On July 31, 2013, Senator Chuck Grassley (R-IA), Ranking Member of the Senate Judiciary Committee, sent a letter to Walgreens, Inc., requesting additional information about the pharmacy chain’s participation as a contract pharmacy in the 340B Drug Discount Program.  While the letter does not allege any wrongdoing by Walgreens, it does express interest in the details of Walgreens’ contract pharmacy operations.  Grassley notes concerns expressed in a 2011 Report by the Government Accountability Office regarding possibly reduced program oversight and increased diversion risk with respect to contract pharmacies.  Grassley also appears interested in the potential for pharmacies to profit from their 340B contract pharmacy arrangements.

Among other things, the letter requests Walgreens to provide:

  • “a summary of all profits generated as a result of participating in the 340B program as a contract pharmacy. When providing this information, please break down the revenue by location and participating covered entity.” 

Additionally, the letter asks Walgreens to respond to the following questions:

  • “Covered entities have long argued that the 340B program was intended to assist non-profit safety-net providers to, ‘stretch scarce Federal resources,’ in serving the underserved populations in their communities. Under this interpretation, why should Walgreens, as a for-profit corporation, financially benefit from such a program?”
  • “Does Walgreens have a transparent process for reinvesting money back into underserved communities generated by being a contract pharmacy in the 340B program? If not, why not?”

Contract pharmacy growth within the 340B Drug Discount Program has been significant in recent years, due in part to more permissive Health Resources and Services Administration (“HRSA”) requirements.  Retail pharmacies cannot generally quality as “covered entities” eligible to purchase at 340B discounted prices.  However, HRSA has established processes to permit covered entities (such as certain “safety net” hospitals) to contract with retail pharmacies under certain agreements where the drug product is shipped to the pharmacy (for dispensing to patients of the covered entity) and billed to the covered entity.

Posted by Kathleen Peterson

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