A federal judge has denied a group of defendants’ motion to dismiss Gilead’s lawsuit against them alleging fraudulent 340B-related transactions of the company’s PrEP drugs.

Federal Judge Denies Fla. Healthcare Providers’ Bid to Throw Out Gilead’s Suit Alleging 340B Fraud

A federal district judge in Florida has denied a group of defendants’ motion to dismiss Gilead’s lawsuit against them alleging fraudulent 340B-related transactions on the company’s HIV pre-exposure prophylaxis drugs Truvada and Descovy.

U.S. District Judge Aileen Cannon of the Southern District of Florida announced her decision on Feb. 10.

In November 2020, Gilead sued two groups of Florida health care providers, pharmacies, and labs—including five sexually transmitted disease clinics with multiple locations that participate in the 340B program and two contract pharmacies—of “captur[ing] tens of millions of dollars in profits through fraudulent enrollments and reimbursement claims” on Truvada and Descovy.

“Defendants have made at least $43 million in profits from their schemes since February 2018,” Gilead alleged in its lawsuit. Some defendants have entered into consent final judgments and been dismissed from the lawsuit.

Cannon’s ruling this month pertains to just one subset of defendants. This group argued in part that the court lacked subject matter jurisdiction over several of Gilead’s claims. The defendants said that under the U.S. Health Resources and Services Administration’s (HRSA) 340B administrative dispute resolution (ADR) final rule, Gilead first should have audited them for 340B program compliance and next should have submitted relevant claims to the ADR review board.

Gilead pointed out that the ADR rule took effect on Jan. 13, 2021, several weeks after it filed its lawsuit. Applying the ADR rule to its claims would violate the presumption against retroactivity, Gilead said. The company also argued that the ADR rule was inapplicable because none of members of this group of defendants is a 340B covered entity and because the claims against them “allege violations of law wholly distinct from the 340B program.”

Cannon based her decision to deny the defendants’ motion to dismiss on the fact that the ADR rule was not in place when the lawsuit was filed.

She went on to say, though, that “it is an open question whether the ADR rule strips district courts of subject matter jurisdiction over claims of violations of the 340B requirements; the authorities on that point do not indicate a clear answer, although they suggest the answer is no.”

The statutory language that created the 340B ADR system “does not bear the hallmarks of a jurisdiction-stripping framework in the manner suggested by defendants.”

“This statutory language shows Congress’s intent to establish an agency adjudication process to resolve claims of violations of the duplicate discount and drug resale prohibitions by covered entities,” Cannon said. “But it does not—by its text—speak to displacing or limiting district courts of their authority to entertain such claims, at least not in the manner typically required to strip or reduce a court’s subject matter jurisdiction.”

“Even the regulations governing the 340B process do not themselves bespeak HHS’s exclusive jurisdiction over initial adjudication of 340B-type claims,” she said.

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