Under ‘threat’ of fines, Novartis sues HHS over drug pricing program
The biopharma industry is not taking the threat of even modest civil monetary penalties lightly, as Novartis last week sued the Biden administration’s HHS over plans to assess such penalties for changes that the companies made in regard to a small but high-profile drug discount program for hospitals.
Under the program, known as 340B and run by HHS’ Health Resources and Services Administration, drugmakers are required by law to sell their products at heavily discounted prices so hospitals can provide them to low-income patients. Although the national program is somewhere between 8% and 5% of the entire US drug market, biopharma companies have criticized the ballooning growth of certain contract pharmacies that are now operating on behalf of many of the hospitals and took action to halt that growth over the past year.
But HRSA told drugmakers — AstraZeneca, Novo Nordisk, Lilly, Novartis, United Therapeutics and Sanofi — last month that they have to provide the discounts to the contract pharmacies, or else pay $6,000 for each instance in which the government believes that each sold a product to an entity at an incorrect price.
Like Lilly in Indiana district court (which now has until June 10 to reply to HRSA’s letter), Novartis is calling on the DC district court to stop “HRSA’s threat” because it lacks merit and because Novartis has not overcharged any entities as it only stopped the discounts for contract pharmacies outside of a 40-mile radius from participating hospitals.
“Nothing in the statute contemplates—let alone requires—that manufacturers agree to ship drugs nominally purchased by covered entities directly to ‘contract pharmacies’ for dispensing to both patients and non-patients of the covered entity alike. And yet that is precisely what HRSA has purported to mandate here,” Novartis said.
The company also noted an explosion of contract pharmacy arrangements over the last decade, as contract pharmacy participation grew 4,228%, according to a report from the Berkeley Research Group, and as the number of contract pharmacy arrangements by hospitals increased from 193 to more than 43,000 during the same period.
That growth has come with abuse, Novartis alleges, and the government’s public claim that the company has knowingly and willfully violated its 340B obligations “plainly injures Novartis’ reputation.”