340B Litigation Update: Once more unto the breach, dear friends, once more
by Elizabeth “Issie” Karan and Mike Glomb

Recently, three courts issued opinions related to ongoing 340B Program litigation. If you find yourself confused by headlines describing these outcomes, you are not alone. Before you devote significant brain power to dissecting the intricacies of the courts’ rationale, please note that these decisions likely will be appealed. However, the legal melee (or breach to quote William Shakespeare) does set the stage for congressional action and/or for HRSA to provide clearer guidance on the use of contract pharmacies in the 340B Program.

First, on October 29, 2021, the US District Court for the Southern District of Indiana handed Eli Lilly a mixed outcome. The judge wrote that HRSA “fails to acknowledge or explain the agency’s changed position(s) with regard to its authority to enforce statutory compliance when the alleged violation is entangled with a regulated entity’s failure to comply with the agency’s nonbinding contract pharmacy guidance.” However, the judge also stated that Eli Lily is not permitted to make “unilateral extra statutory restrictions on its offer to sell 340B drugs,” while noting examples of covered entities that lost hundreds to thousands in discounts.

Next, on November 5, 2021, the US District Court for the District of Columbia gave Novartis and United Therapeutics a more favorable opinion stating that drug companies can place conditions on the sales of drugs discounted under the 340B Program to contract pharmacies. However, that same day, the US District Court for the District of New Jersey contradicted this result. In that opinion, the judge told Novo Nordisk and Sanofi that they cannot unilaterally impose restrictions on the 340B Program and that their new policies “must cease.”

Although each suit differs, drug manufacturers are challenging the extent of HRSA’s authority to enforce penalties on drug manufacturers which refuse to provide discounts (or create limitations) on drugs dispensed by covered entities at contract pharmacies. Each case also questions the clarity of HRSA’s contract pharmacy guidance. In large part, the courts agreed that HRSA needs to issue clearer, well-reasoned guidance putting manufacturers on complete notice of the agency’s position for enforcement. As such, all three courts rejected a previously withdrawn HHS Advisory Opinion from December 30, 2020, and vacated letters sent to manufacturers in May 2021, threatening enforcement action. Predictably, both covered entities and drug manufacturers are claiming victory by pointing to different opinions and rationales.

The Hemophilia Alliance team will keep members informed as litigation progresses.