Merck Sues HHS Over 340B Fines

The saga between the federal government and pharmaceutical companies over the 340B program continues to heat up. In July 2022, Merck filed a lawsuit against the United States Department of Health and Human Services (HHS), trying to avoid potential fines for cutting off 340B contract pharmacies from receiving discounted prescriptions.

Background

Under the 340B program, pharmaceutical companies offer discounted products to certain providers in exchange for Medicare and Medicaid participation. Pharmaceutical companies have argued that the program has gotten too big and is no longer benefiting patients. Therefore, as noted below, in 2021, several companies cut off sales of 340B-discounted drugs to contract pharmacies.

In 2021, the HHS Health Resources and Services Administration (HRSA) sent a warning letter to Merck – among other pharmaceutical companies – over its changes to the contract pharmacies. Since that time, many of the pharmaceutical companies who received letters from HRSA sued HHS, arguing that HRSA did not follow the proper notice and comment procedures and that the agency does not have legal authority to levy any fines.

A month later, amid litigation, HRSA withdrew the 340B advisory opinion via a legal filing to “avoid confusion and unnecessary litigation.” However, HRSA did not revoke or withdraw the enforcement letters at that time.

Merck Lawsuit

The lawsuit, filed in the United States District Court for the District of Columbia, argues that favorable rulings in similar cases should make a warning letter from the federal government moot. Readers may recall in 2021, when Merck – along with other drugmakers – cut off sales of 340B-discounted drugs to contract pharmacies, saying that if the 340B entities did not join the company’s integrity program and submit claims-level data, it will not provide the drugs to contract pharmacies. Merck said this was to try to avoid discounts being duplicated between 340B and Medicaid.

Merck has noted that it has multiple policies in place that attempt to account for 340B program noncompliance and that it has “worked diligently to communicate with HRSA regarding Merck’s policies and the reasons why they are lawful, necessary and appropriate.” Merck also notes in the filing that Merck allows all covered entities to purchase covered outpatient drugs, irrespective of whether they provide the requested claims-level data.

Merck is asking the court to set aside and vacate the violation letters, declare that Merck is not violating Section 340B, impose an injunction that prevents HHS from imposing any civil monetary penalties, litigation fees, and more.

Other Lawsuits

Eli Lilly and AstraZeneca were among the other companies who sued; and those cases, the warning letters from HRSA were vacated. In its filing, Merck points to those rulings, saying that the “plain language, purpose and structure of the statute do not prohibit the manufacturers from imposing any conditions on their offers of 304B-priced drugs to covered entities,” and arguing that therefore, its own HRSA warning letter should also be vacated.

This is not so cut and dry, however, as the federal case filed by Sanofi and Novo Nordisk ruled the other way and found that the agency did have the administrative authority to issue the warnings. The government has also sought to appeal the rulings that went against it, so it is possible that even the decisions that support Merck’s case ultimately get reversed.

We will see how this ongoing battle will continue to shake out in the coming months.  Bausch Health recently announced similar 340B restrictions, becoming the 18^th company to do so and joining the forces of companies making a show of the fact that they are not dissuaded from putting 340B restrictions into place, even in the midst of the ongoing legal battles.