An Open Letter to HRSA

In its effort to "protect" 340B covered entities, the Health Resources and Services Administration is actually hurting them--and the window to correct course is closing quickly.

Dear HRSA,

You have seen, of course, the announcement from Sanofi that it is joining both J&J and Eli Lilly in the adoption of what is variously called the “rebate model”, the “cash replenishment” model, or, in Sanofi’s parlance, the “credit model”.  I know that you think that you are “protecting” covered entities by continuing to resist ANY adoption of these models (or ANY variant) under ANY circumstance, but you are actually making the inevitable LESS favorable to the very stakeholders you are trying to “protect”. 

You take the position, unsupported by the text, structure, or purpose of the statute, that you have the authority to dictate whether drug makers effectuate the 340B price by a  “discount” or a “rebate”, even though the statute requires you to “provide[]” for “rebates or discounts”.  3 lawsuits have now been filed (and more are on the way—you know that). You are going to lose the lawsuits if you don’t find a way out of the impasse YOU created.

Though you have been presented with these kinds of models for years (often by me), you recently turned away J&J, which had rather modestly proposed a model only for 340B hospitals, sparring all the clinic covered entity types. J&J’s proposed program also covered only its 2 drugs that will soon be subject to Medicare fair price under the Inflation Reduction Act. J&J was attempting to channel CMS’ guidance which, given the emerging deduplication risk under the IRA, actively invited manufacturers to do precisely what J&J proposed to do.

You tried to snuff the entire concept out by threatening J&J and, more to the point, its patients. You promised to remove ALL Medicaid and Medicare Part B coverage for ALL J&J products—an act that would undermine the health and well-being of millions of patients.

That, as you should have known, was essentially a declaration of war. 

It invited every other manufacturer to conclude that you no longer were an honest broker in the growing disputes between them and some covered entities (the bad apples). 

It also told other manufacturers that they needed to join the fight, understanding that you could never actually cut off coverage for manufacturers once MULTIPLE manufacturers separately decided to employ their own models.  

Yes, that’s right, your anti-patient tactics were the DIRECT cause of a wholly avoidable escalation.

Nevertheless, you rejected J&J’s modest, limited proposal, which you could have “approved” with conditions like a 7-14 day turnaround time to respond to covered entity concerns that they not be subjected to extended gaps between data submission and payment. But you rejected that, pouring gasoline on a fire.

Lilly then gave you a second chance, with a proposal that committed to address turnaround times.  But you rejected that olive branch, too.

Kalderos, which had engaged with you for years, presented yet another opportunity to avoid a meltdown, but you did not seize the opportunity to settle its lawsuit, forcing it to file an amended complaint and restart that litigation.

And now, in the inevitable escalation that has followed, Sanofi has announced that its model will apply “for every dispense” for an extensive list of products (though not all Sanofi products) and for most hospital types, plus “consolidated health centers”. 

Sanofi offers a credit at “30 days”, not the shorter period that others had offered—and that you could have “approved”. That 30 day commitment only applies when the covered entity submits data within 22 days, and the credit actually is provided up to “7 days” after the data is submitted. (There is a slightly different, shorter process for CHs, which “presumptively” receive a credit upon “submission and validation” of certain data, but it is not as good as what others had already offered.)

Drug makers are growing MORE aggressive as they appreciate that the risk of withdrawing coverage weakens with each new manufacturer that announces a program.  

This was entirely predictable, but you did not predict it. Honestly, what were you thinking?

If you want to ensure reasonable safeguards for covered entities, you need to act NOW, and approve a model that reflects a reasonable approach reflecting the needs of all relevant stakeholders.

You are rapidly losing control of this program.

And it could get EVEN worse—SOON.

In their op-ed, Elon Musk and Vivek Ramaswamy described their desire to use the “DOGE” to attack “decades long executive power grab[s]”. They promise to target “federal agencies’ interpretations” that are unlawful.  Similarly, they say they will attack a “plethora” of current regulation and guidance issued in a manner that “exceed[ed] the authority Congress has granted under the law”. The 2 step plan would first be to “IMMEDIATELY pause … enforcement” of and then “initiate … rescission” of all targeted guidance.

In other words, unless you act quickly to bring the temperature down, you face a near term risk that your contract pharmacy guidance, your guidance in opposition to manufacturers taking any “enforcement action”, your drug maker audit requirements, and many other provisions could be WIPED OUT.  

You might discount that risk, but you would be foolish to ignore it as “impossible”—we are on the verge of an Administration that is determined to be disruptive.

You are not “protecting” covered entities at this point.  You are endangering them. Your window to reverse course is rapidly closing.