Wednesday, June 19, 2013

With a Top Secret Letter, HRSA Blesses Amgen’s New 340B Distribution Plan

Here’s some crucial 340B news—along with a perfect illustration of why the 340B drug discount program urgently needs fundamental reform and oversight.

Amgen just announced that Neulasta purchases by 340B covered entities must be made exclusively from such specialty distributors as AmerisourceBergen’s ASD Healthcare business. Despite loud protests from the Safety Net Hospitals for Pharmaceutical Access (SNHPA), the Health Resources and Services Administration (HRSA) has reportedly decided that Amgen’s distribution plan “will not violate the 340B statute.”

This is a major decision for all pharmaceutical manufacturers that provide discounts to 340B entities. Want to know about HRSA’s guidance? Too bad.

Following in the sad footsteps of other barely-accountable government bureaucracies (IRS, NSA, Justice Department), HRSA has labeled its decision “top secret” and won't release any regulations or public rulemaking about manufacturer distribution strategies. Instead, HRSA continues to operate the 340B program through a tangle of sub-regulatory guidance that is not readily available for public comment or review.

Read on to learn more about Amgen's plan, SNHPA's complaints, and HRSA's "decision."


On June 1, Amgen is moving Neulasta to the specialty distribution channel for hospital outpatient departments that receive discounted prices under the 340B drug discount program. Amgen describes its new distribution program in Neulasta® and the 340B Drug Discount Program:

Key excerpts:
“The specialty distribution requirement does not single out 340B covered entities. Neulasta has been available through specialty distribution in the physician office setting of care (e.g., oncology clinics) since 2003, and in 2012 we fully transitioned and required all oncology clinics to use the specialty distribution channel for Neulasta®. The changes we recently made simply extend the specialty distribution requirement to hospital outpatient departments of 340B covered entities. Non-340B hospitals will continue to access Neulasta® through full-line wholesalers.
“…the specialty distribution channel for Neulasta® makes the statutory discounts and ceiling price available to all 340B covered entities. Further, the specialty distribution requirement previously was and will continue to be required for other types of customers (e.g., oncology clinics), not just 340B covered entities.”
Amgen can more closely monitor the 340B program, which suffers from little oversight, few audits, and creative accounting. (See Hospitals' Extraordinary 340B Pharmacy Profits from Insured Patients.) As Amgen notes:
“The shift of Neulasta® sales to 340B hospital outpatient departments to the specialty distribution channel will also provide Amgen with a more focused, efficient and accurate data set to monitor and potentially audit Neulasta® 340B sales. We will be working with the U.S. Health Resources and Services Administration (HRSA) as well as our 340B customers before proceeding with any audit plan.”
Prior to the launch of the 340B strategy, ASD Healthcare was not an authorized distributor of record (ADR) for Neulasta.


After the plan was announced, the Safety Net Hospitals for Pharmaceutical Access (SNHPA) issued a breathless press release, complaining that the new program would (in their words) “discriminate against safety net hospitals.” See SNHPA Protests Amgen's Plan to Discriminate Against Safety Net Hospitals.

SNHPA also wrote a letter to Amgen’s Chairman and CEO, stating: “The plan violates federal policy prohibiting restrictions that create significant administrative and financial challenges for 340B providers.”

Hmmm, notice that SNHPA didn’t say that Amgen’s plan violated federal regulations? That’s because there aren’t any federal regulations guiding the 340B program! Believe it or not, HRSA has managed the program with nothing more than non-public letters, notices, clarifications, and FAQs.

Instead, SNHPA can only cite to this 1994 (!) Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Entity Guidelines. For those who don’t know, a “notice” is not subject to open comment and public input.

Let’s face it. Since 1994, a lot has changed about both the distribution system and the 340B program. Just consider that Justin Beiber was BORN in 1994. How can manufacturers develop sensible, compliant policies based on a vaguely-worded notice from NINETEEN YEARS AGO?!?

SNHPA declined my repeated requests for comment on HRSA’s decision. I can only presume that SNHPA is either embarrassed or planning legal action.


SNHPA then asked HRSA to opine on Amgen’s plan. As reported in this snippet from Drug Discount Monitor, HRSA reportedly opined that Amgen’s policy “will not violate the 340B statute.” Alas, the full article is not available unless you subscribe.

Naively, I asked HRSA for the guidance letter, which would be helpful for manufacturers planning 340B strategies. David Bowman, from HRSA’s Office of Communications, sent me this curt reply:
“We do not share correspondence, nor comment on it.”
Apparently, Mr. Bowman is a big Lucille Bluth fan.

I have filed a Freedom of Information Act (FOIA) request to get public access to the letter. Don’t get your hopes up, because HRSA has been sitting on my previous FOIA request for more than 6 months. So much for transparency.

Senator Grassley, if you’re listening, please haul HRSA’s top folks before Congress and have them explain, under oath, why they refuse to issue 340B regulations for public comment and review. Inquiring citizens want to know.


* In my April editorial for The Hill, I mistakenly stated that HRSA had issued regulations. With the exception of the proposed (but not final) orphan drug rule, HRSA has not issued any regulations for the 340B program.


  1. Adam, as usual, spot on, with a humorus twist.

  2. Love the Lucille Bluth reference; along with an "improved data set" I believe the pay terms with specialty distributors are in Amgen's favor (Adam could probably tell you). Not too sure any primary wholesalers would be inclined to keep a high profile item like this without favorable terms; at least in respect to 340B. I'm sure they were happy to push this item onto the specialty sides of their business, if that were the case.