340B saves the hospital $1.1 million annually, and the hospital cannot afford to pay for prescription drugs at market prices and maintain its current services, Mantz wrote in the complaint.
The federal Health Resources and Services Administration announced earlier this year that it would launch a “340B rebate model pilot program” for ten widely prescribed drugs. The program will be effective Jan. 1 for nine of the drugs and April 1 for the remaining one.
The American Hospital Association, Maine Hospital Association and four hospitals, including the Dallas County one, are joint plaintiffs in the lawsuit filed Monday in the U.S. District Court for the District of Maine. The defendants are HRSA, its administrator Thomas Engel, HHS Secretary Robert F. Kennedy Jr. and the department, and the United States itself.
Requiring hospitals to pay market prices for drugs and seek reimbursement for the discounted difference by providing claims data to drug companies “would inflict hundreds of millions of dollars’ worth of annual costs on hospitals and other covered entities,” according to the plaintiffs’ joint complaint.
“First, a rebate system would impose vast administrative costs to submit, track, recover, and potentially dispute the rebates,” the complaint states. “Second, it would drain 340B hospitals of huge sums of money through payments to drug companies that the hospitals then must wait to have refunded by those drug companies. Third, a rebate system would invite mischief from drug companies that have every incentive to slow and stymie the issuance of rebates, figuring that some number of rebates can be withheld from safety-net hospitals by throwing the proverbial ‘sand in the gears.'”
According to both complaints, drug companies have wanted HRSA to institute a 340B rebate program for years. Drugmakers have alleged in the past that some hospitals are pocketing the savings instead of investing the money in more services. Some research supports that contention.
Dallas County Medical Center has used its savings for a variety of patient services, Mantz wrote in the complaint. Those services include:
-A financial assistance program for low-income patients
-An outpatient psychiatric program for senior citizens
-Several primary care outpatient clinics
-A telehealth clinic for cancer patients, eliminating their need to drive multiple hours round trip to see a doctor
-Replacing the hospital’s leaky roof this year without taking on debt
“We fear the increased costs from Defendants’ rebate program will force us to cut unprofitable service lines, such as our telehealth oncology clinic,” Mantz wrote. “Ultimately, the financial pressure from the rebate program could force DCMC to leave the 340B Program altogether.”
The hospital planned to use its 340B savings for more new services, such as a daycare center for employees’ children, a telehealth clinic in a local school, a wheelchair-accessible shower in the hospital, and more repairs and maintenance, Mantz wrote. The announcement of the rebate program forced the hospital to delay or cancel those plans.
Complying with the rebate program would require the Dallas County Medical Center to hire two new full-time employees “to track and chase rebates and monitor the impact on our operational budget,” but Jan. 1 is too soon for the employees to be hired and trained, Mantz wrote. Paying those employees would cut into the hospital’s budget.
Mantz said he has concerns about the rebate program itself, specifically the lack of “specific penalties” for improperly denied rebates and the use of a private-third party data collector with “unreasonable terms and conditions” and no guarantee to protect patients’ data.
The joint complaint criticizes the use of the term “pilot program” to describe it because it requires all 340B entities to participate or lose access to the program upon its implementation. The complaint also accuses HRSA of ignoring feedback from health care entities nationwide raising concerns about the administrative costs of the new program.
The plaintiffs seek a temporary restraining order before Jan. 1 preventing the rebate program from going into effect until the court makes a final judgment.
“Giving hospitals only a few months to comply with these burdensome new requirements or risk losing millions of dollars in discounts they are entitled to under the law will harm patients and communities across the country,” Rick Pollack, president and CEO of the American Hospital Association, said in a news release. “We are asking the court to act quickly to protect access to vital care services.”
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