BREAKING: Hospitals Sue HHS Over Drug Companies’ Denials of 340B Pricing

Hospitals Sue HHS Over Drug Companies’ Denials of 340B Pricing

Five hospital associations, the association of hospital pharmacists, and three hospitals last night sued the U.S. Health and Human Services Department and HHS Secretary Alex Azar “to take action against” drug manufacturers “refusing to offer 340B discounts for covered drugs if a covered entity dispenses the drug through a contract pharmacy.”

The American Hospital Association (AHA), 340B Health, America’s Essential Hospitals, the Association of American Medical Colleges (AAMC), the Children’s Hospital Association (CHA), and the American Society of Health-System Pharmacists sued HHS and Azar together with Avera St. Mary’s Hospital in Pierre, S.D., Riverside Regional Medical Center in Newport News, Va., and St. Mary’s Medical Center in San Francisco, Calif.

The hospitals filed their complaint in federal district court in Northern California. (They concurrently filed a related legal memorandum.) Ryan White Clinics for 340B Access (RWC-340B) and the National Association of Community Health Centers (NACHC) also have separately sued HHS over the manufacturers’ actions. Their lawsuits both are in federal district court in Washington, D.C. The hospitals might have filed suit in a different federal district as a hedge against all three lawsuit being consolidated into one in federal district court in Washington. This way, if a judge rules in HHS’s favor in one lawsuit, it leaves open the possibility of judges’ ruling in covered entities’ favor in one or both of the other suits.

According to a news release issued last night, the hospital plaintiffs seek orders “that HHS require these drug companies to provide 340B discounts on the drugs dispensed at community-based pharmacies and issue refunds to hospitals that were refused discounts. It also asks for an order requiring HHS to refer the drug companies responsible for these violations to the HHS Office of Inspector General (OIG) to assess penalties the law requires.”

The plaintiffs say HHS’s failure to take action against the manufacturers violates the federal Administrative Procedure Act.

RWC-340B in October sued HHS for failing to enforce HIV/AIDS clinics’ right to buy covered outpatient drugs at 340B discounts via contract pharmacy arrangements. Drug manufacturers Eli Lilly and Co. and Sanofi last month asked to be named defendants in RWC-340B’s suit, saying HHS cannot adequately represent their interests.

NACHC in October also sued HHS over its inaction about manufacturers’ denials of 340B pricing on drugs shipped to contract pharmacies. Unlike the hospitals and HIV/AIDS clinics, however, it did not seek to force HHS to require the manufacturers to resume 340B pricing on contract pharmacy drugs.

Instead, NACHC sought an order requiring HHS to issue 340B program administrative dispute resolution (ADR) final regulations. HHS’ Health Resources and Services Administration (HRSA) released a 340B ADR final rule on Thursday.

RWC-340B, as part of its lawsuit against HHS, also sought an order requiring the department to publish 340B ADR final regulations. But it said that alone was an insufficient remedy, in part because “the ADR process will be lengthy.” It said the court could could cure the harms against HIV/AIDS clinics in the short term only by directing HHS to act immediately against the drug companies.

In statements Thursday about the 340B ADR final rule, AHA and 340B Health both said the rule on its own could not rectify the harm to covered entities of being denied 340B pricing on drugs shipped to contract pharmacies.

In response to questions from 340B Report, HRSA late yesterday declined to comment directly on AHA and 340B Health’s remarks about the ADR final rule’s inadequacy as a remedy for manufacturers’ pricing denials. HRSA also declined to answer whether it will require covered entities and their associations, first, to use the ADR process before pursuing claims in court against HHS over manufacturers’ pricing denials; and whether its promulgation of the ADR rule rendered RWC-340B and NACHC’s lawsuits against HHS moot.

HRSA instead gave us this statement:

This rule was required by statute. The provisions of the final rule include a process to resolve (1) claims by covered entities that they have been overcharged for covered outpatient drugs by manufacturers and (2) claims by manufacturers, after the manufacturer has conducted an audit of a covered entity as authorized by section 340B(a)(5)(C) of the Public Health Service Act, that a covered entity has violated the prohibition on diversion or duplicate discounts. 

HRSA will post the final rule on the 340B website. In the meantime, please refer to the Federal Register document for more information.

As more details become available regarding the execution of this rule, that information will be shared with stakeholders on the OPA website.

Correction

In an Oct. 10 breaking news alert, we reported incorrectly that HRSA, in the preamble to its 340B program administrative dispute resolution final rule, “rejected recommendations that manufacturers be required to first to audit covered entities before bringing claims against entities.” The opposite is true. HHS rejected recommendations that manufacturers not be required to first audit covered entities before bringing claims against entities.

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