On October 29, 2021, United States District Court Judge Sarah Evans Barker granted Eli Lilly’s request to vacate two administrative actions aimed at drugmakers and the 340B program discounts.
Readers likely remember the December 2020 advisory opinion from the Department of Health and Human Services Office of the General Counsel that said drug manufacturers in the 340B Program are obligated to deliver covered outpatient drugs to contract pharmacies and charge the covered entity no more than the 340B ceiling price for those drugs.
Several pharmaceutical companies, including Eli Lilly and AstraZeneca, filed a lawsuit against HHS over the advisory opinion, arguing that the advisory opinion violated federal law and that HHS did not have the authority to issue it.
In May 2021, the Health Resources and Services Administration (HRSA) followed up with an enforcement letter that determined Eli Lilly’s actions resulted in overcharges and were in “direct violation” of the 340B statute. The letter directed Eli Lilly to “immediately begin offering its covered outpatient drugs at the 340B ceiling price to covered entities through their contract pharmacy arrangements, regardless of whether they purchase through an in-house pharmacy.”
Eli Lilly sued the federal government in response to that enforcement letter and threat of penalties, requesting a preliminary injunction and temporary restraining order over the contract pharmacy restrictions.
In her ruling, Judge Barker found that the December advisory opinion and May enforcement letter were “arbitrary and capricious” and violated the Administrative Procedures Act. She ordered the two actions to be set aside and vacated, but also noted that HHS did not exceed its statutory authority – or act unconstitutionally – with respect to the May enforcement letter.
Judge Barker also found that under the current 340B statute, drug manufacturers cannot “impose unilateral extra-statutory restrictions on its offer to sell 340B drugs to covered entities utilizing multiple contract pharmacy arrangements.”
Barker took issue with the fact that the way the law is currently written, it is difficult to understand whether Congress intended for drug manufacturers to have “unlimited delivery obligations…untethered to the particular covered entity’s actual distribution needs.” She continued on saying, “We have no insight into why there is apparently so much reluctance to promulgate a holistic legislative proposal to bring clarity to the scope of the regulated parties’ obligations and entitlements … rather than engage in piecemeal interpretations and after the fact patchwork characterizing the history of the agency’s attempts to manage this program.”
Interestingly, the advisory opinion was withdrawn by the Biden Administration in June 2021. The court case, however, will continue to play out over the coming weeks and months.