A federal appeals court is questioning whether a lower court's ruling in Lilly's 340B contract pharmacy suit is "ready for appellate review."

Appeals Court Raises Procedural Questions About Lilly’s 340B Contract Pharmacy Case

Drug manufacturer Lilly’s appeal of a federal district judge’s ruling late last month in the company’s 340B contract pharmacy lawsuit has hit a procedural snag.

In an unsigned pair of orders on Tuesday, the federal appeals court in Chicago questioned whether U.S. Senior District Judge Sarah Evans Barker of the Southern District of Indiana issued a final judgement on Oct. 29 in Lilly’s case against the federal government that is appealable.

In one order, the U.S. Seventh Circuit Court of Appeals gave Lilly and the government until Nov. 30 to file “a brief memorandum stating why this appeal should not be dismissed for lack of jurisdiction or sent back” to Barker with instructions for her to declare what rights Lilly and the government have under her ruling. The court said that under its precedents, a lower court ruling that fails to separately declare the rights of the parties “may not be a final appealable judgment…or at the very least may not be ready for appellate review.”

The Seventh Circuit Court’s other Nov. 16 order in Lilly’s case directed the company by Nov. 23 to “file a complete statement of jurisdiction that accurately provides the basis for appellate jurisdiction.”

Barker held in the government’s favor that the U.S. Health Resources and Services Administration’s (HRSA) May 17 letter determining that Lilly has broken the law “neither exceeds the agency’s statutory authority nor is contrary to law.” She also said “the fairest and most reasonable interpretation of the 340B statute” would not let manufacturers unilaterally restrict drug distribution in ways that frustrate 340B’s purpose.

Baker, however, set aside and vacated the government’s violation letter on the grounds that HRSA did not acknowledge or explain its change in position regarding its ability to enforce contract pharmacy arrangements. She sent the letter back to HRSA “for further consideration/action consistent with” her decision.

Lilly, which filed its notice of appeal on Nov. 10, has not yet responded to our request for comment on the Seventh Circuit Court’s orders. HRSA does not comment on pending litigation in which it is involved.

Health care attorney Barbara Straub Williams, partner at Powers Law, said, “I was surprised that Lilly filed an appeal because the district court case isn’t closed.” Lower court orders remanding federal agency actions “are generally not appealable,” she said.

Health care attorney Andrew Ruskin, partner at K&L Gates, had a different take. “I’ve seen messier Medicare cases get taken up on appeal,” Ruskin said. “As I’ve said, we’re going to be watching this matter play out in the courts for years to come.”