The federal government has asked a judge to dismiss PhRMA's legal challenge to the 340B administrative dispute resolution final rule and guidelines governing drug manufacturer audits of 340B covered entities.

DOJ Asks Judge to Toss PhRMA Suit Against 340B Dispute Resolution System and Audit Guidelines

The U.S. Justice Department (DOJ) has submitted a blistering motion asking that a lawsuit filed by Pharmaceutical Research and Manufacturers of America (PhRMA) to strike down the new 340B program administrative dispute resolution (ADR) process be tossed out of court.

Filed on June 11, the motion accused PhRMA of a “brazen strategy” to upend the entire 340B program. “PhRMA’s ultimate goal in this suit is manifestly clear in its complaint: It seeks to interfere with HHS’s enforcement of the 340B statute against its members,” DOJ attorneys declared.

PhRMA filed suit on Jan. 22 in federal court in Maryland against the U.S. Health and Human Services Department (HHS) and the Health Resources Services Administration (HRSA), which oversees the 340B program. It demands that not only that the ADR mechanism be eliminated, but that 1996 guidelines drug manufacturers must follow when auditing a covered entity be quashed.

PhRMA argued in its litigation that the guidelines regarding audits are burdensome and the establishment of the ADR was arbitrary and capricious. It sued just days after the ADR final rule took effect.

DOJ argues that PhRMA’s lawsuit lacked merit and should be dismissed.

It said the 340B statute “unambiguously” vested HHS with authority to issue guidelines for manufacturer audits of covered entities.

“Congress never intended to provide for free-ranging inquires by well-resourced and highly profitable manufacturers into the business of covered entities, who provide invaluable services to vulnerable populations and are often operating on tight margins,” DOJ said.

DOJ also rejected PhRMA’s contention that the requirement that it use independent accountants to audit covered entities was burdensome.

“That PhRMA even seriously contests the need for independent accountants to conduct an audit underscores PhRMA’s real concern—that independent auditors without a financial stake in the results of the audit may not uncover nonexistent wrongdoing on the part of covered entities,” the government said.

“In light of the statute’s text, context, and the Secretary’s reasonable explanation of the need for the audit guidelines, PhRMA cannot establish that the guidelines are contrary to law, and the claim fails as a matter of law,” DOJ said.

Regarding PhRMA’s claim that the ADR final rule was arbitrary and capricious, DOJ said the rule was mandated by Congress and lawfully established. It said the rule was “substantively compliant” with the Administrative Procedure Act. DOJ rejected PhRMA’s claims that HHS illegally ignored comments and petitions asking the department to revise HRSA’s manufacturer audit guidelines and 340B patient definition guidelines.

“The ADR Rule is the culmination of a congressionally mandated rulemaking for the development of a 340B dispute-resolution mechanism,” DOJ said. “In meeting this mandate, the Secretary was not required to propose an omnibus rule to address separate matters or to solve every potential problem brought to his attention.”

DOJ also rejected PhRMA’s argument that appointees to the ADR board are “principal officers” of the government requiring appointment by the President and confirmation by the U.S. Senate. It said ADR board appointees are “inferior officers” because they are supervised by the HHS Secretary, a Senate-confirmed officer who has the power to remove them from their positions.

It is unclear from the briefing schedule in the lawsuit when PhRMA will file its response to DOJ’s motion either to dismiss the case or decide it in the government’s favor.

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