(INDIANA CAPITAL CHRONICLE) — Drugmaker Eli Lilly and Co. is restricting access to a drug discount program intended for safety-net hospitals in a move the company says is needed to identify waste, fraud and abuse.

The Indianapolis-based pharmaceutical company now requires hospitals to submit insurance claims data for in-house pharmacy dispensing to qualify for discount pricing through the federal 340B program — an expansion of the company’s long-standing reporting requirements.

“That data is necessary to identify unlawful duplicate discounts, audit covered entities, initiate HRSA’s dispute-resolution process, and comply with obligations under the Inflation Reduction Act,” Josh O’Harra, senior vice president and deputy general counsel for Eli Lilly, said in a June letter to the federal Health Resources and Services Administration.

O’Harra informed the agency of actions Eli Lilly took prior to discontinuing 340B pricing for a “minority” of hospital pharmacies that did not submit claims data by its June 8 deadline — reminder letters and individual contact with entities that didn’t comply. He suggested compliance should be simple as hospitals already transmit data to insurers, Medicare and Medicaid daily.

“Lilly takes this step reluctantly,” he wrote. “For months, Lilly worked tirelessly to avoid this outcome and resolve any legitimate concerns. But Lilly cannot allow a coordinated holdout — orchestrated by powerful hospital trade groups that oppose 340B transparency in any form — to defeat a lawful, modest integrity measure that is essential to ending what Secretary (Robert F.) Kennedy has described as the 340B ‘boondoggle.’”

Eli Lilly is among the largest pharmaceutical companies in the world.

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The American Hospital Association protested Eli Lilly’s decision to withhold discount pricing from entities that did not meet the company’s June deadline, calling the action “extraordinary.”

“Congress should immediately use its oversight authority and demand (Health and Human Services) take a position on drug companies’ attempts to hijack the 340B program through burdensome claims-data demands,” AHA President and CEO Rick Pollack said in a June 18 statement.

“These manufacturer-imposed requirements would drain scarce resources from 340B hospitals and threaten patients’ access to lifesaving drugs. HRSA and HHS cannot continue to stand by while Eli Lilly and others rewrite the rules for their own benefit and skirt their obligations.”

A spokesperson for Eli Lilly declined to comment when asked whether any of the hospitals now suspended from the company’s 340B pricing are based in Indiana.

Public officials seek transparency for drug discounts

Congress enacted the 340B drug discount program in 1992 so safety-net hospitals could purchase outpatient drugs at a discount from drug makers that participate in Medicaid.

Hospitals may then bill patients and insurers at a higher rate — even the full cost of the drug in some cases — a provision designed by Congress to assist hospitals serving the poorest Americans in paying for critical services and costly medications.

Critics allege the program is rife with abuse as it has expanded.

Hoosier lawmakers responded by adopting transparency requirements for hospitals purchasing drugs at 340B prices, with the first transparency reports due back in April.

Secretary Mitch Roob, head of the Indiana Family and Social Services Administration, took the effort a step further when he proposed a rule change, set to take effect in July, to discontinue Medicaid reimbursement for drugs purchased through 340B. He later exempted federally-qualified health centers from the rule.

Congress too is debating expanded federal oversight of the program.

Now, drug makers are adopting their own transparency measures to prevent misuse of 340B.

Lilly alleges ‘coordinated boycott’

In his letter to HRSA, O’Harra said 70% of the 2,350 entities purchasing Eli Lilly medications at 340B prices submitted in-house claims data — totaling nearly 800,000 claims since Jan. 1.

This includes claims from a majority of participating STD clinics, federally-qualified health centers and critical-access hospitals, he wrote.