Recently, Sanofi-Aventis US LLC filed a lawsuit against the Department of Health and Human Services (HHS) and the Health Resources and Services Administration (HRSA) over changes to the 340B program. In 2024, Sanofi – along with Johnson & Johnson and Eli Lilly – tried to change the way they provided 340B savings by paying rebates to hospitals after the providers prove that their drug purchases are eligible for the 340B program, compared to the requirement that drugmakers sell eligible drugs at the lower 340B price at the time of the sale.
HHS and HRSA warned the three companies about implementing the new policy, saying that if they moved forward with their proposed change, they would face fines and potential termination of their pharmaceutical pricing agreement with the government. Termination of the pricing agreement would result in the medications manufactured by the companies being removed from Medicare and Medicaid coverage, which would result in a large loss of potential patients.
Sanofi’s proposed changes would require 340B-covered entities to disclose data to the company that proves the medication and patient are eligible for 340B benefits. Once it was verified, the facilities would receive a credit from Sanofi for the difference between the lower 340B price and the wholesale acquisition cost (WAC) of the drug. Providers were intended to receive that payment before they had to pay the wholesaler, which meant that they wouldn’t have to front the higher cost of the medication.
HRSA believes that the proposal goes against Section 340B of the Public Health Service Act, stating that the Act requires manufacturers to lower the price of a drug through an upfront discount. Sanofi – along with Johnson & Johnson and Eli Lilly – argue that the law does not mandate such an upfront discount and that by providing the discount via a subsequent credit or rebate should satisfy the law. “Sanofi’s planned Credit Model is fully consistent with Section 340B, and HRSA’s contrary position is unlawful,” Sanofi states in the complaint. “Nothing in Section 340B prohibits Sanofi from implementing its Credit Model.”
Sanofi even goes to state, “The statute expressly contemplates that manufacturers may effectuate the discounted price through a post-purchase credit. And the statute does not prohibit manufacturers from attempting to prevent unlawful diversion.” Additionally, Sanofi cites a prior HRSA Notice, Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Rebate Option, 62 Fed. Reg. 45,823, 45,824 (Aug. 29, 1997), where HRSA itself stated, “Section 340B has no explicit language as to whether the required reduction in price should be obtained by an initial reduction in the purchase price (i.e., a discount mechanism) or received as a required reduction in cost rebated after purchase, dispensing, and payment are completed (i.e., a rebate option).”
Sanofi also references “waste and abuse” in the 340B program, noting that HRSA has recognized the waste and abuse via audits. Sanofi argues that a contributing factor to the waste and abuse is the use of “contract pharmacies,” defined as “for-profit, commercial pharmacies that enter into agreements with covered entities” to distribute 340B drugs.
Sanofi is asking the court to issue a declaration, order, and judgment that holds the Violation Letter as unlawful and enjoins and sets it aside; a declaration, order, and judgment holding that Sanofi’s Credit Model complies with Section 340B because the statute does not prohibit Sanofi from effectuating the 340B price through a credit or implementing its patient eligibility condition without the Secretary’s prior approval; an injunction prohibiting HHS and HRSA from terminating Sanofi’s Pharmaceutical Pricing Agreement or otherwise taking any enforcement action against Sanofi for implementing the Credit Model, including without prior approval from the Secretary; and an award of costs and attorney’s fees.