A group of Texas hospitals urged a federal court to grant their request for a summary judgement—or at minimum preliminary relief—in a case challenging an HHS rule.

Court Hearing Today on Hospitals’ 340B Contract Pharmacy Suit Against HHS

A federal district judge in Oakland, Calif., is scheduled to hold a hearing this afternoon on the U.S. Health and Human Services (HHS) Department’s motion to dismiss a lawsuit against it by 340B hospitals over HHS’s enforcement of its 340B contract pharmacy requirements for drug companies.

On Jan. 11, nine days before the change in presidential administrations, the U.S. Justice Department (DOJ) filed a motion on then-HHS Secretary Alex Azar’s behalf to dismiss the suit filed against him and HHS in December by five hospital associations, the association of hospital pharmacists, and three hospitals.

The hospital plaintiffs asked the court to order HHS to require six drug companies—Eli Lilly, Sanofi, AstraZeneca, Novartis, United Therapeutics, and Novo Nordisk—to provide 340B discounts on drugs dispensed by contract pharmacies, to issue refunds to hospitals that were refused discounts, and to impose civil monetary penalties against the companies.

DOJ last month, while Donald Trump was still president, told U.S. District Judge Yvonne Gonzalez Rogers that the new 340B administrative dispute resolution (ADR) system—which began accepting claims on Jan. 13—should handle the matter, not the federal court system. DOJ cited other grounds for dismissal, including that there hasn’t been final agency action for the court to review.

Proceedings before the ADR panel, however, were frozen on Jan. 21 when the new Biden administration withdrew Azar’s Jan. 20 public notice of his appointment of six voting and two ex-officio non-voting members to the ADR board. Then, on Jan. 25, Pharmaceutical Research and Manufacturers of America (PhRMA) sued in federal district court in Maryland to strike down the federal final rule that established the ADR process.

The hospital plaintiffs on Jan. 25 filed their response to DOJ’s motion to dismiss. They said a 2011 U.S. Supreme Court decision did not deprive them of the right to bring claims against HHS under the Administrative Procedure Act. The hospitals also told the court that the U.S. Health Resources and Services Administration’s (HRSA) July 8, 2020 statement to hospital group 340B Health that it lacks authority to require the manufacturers to offer 340B discounts on drug dispensed by contract pharmacies, because its 2010 340B contract pharmacy guidance is not legally enforceable, “is a reviewable, final agency action.”

The hospitals plaintiffs said the 340B statute does not require them to seek resolution of their claims through the new ADR process, and that the relief they seek does not interfere with HHS’s enforcement discretion. Finally, the hospital plaintiffs argued that, even if the court agrees with HHS that there has not been a final agency action, it should rule instead that HHS’s failure to address the manufacturers’ refusal to provide 340B discounts on contract pharmacy drugs is an agency action unlawfully withheld or unreasonably delayed.

DOJ, under Biden administration management, pointed out in a Feb. 2 filing in the case that in community health centers’ and HIV/AIDS clinics’ separate lawsuits against HHS over the same drug manufacturers’ denials of 340B pricing on drugs dispensed by contract pharmacies, HHS and the covered entities jointly agreed to stay proceedings to allow petitions filed against the manufacturers to run their course.

“While other covered entities already have filed and continue to pursue their claims for violations of the 340B program before the agency, the covered entities here doggedly (and inexplicably) insist on instead pursuing their verboten suit for private 340B enforcement in this court,” DOJ said.  The hospital groups have argued that the ADR process is insufficient to rectify the harm to covered entities and that the undertaking will take too long.