Judge strikes down HRSA's warning to AstraZeneca over 340B contract pharmacy restrictions

The Biden administration must withdraw a warning to drugmaker AstraZeneca over its access restrictions on 340B contract pharmacies, according to the latest ruling in a legal feud between the administration and major drug companies.

The federal ruling issued late Wednesday found that the Health Resources and Services Administration (HRSA) did not follow federal regulations when it warned AstraZeneca in May 2021 and the agency's letter must be vacated. It is the latest development in a sprawling legal fight over the Biden administration’s effort to rein in drugmakers that want to restrict sales of 340B-discounted products to covered entities’ contract pharmacies.

AstraZeneca argued in its lawsuit, one of several filed by pharmaceutical companies in recent months against the administration, that HRSA failed to follow proper notice and comment procedures and didn’t have the authority to issue the warning.

The drugmaker also said that HRSA uses the same legal argument as an opinion written in December 2020 by Health and Human Services’ general counsel. That opinion said the statute governing program clearly allows 340B-covered entities to use an unlimited number of third-party contract pharmacies to dispense their medications to patients.

AstraZeneca sued last year challenging that opinion and a federal judge agreed the agency didn’t have the statutory authority to issue it. HHS withdrew the opinion soon after the legal defeat.

But AstraZeneca argues in its new lawsuit over the May warning letter that HRSA is using the same legal argument that the 340B statute clearly requires drug companies offer access to contract pharmacies.

Judge Leonard Stark of the U.S. District Court for Delaware agreed with AstraZeneca, noting that HRSA relied on the advisory opinion and references it in the warning letter.

“Because the violation letter advances essentially the same statutory interpretation as the one contained in the opinion, the court’s previous analysis of the 340B statute applies here,” Stark wrote.

Stark added that the 340B statute never references pharmacies. Since the letter relies on the same “flawed statutory interpretation that the court already rejected” then the letter must be struck down, he wrote.

The ruling is the latest in a legal feud between six major drug companies and the federal government.

In the summer of 2020, drugmakers started to restrict 340B sales to contract pharmacies, which are used by covered entities to dispense pharmaceuticals, arguing the move is to clamp down on any duplicative discounts for 340B and Medicaid.

RELATED: Safety net hospitals say pharma's 340B restrictions already endangering services

Pharma companies agree to offer discounts to 340B-covered entities such as safety-net providers in exchange for participation in Medicare and Medicaid. But the pharmaceutical industry has charged that the program has gotten far too large, and patients aren’t benefiting from the discounts. 340B and hospital advocacy groups counter the program is vital to help safety-net providers that operate on thin margins to deal with high drug prices.

HRSA warned six drug companies—Novartis, AstraZeneca, Sanofi, Eli Lilly, United Therapeutics and Novo Nordisk—in May 2021 for cutting off contract pharmacy drug access. These firms were not deterred by the prospect of fines and five of them sued the agency in several lawsuits over the warnings.

Including AstraZeneca there have been four rulings on the issue, with two finding that HRSA had the authority to deliver the warnings and two striking down the letters.

HHS had appealed one of the prior rulings that did not go its way. The agency did not immediately return a request for comment on what it will do for the latest ruling.

RELATED: Supreme Court justices grill HHS in lawsuit surrounding nearly 30% cut to 340B payments

As the legal fight continues, more drugmakers have decided to issue the same restrictions. So far a total of 14 pharmaceutical companies—with the latest being GlaxoSmithKline—have decided to cut off sales to contract pharmacies.

The advocacy group 340B Health chided the ruling and the growing trend of drug companies installing their own restrictions.

"More than 700 companies are abiding by those legal agreements, but a growing number of drugmakers—including some of the world’s largest and most profitable—are now violating the law,” said Maureen Testoni, president and CEO of 340B Health in a statement.