The 340B Program uses a statutory formula to calculate the maximum price a drug manufacturer can charge a covered entity. For some drugs, that formula produces a ceiling price at or below zero. When that happens, manufacturers are required to charge no more than $0.01 per unit. This is called “penny pricing.”
Penny pricing is not a loophole or a quirk. It is the direct result of the formula Congress established. When a drug’s rebates and price adjustments push the ceiling price below zero, the manufacturer’s obligation is clear: charge a penny.
The Compliance Gap
According to the Adventist complaint, multiple drug manufacturers charged prices far above the penny threshold for years. The issue came to light because of the Health Resources and Services Administration (HRSA), an agency that is part of the U.S. Department of Health and Human Services.
HRSA published a final rule in 2019 imposing civil penalties for noncompliance with the penny pricing policy. After that rule took effect, Adventist says it noticed drug prices suddenly dropping to $0.01 per unit, a shift it argued could only be explained by manufacturers’ prior and systematic failure to comply with the law. Adventist described this as a pattern: manufacturers inflated prices for years, then abruptly shifted to compliance when enforcement became real.
The timing matters, according to the lawsuit. If market conditions or legitimate formula changes explained the higher prices, the drop would have been gradual. Instead, the shift was sudden, suggesting that manufacturers knew the correct prices all along.
What This Means for Safety-Net Providers
Advocates believe every dollar overpaid on a drug that should have cost a penny is a dollar that did not go to patient care. For safety-net providers operating on thin margins, these overcharges compound. They affect hiring, service availability and whether a clinic can keep its doors open.
Sagebrush’s case against Amgen fits within this broader pattern. When drug manufacturers charge more than the formula allows, supporters say safety-net providers and the patients they serve bear the cost.