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Sentry Data Gets 'Major Concessions' from CVS in 340B Lawsuit

By Jack O'Brien  
   June 13, 2018

Sentry Data Systems earned an early victory in its lawsuit against CVS over its mandate that all 340B hospitals switch to Wellpartner by the end of 2018.

The legal fight between Sentry Data Systems and CVS Pharmacy Inc., resulted in CVS issuing a letter of "major concessions," in a case which could have major repercussions for the 340B Drug Pricing Program.  

Sentry alleges that CVS "unilaterally mandated" all 340B hospitals and clinics working with its pharmacies adopt Wellpartner Inc. as its 340B administrator by the end of the year. Sentry argued this move, coupled with the threat to restrict access to the CVS pharmacy network, has taken away free choice for covered entities in the 340B program.

CVS has denied the Sentry's allegations since the suit was filed in February, telling Axios the lawsuit is "without merit."

The case, being heard in the United States District Court for the Southern District of Florida, is another development surrounding the 340B program, which critics allege is rife with profiteering and abuse. However, the program is utilized by more than 1,300 hospitals and is part of the Trump administration's recent efforts to lower prescription drug prices.

"This initial victory is only the first step in rolling back CVS's unreasonable mandate to use Wellpartner, which places an undue burden on hospitals and clinics that already serve some of the neediest and most vulnerable patient populations in the country," Travis Leonardi, CEO of Sentry, said in a statement. "We will continue to fight to ensure that safety net providers – not pharmacies – remain in control of how to best care for their patients."

Below are additional notes regarding the case and the 340B program:

  • The main focus of the case is on CVS, a leader among contract pharmacy networks, and how 340B-covered entities should be able to contract out with other pharmacies.

  • Tuesday's announcement is a significant development as the legal proceedings continue, a case where 340B hospitals have primarily sided with Sentry.

  • Another core issue is control of the program and the role of choice for hospitals pursuing 340B compliance. Allies of Sentry believe the covered entity is responsible for choosing its solution from any number of options.

  • Sentry alleges that CVS is usurping the way the program is run, traditionally operating in a centralized way, while the new strategy relies on a more decentralized approach where vendors control how hospitals keep their programs compliant.

  • The antitrust component of the case is based on CVS' use of third party administrators to charge covered-entities, maintain a contract pharmacy, participate in a revenue share.

  • The revenue share arrangement is not typical of industry pricing structure, critics say. There are no benefits from having 340B eligibility or not, critics add, since the basis that CVS focuses on is the eligibility vendor that a covered entity uses. Covered entities, meanwhile, are responsible for the integrity of the program and see large percentage of the gross revenues taken off the top by CVS.

  • Sentry plans to continue with its antitrust claims against CVS and Wellpartner, and cooperate with regulatory authorities investigating CVS as it relates to legal proceedings.

  • In addition to the pending legal proceedings, a new piece of legislation addressing problems with the 340B program made its debut Tuesday.

  • Maureen Testoni, interim CEO of 340B Health, said in a statement that the legislation is "essential to the success of the 340B program in helping safety-net providers meet the health needs of low-income and rural patients across the country."

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

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