The PhRma Cowers before ACT UP!
Justice Prevails for PWAs.

In the face of the ACT UP Demo,
the PhRMA greedheads dropped their outrageous lawsuit.

reportage by

John James
AIDS Treatment News

Pharmaceutical Industry Sues to Stop Discount Pricing to Clinics

PhRMA (the Pharmaceutical Research and Manufacturers of America), a trade association of the largest drug companies, filed suit in July 1996 to stop the government from requiring pharmaceutical companies to provide discounts to thousands of public medical clinics, ADAP programs, and other government- supported medical programs for the poor. Discounts to Medicaid, and to programs large enough to have their own pharmacies, apparently would not be affected by this lawsuit.

Supporters of the clinics believe the suit is without merit. The Public Hospital Pharmacy Coalition (phone 202/624-7346), along with community health centers and other representatives of facilities that receive the discounts, is preparing to file a friend-of-the-court brief against the PhRMA suit.


This dispute concerns a law (Section 340B of the Public Health Service Act), passed by Congress in 1992, which requires pharmaceutical companies to offer deep discounts to certain government entities, as a condition for Medicaid buying the company's drugs. The prices under this program are, on average, about 40% below "average wholesale price," or about 20% lower than prices paid by group purchasing organizations. The PhRMA lawsuit is not trying to overturn this law itself; instead, it is trying to stop the government-funded facilities and clinics from contracting with outside pharmacies to dispense the drugs. This would greatly limit the deep-discount program, since many of the clinics are too small to have their own pharmacies. They would not be able to send their patients to have their prescriptions filled at a discount by pharmacies elsewhere, greatly increasing the financial burden of providing healthcare for the poor and uninsured.

At this time only about a dozen of the state ADAPs (AIDS Drug Assistance Programs) use the discount pricing. This is because most ADAPs do not operate their own pharmacies capable of buying the drugs at the discounted rates. However, many of the non-participating ADAPs could join the 340B program by taking advantage of the contract pharmacy model. The PhRMA lawsuit, if successful, would eliminate this option, preventing most ADAPs from stretching their dollars farther in paying for AIDS drugs.

PhRMA complains that guidelines on contracting with pharmacies was not published in the Federal Register, as it claims the law requires, but instead were released on a government computer system set up to dispense information about the Section 340B program. PhRMA also claims that companies cannot adequately protect themselves from diversion of low-price drugs to non-covered patients. The Public Hospital Pharmacy Coalition says that the companies and the government both have the right to audit the records of the organizations using the program, and that no documented instances of intentional diversion have occurred. The PHPC also believes that the government followed the proper procedures in developing and publishing the guidelines.

PhRMA also argues that companies would be violating state laws if they sold prescription drugs or controlled substances to clinics which are not pharmacies -- and that if the sale were considered to be to the pharmacy with which a clinic had contracted, then there is no provision in Section 340B for such a sale. In response, PHPC points out that the 340B statute is silent on the issue of contract pharmacies, and that, under state laws, such arrangements are permissible.


This PhRMA lawsuit is one of the thousands of private and public efforts now underway to increasingly abandon responsibility to the poor and the sick, exacerbating the damage from the growing disparity of wealth. Unless the public organizes to defend itself, more and more people will have no viable place in the future.

As we announced in our last issue, on October 11 a major demonstration sponsored by several AIDS organizations will target PhRMA over drug pricing; for more information call 215/731-1844, or email

Our own view is that for long-range strategy, drug pricing should not be an AIDS-specific issue, but rather a coalition issue involving the many publics and organizations affected. Also, we believe that the best strategic goal may not always be to reduce prices overall, but rather to make sure that those who need medical care are not denied it. For example, even a large reduction in the prices of protease inhibitors would not make them affordable out of pocket for most people; therefore, it might be better to focus on effective government, private, and other patient assistance programs, on enabling those currently uninsured to obtain access to medical coverage, and on facilitating the testing of nutritional, herbal, and other nonproprietary low-cost treatment options, which today are unlikely to be studied in scientific trials either before or after they have become widely used.

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Mail: 1100 15th St. NW, Washington, DC 20005

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