DOJ Slams Lilly’s Arguments for Derailing 340B Dispute Resolution

The U.S. Justice Department (DOJ) on Tuesday asked a federal district judge in Indianapolis, in a strongly worded filing, to deny drug manufacturer Eli Lilly’s motion in late January to block the 340B program’s new administrative dispute resolution (ADR) process.

On Jan. 12, Lilly and fellow manufacturers AstraZeneca and Sanofi filed separate lawsuits to block federal sanctions over their decisions to stop or impose conditions on 340B discounts on drugs dispensed by contract pharmacies. Manufacturer Novo Nordisk sued separately three days later. Lilly, AstraZeneca, and Sanofi filed suit the day before health care providers could begin filing petitions for redress over denials of 340B pricing on contract pharmacy drugs with the new 340B ADR system.

Lilly initially asked the court to enjoin the U.S. Health and Human Services Department (HHS) from implementing and/or enforcing a Dec. 30 advisory opinion. The opinion said the 340B statute requires manufacturers to offer their drugs at or below the 340B ceiling when covered entities use contract pharmacies. Lilly also asked Judge Sarah Evans Barker to declare “that it would be entirely lawful for Lilly not to offer 340B price discounts to contract pharmacies.”

On Jan. 25, Lilly asked Evans Barker also to enjoin HHS from implementing and enforcing the department’s Dec. 14 final rule establishing the ADR system. Lilly told the judge that, if she failed to grant the company’s motion for a preliminary injunction, Lilly would be “forced to expend considerable amounts of time and money litigating” numerous complaints lodged against it under HHS’s “unconstitutional ADR process, against the backdrop of” the HHS general counsel’s “unlawful decision that manufacturers must offer 340B discounts to for-profit contract pharmacies (lest they be exposed to crippling penalties), and in the shadow of the threat of binding and self-executing judgments for money damages and equitable relief.”

The federal government responded forcefully on Feb. 16 to Lilly’s motion for an injunction against the ADR process.

“This case is part of a brazen strategy by a cohort of large, highly profitable pharmaceutical companies—led by plaintiff Eli Lilly—unilaterally to upend the decades-old, settled operation of a statutory program that provides discounted medications to safety-net healthcare providers and their uninsured and underinsured patients,” the DOJ’s opening sentence said.

“Late in 2020 Lilly and its peers, clearly dissatisfied with the scope of the 340B program, unilaterally imposed onerous and non-statutory restrictions on providers’ access to 340B discounted drugs,” DOJ continued. “Lilly and other manufacturers’ abruptly announced changes—impacting healthcare entities serving the country’s most vulnerable patients, in the midst of a global pandemic—have upended the settled operation of the 340B program” and “spawned a raft of litigation against” HHS.

DOJ said “Lilly’s ultimate goal in this suit is manifestly clear.”

“It seeks to have this court sanction Lilly’s rewrite of its statutory obligations in a way that would drastically restrict many providers’ access to discounted drugs (and, in so doing, boost Lilly’s profits).” The company “seeks to advance that goal,” DOJ continued, “by blocking implementation of a new rulemaking that establishes a straightforward, statutorily mandated administrative dispute-resolution mechanism Congress devised to resolve disputes over 340B program violations.”

“In other words, Lilly seeks to head off resolution by HHS of the legality of its recent changes by asking this court to enjoin the agency’s newly available adjudication system—a system established by statute and modeled on numerous other administrative bodies,” DOJ said. “There is no cause for this court to do so.”

DOJ said Lilly’s arguments that the ADR process is unconstitutional “fundamentally misrepresent the [ADR] rule and the powers it grants to [ADR] board members.” DOJ also said the rule “fully complies with both notice-and-comment and substantive APA [Administrative Procedure Act] requirements.”

“Lilly faces no irreparable harm in being ‘subjected to’ the dispute-resolution mechanism Congress mandated, and cannot overcome the fact that the public interest firmly lies in allowing HHS to resolve, in the first instance, whether Lilly’s contract-pharmacy restrictions are lawful,” DOJ concluded.