HHS yesterday withdrew its ex-General Counsel Robert Charrow's legal advisory opinion that the 340B statute requires drug companies to offer 340B pricing when covered entities use contract pharmacies.

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BREAKING: HHS Withdraws 340B Contract Pharmacy Advisory Opinion, and Becerra Appoints 340B Dispute Resolution Board Members

HHS Withdraws 340B Contract Pharmacy Advisory Opinion, Says May 17 Demand Letters Are Unaffected

The U.S. Health and Human Services Department (HHS) yesterday withdrew its December 2020 legal advisory opinion (AO) that the 340B statute unambiguously requires drug manufacturers to offer 340B pricing on their products when covered entities use contract pharmacies or other distribution methods.

“It is [HHS’s] position that such withdrawal renders claims challenging the advisory opinion moot,” the department said.

HHS also said the advisory opinion’s withdrawal does not affect the U.S. Health Resources and Service Administration’s (HRSA) May 17 letters to six drug manufacturers informing them that their restrictions on 340B pricing to covered entities that use contract pharmacies are in direct violation of the 340B statute. HRSA demanded immediate resumption of deliveries of 340B-purchased drugs to contract pharmacies, and provision of credits or refunds for overcharges. HRSA said it could impose civil monetary penalties for noncompliance.

“HRSA’s enforcement process operated independently from the issuance of the opinion, and operates independently from the opinion’s withdrawal,” HHS said.

HHS’s action came two days after a federal judge ruled that the 340B statute “is silent as to the role that contract pharmacies may play in connection with covered entities’ purchases of 340B drugs.” It is up to Congress, not the courts, to decide whether drug companies must deliver 340B drugs to an unlimited number of contract pharmacies, or to none at all, the judge said.

The judge was acting in drug manufacturer’s AstraZeneca’s lawsuit challenging the advisory opinion. He had given both sides until yesterday to recommend what relief the company was entitled to and how the case should proceed, if at all. Both sides yesterday asked the court to extend the deadline to June 21.

In a late afternoon filing, U.S. Justice Department (DOJ) lawyers for HHS gave notice that it had withdrawn the advisory opinion “in light of ongoing confusion about the scope and impact of the opinion.”  The AO was written by Robert Charrow, HHS General Counsel in the Trump administration.

Noting that AstraZeneca and four other manufacturers—Lilly, Sanofi, Novo Nordisk, and Novartis—have challenged the advisory opinion’s legality, HHS said in its withdrawal notice that the opinion was never intended to create new 340B binding obligations on the manufacturers, or to be the predicate for enforcement against them, as the five manufacturers maintain.

HHS said its advisory opinion was narrowly intended to set forth the department’s views on how the 340B statute should be interpreted, and that the opinion did not have the force or effect of law.

HHS said it disagrees with U.S. Chief District Judge Leonard Stark’s opinion Wednesday in AstraZeneca’s lawsuit. It said it withdrew the advisory opinion “in the interest of avoiding confusion and unnecessary litigation.” AstraZeneca will likely argue that the withdrawal of the AO does not address the Judge’s contention that the 340B statute does not address the contract pharmacy program.  In addition to challenging the AO, the company is challenging the May 17 demand letter.  The other drug manufacturers that are suing the government have also revised their suits to prevent enforcement of the May 17 letter.

Becerra Makes Appointments to Long-Awaited 340B Dispute Resolution Board

U.S. Health and Human Services (HHS) Secretary Xavier Becerra signed a memorandum on Thursday, June 17 appointing members to the 340B program administrative dispute resolution (ADR) board, lawyers for the federal government and Ryan White Clinics for 340B Access (RWC-340B) told a federal judge yesterday.

The disclosure came in a June 18 status report in RWC-340B’s lawsuit to compel HHS to promulgate 340B ADR regulations and initiate enforcement proceedings against drug manufacturers that are denying 340B pricing on drugs shipped to contract pharmacies.

HHS published final ADR regulations on Dec. 14, 2020 and they took effect on Jan. 13. On Jan. 20, in one of his last acts before his term ended, ex-HHS Secretary Alex Azar appointed six voting and three non-voting ex- officio members to the ADR board. The new Biden administration withdrew the Federal Register notice of Azar’s appointments on Jan. 21.

In a May 19 status report in RWC-340B lawsuit against HHS, the parties to the suit said “HRSA sent to the Office of the Secretary of HHS recommended new appointments to the ADR Board to correct for shortcomings in the prior slate of appointments.”

Pharmaceutical Research and Manufacturers of America (PhRMA), Eli Lilly, and Sanofi have sued to have the ADR regulations declared illegal, unconstitutional, or both.

On March 16, a federal district judge in Indianapolis  issued a preliminary injunction stopping HHS from implementing or enforcing its ADR regulations against Lilly.

A Federal Register notice announcing Becerra’s appointments to the ADR board could come as soon as Monday.

The National Association of Community Health Centers and the federal government had a June 18 deadline to file a status report in NACHC’s similar 340B ADR lawsuit against HHS. It has not yet been posted in the federal judiciary’s court records database as of early this morning.

CORRECTION Sunday June 20, 2021—This article originally said Becerra signed the memorandum appointing members to the 340B ADR board on May 17. He signed the document on June 17.

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