DOJ Opposes Sanofi’s Move to Head Off 340B Dispute Resolution in Contract Pharmacy Battle

The U.S. Justice Department (DOJ) has slammed a second drug manufacturer’s motion before a federal court to block implementation of the 340B program’s new administrative dispute resolution (ADR) process.

First, on Feb. 16 in a federal district court in Indiana, DOJ forcefully opposed Eli Lilly’s motion for an injunction against the ADR process. Then, nine days later, in federal district court in New Jersey, DOJ likewise forcefully opposed Sanofi’s Feb. 2 motion challenging the 340B ADR rule.

Repeating almost word for word what it told the court in Indiana in the Lilly lawsuit, DOJ last Thursday in the Sanofi case told the court in New Jersey, “This case is part of a brazen strategy by a cohort of large, highly profitable pharmaceutical companies—through concerted but unilateral actions—to upend the decades-old, settled operation of a federal program that provides discounted medications to safety-net healthcare providers and their uninsured and underinsured patients.”

“Sanofi’s ultimate goal in this suit is manifestly clear in its complaint: It seeks to have this court sanction Sanofi’s rewrite of its statutory obligations in a way that would drastically restrict many providers’ access to 340B-discounted drugs (and, in so doing, boost Sanofi’s profits),” DOJ continued. “In this emergency motion, however, Sanofi seeks to advance that goal by blocking implementation of a new rule that establishes a straightforward, statutorily mandated administrative dispute-resolution mechanism Congress devised to resolve disputes over 340B program violations.”

“In other words, Sanofi seeks to head off resolution by HHS [the U.S. Health and Human Services Department] of the legality of its recent changes by asking this court to enjoin the agency’s recently implemented adjudication system—a system mandated by statute and modeled on numerous other administrative bodies,” DOJ said. “There is no cause for this court to do so.”

Sanofi initially sued the government on Jan. 12, asking the court to set aside HHS’s Dec. 30 advisory opinion that the 340B statute requires drug makers to offer 340B pricing on drugs dispensed by contract pharmacies. About two weeks later, it filed a motion for a preliminary injunction to stop HHS from implementing the 340B ADR rule.

Sanofi is challenging the 340B ADR rule on constitutional grounds. First, it argues that ADR panelists’ powers, discretion, and protections from removal are so broad that they should be appointed by the President with the Senate’s advice and consent. Second, it argues that the Constitution reserves the power to adjudicate private disputes over manufacturers’ common-law rights, and to award money damages and equitable relief, to the courts. Sanofi said its request for an injunction against the ADR process should be granted because it will suffer irreparable injuries. “No matter what damages Sanofi incurs in defending itself before the ADR panel or complying with the ADR panel’s orders—all under a cloud of constitutional doubt—it cannot recover a dime from the government,” it said.

DOJ countered that ADR panelists “are supervised by, and can be removed at will by, the HHS Secretary, and thus constitute inferior officers.” It said Sanofi’s argument that courts, not the ADR system, should resolve 340B-related disputes “rests on false premises regarding the ADR Board’s powers and the claims it may hear.” Finally, it said, “Sanofi faces no irreparable harm in ‘being haled before’ the dispute-resolution mechanism Congress envisioned.” Any party dissatisfied with an ADR panel’s decisions can seek judicial review, it pointed out.

“The public interest firmly lies in allowing the agency charged with oversight of the 340B program to resolve, in the first instance, whether the recent manufacturer restrictions are lawful, thereby providing clarity for both covered entities and drug makers,” DOJ said.

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