340B “Saga” Works Its Way Through the Courts: What Manufacturers Need to Know

It’s a dispute lasting years seeking to define the exact contours of the authority of the Health Resources and Services Administration (HRSA) to interpret the 340B Statute concerning (i) participating Covered Entities’ use of “contract pharmacies”, (ii) whether participating drug manufacturers are required to recognize such pharmacies, and (iii) the ability of participating drug manufacturers to place their own administrative conditions on Covered Entity contract pharmacy agents in order to receive drugs at the heavily discounted 340B price on behalf of Covered Entities. However, just like any good saga, there is still much of the story yet to be revealed.

The individual cases at issue are:

• AstraZeneca Pharms. LP v. Becerra (U.S. District Court for the District of Delaware) (Case 1:21-cv-00027)
• Eli Lilly & Co. v. U.S. Dep’t of Health & Human Servs. (U.S. District Court for the Southern District of Indiana) (Case 1:21-cv-00081)
• Sanofi-Aventis U.S., LLC and Novo Nordisk Inc. v. Dep’t of Health & Human Servs. (U.S. District Court for the District of New Jersey) (Cases 3:21-cv-00634 and 3:21-cv-00806)
• Novartis Pharms. Corp. and United Therapeutics v. Espinosa (U.S. District Court for the District of Columbia) (Cases 1:21-cv-01479 and 1:21-cv-01686)

The cases address common questions concerning the interpretation and implementation of the 340B Statute:

1. the authority of HRSA to interpret/issue guidance related to the use of contract pharmacies;
2. the validity of an Advisory Opinion issued by the Department of Health and Human Services (HHS) General Counsel’s office from December 2020 requiring participating drug manufacturers to deliver covered outpatient drugs to contract pharmacies; and
3. the validity of several “Enforcement Letters” issued to drug manufacturers in May 2021 alleging that manufacturers violated the law by issuing and implementing specific policies ultimately related to the use of contract pharmacies, for which HRSA threatened to impose civil monetary penalties.

Additionally, one case addresses the validity of the so-called “ADR rule” that HRSA was required to issue under the Affordable Care Act back in 2010, but did not promulgate until December 2020. The ADR Rule sought to create an administrative dispute resolution mechanism to resolve disputes between participating manufacturers and Covered Entities related to the 340B program.

Fundamentally, these cases highlight HRSA’s piecemeal, and at times, conflicting interpretation of the 340B Statute. They also demonstrate the limitations the agency faces given the authority provided to it by Congress under the 340B Statute. Those familiar with the 340B Program and the 340B Statute know that fulsome implementing regulations are scant, in part because HRSA’s statutory authority to promulgate regulations is limited to two distinct areas: (i) imposing civil monetary penalties on participating manufacturers for failing to offer the 340B Ceiling Price to Covered Entities, and (ii) creating an administrative dispute resolution process. Given these limitations, Covered Entities and participating manufacturers alike have been forced to rely upon guidance issued by HRSA in the form of notices in the Federal Register, letters to program participants, and other less formal means. At times – such as with respect to the use of contract pharmacies – the agency has altered its view and position, creating confusion and diverging interpretations of the 340B Statute by parties impacted by the statute.

We have summarized the key takeaways from the four cases in the chart below:

It is important for participating manufacturers to note that these cases are far from final. Eli Lilly and Sanofi have already appealed. There are other cases brought by other participating manufacturers pending. In addition, at least with respect to the Enforcement Letters, HRSA may reissue letters and ask OIG again to seek civil monetary penalties from manufacturers for failing to offer the ceiling price due to their non-recognition/restrictions on contract pharmacies. Currently, no CMPs have been imposed related to this issue, nor has OIG brought administrative action seeking CMPs yet.

Participating manufacturers contemplating changing current policies or procedures addressing 340B purchases should be sure to consult legal counsel before amending current practices. And stay tuned as the saga continues!