Merck sues HHS to avoid fine over 340B contract pharmacy restrictions

Merck is suing the Biden administration to avoid potential fines for cutting off 340B contract pharmacies from getting discounted products.

The pharmaceutical giant argues in a federal lawsuit filed Friday in the U.S. District Court for the District of Columbia that favorable rulings in similar cases make a warning letter from the federal government moot. The lawsuit is the latest in a feud between the federal government and drugmakers over the 340B program.

In 2021, Merck became among nearly 20 drugmakers that cut off sales of 340B-discounted drugs to contract pharmacies, which dispense the products on behalf of covered entities. Merck told 340B entities that if they do not join the company’s integrity program and submit claims-level data then it will no longer provide the drugs to contract pharmacies.

Merck said at the time that the program is intended to not duplicate any discounts between 340B and Medicaid. 

The drugmaker charged that the policy fits within the statute for 340B, but the Health Resources and Services Administration (HRSA) disagreed and in May warned Merck for its actions. 

The lawsuit, however, argues that the May warning letter does not mention recent legal defeats that HRSA has faced over similar moves. 

HRSA warned six drugmakers—Eli Lilly, Novartis, Sanofi, United Therapeutics, Novo Nordisk and AstraZeneca—last year over similar restrictions to contract pharmacies. Of those companies, five have filed a series of lawsuits arguing that HRSA lacks the legal authority to levy any fines and didn’t follow proper notice and comment procedures. 

Merck points to the initial rulings in some of those lawsuits. It noted that decisions in lawsuits brought by United Therapeutics and Novartis vacated the warning letters.

“The plain language, purpose and structure of the statute do not prohibit the manufacturers from imposing any conditions on their offers of 340B-priced drugs to covered entities,” Merck’s lawsuit said. 

Considering those rulings, the court should also throw out HRSA’s warning letter to Merck, the lawsuit adds. 

The government has sought to appeal the rulings that went against it. 

HRSA has also scored some wins. A federal judge in a lawsuit brought by Sanofi and Novo Nordisk found the agency did have administrative authority to issue the warnings.

The lawsuit is the latest to show that drugmakers are not dissuaded from 340B restrictions due to the ongoing legal feud between HRSA and the other companies. The drugmaker Bausch Health recently announced similar restrictions, becoming the 18th company to do so. 

Drugmakers agree under the 340B program to offer discounted products to safety net providers in exchange for participation in Medicare and Medicaid.

However, drugmakers argue that the program has gotten too large and that the discounts are not benefiting patients. But advocates for 340B counter that the program is vital to help safety net providers, which operate on thin margins.