District of Delaware Rules HRSA Exceeded Its Authority in Issuing 340B Enforcement Letters

We have written several times on the December 2020 letter issued by the United States Department of Health and Human Services (HHS) to drug manufacturers that reiterated the requirement that manufacturers continue facilitating the sale of 340B covered outpatient drugs to contracted pharmacies.

In May 2021, the Health Resources and Services Administration (HRSA) started issuing letters to manufacturers, enforcing the use of contract pharmacies under the 340B statute. On May 17, 2021, HRSA sent one of those letters to AstraZeneca. In the letters, HRSA warned that civil monetary penalties may be levied against AstraZeneca if the manufacturer did not immediately begin to offer drugs at the 340B ceiling price to covered entities through their contract pharmacy arrangements, credit or refund all covered entities for overcharges, and restart selling (without any restriction) covered outpatient drugs at the 340B ceiling price to covered entities that dispense medications through contract pharmacy arrangements.

AstraZeneca (and other manufacturers) filed suit, challenging the validity of the HHS and HRSA rules. HHS withdrew its Advisory Opinion on June 18, 2021, but HRSA did not revoke the Enforcement Letters.

District of Delaware Sides with AstraZeneca

While other litigation has occurred simultaneously (briefly mentioned below), the United States District Court for the District of Delaware recently found that HRSA did not comply with the Administrative Procedure Act (APA) when it issued the May 2021 Enforcement Letters. Therefore, the Court vacated and set aside HRSA’s Enforcement Letter and remanded the proceeding to HRSA for further consideration.

The Court found that by issuing the Enforcement Letter, HRSA did not comply with the APA for a handful of reasons, including the following:

·       The text of the 340B Statute does not make any reference to pharmacies;

·       Congress considered (and rejected) language referring to drugs under a contract entered into for on-site pharmacy services;

·       The Enforcement Letter applies “essentially the same flawed statutory interpretation that the Court already rejected” when it reviewed the validity of the HHS Advisory Opinion;

·       The Enforcement Letter is the only document that concludes that the 340B statute requires drug manufacturers to provide drugs for dispensing by an unlimited number of contract pharmacies; and

·       HRSA’s position on use of contract pharmacies has changed over the course of time.

No determination on relief was made, as the Court will seek the parties’ input on the impact of its own conclusions to determine whether the case should proceed in affording relief as requested by AstraZeneca in its complaint.

Other Litigation

Three cases are currently on appeal in similar litigation, including two cases in which the courts disagreed with the Delaware court and found that HRSA did not exceed its authority. The three cases are: Eli Lilly & Co. v. U.S. Department of Health & Human Servs., Case No. 1:21-cv-00081 (D.S.D. Ind.); Sanofi-Aventis U.S., LLC v. Department of Health & Human Servs., Case Nos. 3:21-cv-00634, 3:21-cv-00806 (D.N.J); Novartis Pharms. Corp. v. Espinosa, Case Nos. 1:21-cv-01479, 1:21-cv-01686 (D.D.C.).

Therefore, this decision adds to a split among district courts, which make it likely that this issue will continue to be litigated well into the future. It is worth continuing to monitor this area and the impact it has on the pharmaceutical industry.

For our other articles on the ongoing litigation, click here or here.