Judge dismisses HHS challenge of AstraZeneca's 340B contract pharmacies lawsuit

Photo: Jeff Lagasse/Healthcare Finance News

A federal court this week denied a request from the U.S. Department of Health and Human Services to nix a lawsuit from drugmaker AstraZeneca over the 340B drug discount program. The court said HHS' position that the 340B statute requires drug manufacturers to participate in the program to offer discounts on drugs dispensed by contract pharmacies, was not the only reasonable interpretation of the statute.

AstraZeneca, along with other major drug companies, has restricted sales of discounted drugs through the 340B program to contract pharmacies, third-party entities that dispense discounted drugs on behalf of covered entities. The decision delivered this week means the lawsuit over the drugmaker's restriction of sales will continue.

WHAT'S THE IMPACT

At issue is whether drug manufacturers are required, under the 340B program, to sell drugs at a discount not only to 340B hospitals, but to pharmacies that contract with the providers. Drugmakers are against giving discounts to what they call for-profit contract pharmacies.

The federal court's opinion means AstraZeneca's lawsuit may continue. But the court has not yet ruled on AstraZeneca's motion for a summary judgement striking down HHS' initial opinion. A timeframe for when that ruling may be made has not yet been determined.

The lawsuit has a long and complicated history. In December, HHS maintained that restrictions related to contract pharmacies violated federal law, saying that covered entities can have as many contract pharmacies as needed.

AstraZeneca responded in January by suing the federal government, saying the opinion itself violated federal law, and accused HHS of overstepping its authority. HHS then filed its own motion to dismiss the lawsuit, saying the opinion amounted to a reiteration of a position already held by the federal government in relation to the 340B drug discount program.

The judgement, in effect, nixes HHS' motion and allows AstraZeneca's lawsuit to continue, with Judge Leonard Stark saying the statute is open to interpretation and that the opinion could have a material impact on AstraZeneca's finances, thereby validating the drugmaker's challenge.

THE LARGER TREND

The 340B Program is a discount drug pricing program for large drug manufacturers to sell outpatient drugs at a discount to certain hospitals, community centers and other federally funded clinics serving low-income patients. Manufacturers are required to offer the discount as a condition of participating in Medicaid and Medicare Part B.

In 2017 alone, 340B hospitals provided more than $64.2 billion in total benefits for their communities, according to the American Hospital Association.

The 340B drug discounting program has been a point of contention as of late.

Drugmaker Eli Lilly has also taken issue with HHS, saying in May that the agency capitulated to political pressure from Congress to "come down on drug manufacturers" that disagreed with the government's interpretation of the 340B law.

Lilly filed a motion for a preliminary injunction against a May 17 order from Health Resources and Service Administration Acting Administrator Diana Espinosa telling six drugmakers, including Eli Lilly, to immediately begin offering drugs at discounted prices under the 340B program.

Five days before sending the letter, HHS Secretary Xavier Becerra faced heated criticism from members of Congress to "take swift enforcement action" against Lilly and others, the motion said.

At issue is Eli Lilly's refusal "to provide its products at steep discounts to for-profit pharmacies," it said. Lilly continues to offer 100% of 340B discounts to 100% of covered entities, but will not provide discounts to contract pharmacies as a matter of course, it said. Covered entities are hospitals that serve vulnerable populations.

In December 2020, the American Hospital Association and other provider groups filed a motion for a preliminary injunction to have HHS require Eli Lilly, Sanofi-Aventis, AstraZeneca, Novartis, United Therapeutics and Novo Nordisk to provide drugs covered by the 340B Program at the discounted prices when they were sold to pharmacies that had contracts with the hospitals.

On December 30, HHS gave an advisory opinion. It said that covered entities under the 340B Program were entitled to purchase covered outpatient drugs at no more than the 340B ceiling price – and manufacturers are required to offer covered outpatient drugs at no more than the 340B ceiling price – even if those covered entities use contract pharmacies to aid in distributing those drugs to their patients.

Lilly said in its motion that the December 30 decision was inconsistent with the 340B law.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com