Federal judge dismisses hospital groups' lawsuit against HHS over 340B drug feud

courtroom
A federal judge found several major hospital groups didn't have the authority to file a lawsuit against the Department of Health and Human Services over the 340B drug discount program. (Pixabay)

A federal judge has dismissed a lawsuit filed by several hospital groups seeking to get the Department of Health and Human Services (HHS) to clamp down on drugmakers restricting access to products.

Federal Judge Yvonne Gonzalez Rogers issued a ruling Wednesday that hospitals had to use a new dispute resolution process to settle the feud with the drugmakers, which the hospitals cannot sue individually under federal law for 340B violations.

But the groups were happy that HHS did blast several drug companies’ moves to restrict access of 340B-discounted pharmaceuticals to contract pharmacies, which are third-party entities that dispense drugs on behalf of the 340B hospital or provider.

“We are pleased that HHS is now fully aligned with our position that drug company refusals to offer 340B pricing through community pharmacy arrangements are unconscionable actions that have no basis in the 340B statute,” said Maureen Testoni, president and CEO of advocacy group 340B Health.

The group sued HHS back in December and was joined by America’s Essential Hospitals, the American Hospital Association, the American Society of Health-System Pharmacists, the Association of American Medical Colleges and the Children’s Hospital Association.

The lawsuit urged the federal court to compel HHS to halt the drugmaker’s moves and to reimburse 340B-covered entities for any difference between the price they paid and the discounted price.

RELATED: 27 states and D.C. call for HHS to rein in drugmakers over 340B moves after hospital group lawsuit

They also wanted HHS to issue a decision that restricting access to contract pharmacies violates the 340B statute.

But the ruling from the U.S. District Court for the Northern District of California granted HHS’ motion to dismiss the case because the groups didn’t have the authority to bring the lawsuit.

HHS claimed federal law already bars any private lawsuit against drug companies under the 340B program, and hospitals must use the dispute resolution process, which was finalized last month.

In addition, HHS said it has not yet established any final agency action that can be challenged in court.

The ruling said Congress has explicitly said the 340B program violations are to “be first adjudicated by HHS through an established ADR process. The judiciary has a prescribed role in this process, but its role comes only after the parties have participated in this ADR process.”

Testoni said she was disappointed in the ruling, and “we are reviewing next steps with our fellow plaintiffs and the attorneys representing us.”

RELATED: Bipartisan group of Senate and House lawmakers press HHS to quash drug companies' 340B moves

The ruling is the latest development in a feud that has embroiled the hospital industry and several major drug companies.

Manufacturers Eli Lilly, Novo Nordisk, Sanofi, AstraZeneca and United Therapeutics have taken a range of actions to restrict sales of 340B-discounted drugs to contract pharmacies. Some drug companies restricted access for all of their products, but others have made some exceptions.

The pharmaceutical industry group Pharmaceutical Research and Manufacturers of America sued HHS late last month challenging the dispute resolution process. The group charged that the resolution process cannot consider violations on duplicative discounts or diversion, a key complaint among drug companies over the 340B program.

A drug company offers discounted products to safety net hospitals, community health centers and other providers in exchange for participating in Medicare and Medicaid.