Eli Lilly serves up a win over Biden's HHS in drug discount court case
In the battle over a growing federal drug discount program and whether pharma companies can unilaterally change what entities receive certain discounts, the industry was just dealt a win from a US district court.
The Indiana court ruled that a letter from HHS to drugmakers in May, which said their unilateral changes to the discounts were illegal, is “arbitrary and capricious.” Now HRSA, which runs the 340B drug discount program, has to come up with further consideration/action consistent with the opinion.
The win is good news for the other five companies cited in that letter too, including Novartis, Novo Nordisk, Sanofi and United Therapeutics, and likely means the companies will not be assessed fines.
However, the opinion also makes clear that “the statute, correctly construed, does not permit drug manufacturers, such as Lilly, to impose unilateral extra statutory restrictions on its offer to sell 340B drugs to covered entities utilizing multiple contract pharmacy arrangements,” judge Sarah Evans Barker wrote.
But in the end, she explained how the agency’s May letter “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.”
The size of the ballooning 340B program, which is now the second-largest federal drug distribution/financing program and involves 30 billion discounted purchases each year, was a constant theme in the court’s opinion. It also seemed to place the onus on Congress to make changes to 340B.
“The demand for 340B drugs and the prevalence of contract pharmacies has exploded in a way that Congress likely did not imagine either when the statute was first enacted in 1992,” Barker wrote. “Given the expansion of the 340B program and the vast proliferation of contract pharmacy arrangements since Congress’s most recent amendments to the 340B statute, Congress may at some point choose to amend the statute to directly address these issues. But that is for Congress to determine; drug manufacturers may not usurp the role through unilateral extra-statutory restrictions.”
She also noted examples of some 340B-covered entities that lost access to hundreds of thousands in discounts. “A critical-access hospital in Nebraska documented numerous instances where it paid prices far above the 340B ceiling price for Lilly drugs, including instances where it paid $326, $339, $551, and $797 for Lilly insulin,” the opinion notes.
However, Lilly won the decision in the end because HRSA, which runs the program under HHS, has “failed even to acknowledge any change in its position regarding its ability to take enforcement action related to drug manufacturers’ dealings with covered entities through contract pharmacy arrangements, much less provide ‘good reasons’ for such change, the determinations in the May 17 Letter are arbitrary and capricious and must be set aside and vacated and the issues remanded to the agency as actions violative of the APA.”
HHS’ arguments would “carry more weight if,” she noted, if “prior to the issuance of the Advisory Opinion, the agency had not indicated on several occasions that its enforcement powers were limited and that it lacked authority to ‘compel’ manufacturers ‘to provide 340B discounts on drugs dispensed by contract pharmacies.'”
But it wasn’t all good news for the pharma industry, either, as she poked holes in many of its arguments and laid out several key questions, noting:
We do not know, for example, why the agency said for so long that it was notable to enforce its view of drug manufacturers’ obligations under the statute in the context of contract pharmacy arrangements and then suddenly changed tack and said it was able to enforce these requirements. We cannot divine whether Congress intended for drug manufacturers to have unlimited delivery obligations under the statute, untethered to the particular covered entity’s actual distribution needs. 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 under the statute with regard to contract pharmacy arrangements rather than engage in piecemeal interpretations and after the fact patchwork characterizing the history of the agency’s attempts to manage this program.