompanyNovartisNovo NordiskSanofi and United Therapeutics to adhere to the federal policy. If not, the organizations said, they would seek legal action and ask for civil penalties against the drug companies.