Eli Lilly’s policy requiring 340B hospitals submit claims-level data in order to receive statutory drug discounts garnered a fresh wave of pushback this week from Missouri’s attorney general and a cadre of Massachusetts hospitals, joining others who have described the requirements as unlawful.
Lilly announced its controversial policy for 340B dispensations in January and first put it into effect for a subset of hospitals in June. It applies to all pharmacy and medical dispensations, including in-house pharmacy and contract pharmacy dispenses, in most states.
The company said doing so would allow it to spot instances when a drug purchase is improperly granted multiple discounts under overlapping programs. Hospitals have contended that the extra scrutiny is unnecessary and introduces substantial administrative burden.
Missouri Attorney General Catherine Hanaway has come in on the side of the opposition. On Monday, she issued a cease-and-desist letter to Lilly, writing that the policy violates the Missouri Merchandising Practices Act, a consumer protection law. If the drugmaker doesn’t end its requirement for Missouri providers, the policy “may result in subsequent legal action,” including an injunction and monetary civil penalties, the letter reads.
“Big Pharma does not get to bully Missouri hospitals or hold prescription drug prices hostage,” Hanaway said in an accompanying release. “Eli Lilly is abusing its market power to impose higher prescription prices in Missouri. These tactics fall hardest on rural communities that depend on the 340B program to keep clinics open and ensure patients receive the care they need.”
Hanaway’s letter and release highlight Lily’s decision to end discounts for University of Missouri Health Care in July. The system later agreed to provide the data as requested, but “now bears the heavy costs and burdens of complying with Lilly’s requirements,” the attorney general’s office wrote.
A day later, six Massachusetts hospitals hit Lilly with a new lawsuit to block the policy. Massachusetts General Hospital, Brigham and Women’s Hospital, Salem Hospital, UMass Memorial Medical Center and Umass Memorial Health — Harrington Hospital filed the lawsuit.
Their complaint filed in federal court describes “corporate extortion” from “the largest pharmaceutical company in the world” that “deprives them of resources essential to serving their most vulnerable patients.”
The hospitals “rightfully refused to comply” with the policy and had their 340B discounts pulled, echoing the claimed injuries from others who have sued over the policy, such as Tampa General Hospital and Mary Hitchcock Memorial Hospital. Failing to “capitulate” would cost the plaintiff Massachusetts hospitals “tens of millions of dollars in annual losses” collectively.
However, the new complaint goes on to criticize Lilly’s 340B ESP platform, “a unilaterally selected, private-equity-owned third-party platform” whose use is required by Lilly as “a data dragnet that, so far, has been free from public scrutiny.”
The hospitals said the platform’s claim to de-identify submitted claims data is superficial, and through non-negotiable contractual terms allows the company to use data beyond integrity review while limiting the company’s liability to “the unconscionable sum of $100.” Hospitals forced to use the platform to receive the drug discounts, meanwhile, take on “the full burden of privacy, cybersecurity and regulatory compliance risk” related to the claims data, which they said is protected health information under the Health Insurance Portability and Accountability Act (HIPAA).
“Lilly has thus intentionally abused its substantial market power to create an untenable ‘Sophie’s choice’: Plaintiffs must capitulate to Lilly’s demands, incur higher operational costs, and surrender valuable privacy-protected Claims Data on non-negotiable Terms, or forgo their 340B savings, absorb substantially higher upfront drug costs, and jeopardize services for vulnerable patients,” they wrote in the complaint.
The hospitals wrote that the practices violate Massachusetts’ consumer protection law and are unjustly enriching the company. They asked the court to enjoin Lilly from enforcing its policy and terms, and to require compensatory damages “including but not limited to the amounts plaintiffs have paid to defendant above the applicable 340B Ceiling Price, lost 340B savings and other consequential damages.”
Fierce Healthcare has reached out to Lilly for comment on the attorney general’s letter and the new lawsuit. Lilly has historically disputed hospitals’ portrayal of its policy’s burdens in prior litigation and asserted that the required data is already routinely collected by the organizations.
This week’s developments add to the substantial legal showdowns surrounding the controversial drug discount program, which has ballooned in scale over the last several years. Drugmakers critical of the program have sought to impose restrictions on contract pharmacies, prompting litigation in states where lawmakers have prohibited such restrictions.
Policymakers’ own appetite to curb the subsidy program, such as through a pilot rebate program, has also spurred its fair share of litigation.