HHS appeals judge's ruling that drugmakers can cut off 340B sales to contract pharmacies

The Biden administration is appealing a federal ruling that said drugmakers have the authority to restrict sales of 340B-discounted products to contract pharmacies.

The Department of Justice filed an appeal Tuesday to a lawsuit brought by Novartis and United Therapeutics over drugmakers’ ability to cut off sales to contract pharmacies. It also appealed several aspects of other rulings in separate lawsuits brought by Eli Lilly, Sanofi and Novo Nordisk.

Advocates for the 340B program, which requires drugmakers to give discounts to safety net providers in exchange for participation in Medicare and Medicaid, applauded the decision to appeal the November ruling.

“We agree that the lower court ruling is wrong and should be reversed,” said Maureen Testoni, president and CEO of advocacy group 340B Health. “Two other federal courts have found drug companies cannot impose unilateral restrictions or conditions on 340B discounts.”

The judge in the Novartis and United Therapeutics lawsuit ruled last month that the 340B statute doesn’t prohibit drugmakers from attaching conditions to the sales of discounted products.

But the Department of Health and Human Services (HHS) announced Tuesday that it will appeal the ruling to the D.C. Circuit Court of Appeals.

The Health Resources and Services Administration (HRSA) did not return a request for comment on why it was issuing the appeal. The agency, though, which oversees the 340B program, previously told Fierce Healthcare that it “respectfully disagrees” with the ruling.

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Last summer, drugmakers started to cut off sales of 340B products to covered entities’ contract pharmacies, which dispense the drugs on behalf of the safety net provider.

The drug companies said the move was due to concerns over whether patients were benefiting from the discount and to avoid duplicative discounts with Medicaid. But providers and advocates charge the moves have been an end run around having to offer the discounts, which are sorely needed for safety net facilities that operate on thin margins.

HRSA announced earlier this year it intended to fine six drugmakers—Eli Lilly, Novartis, Novo Nordisk, United Therapeutics, Sanofi and AstraZeneca—over the restrictions. The drugmakers responded with three federal lawsuits arguing HRSA didn’t have the authority to penalize them and that the restrictions were legal under the 340B statute.

In two of the lawsuits, judges were amenable to HHS’ arguments that the agency has the authority to install the fines. However, they  wanted Congress to step in and spell out that the statute requires discounts to be given to contract pharmacies.

HHS is also appealing several aspects of the other lawsuit rulings, which partially vacated the warning letters HRSA sent to the drugmakers due to questions over whether the agency followed correct procedures.