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The federal government asked an appeals court to affirm one part and vacate another of a lower court's opinion about the legality of Lilly's 340B contract pharmacy restrictions.

Feds Ask Appeals Court to Partially Reverse Ruling on Lilly’s 340B Contract Pharmacy Policy

A federal district judge was right to decide that drug manufacturer Lilly cannot tie strings to 340B pricing on its drugs, the U.S. Justice Department told a federal appeals court in Chicago on Friday. But, DOJ said, the judge was wrong to decide that the government’s letter to Lilly telling the company its conditions on 340B pricing are illegal was arbitrary and capricious.

DOJ asked the U.S. Seventh Circuit Court of Appeals on June 24 to uphold the lower court’s October 2021 opinion that the 340B statute does not let manufacturers erect barriers to 340B pricing when entities use contract pharmacies.

The lower court in the same ruling, however, vacated the government’s May 2021 enforcement letter to Lilly. It did so on the grounds that the letter did not explain the government’s change in position about its ability to punish manufacturers like Lilly that restrict entities’ contract pharmacy use. Seventeen drug makers have such policies.

DOJ told the Seventh Circuit Court it should reverse the part of U.S. Senior District Judge Sarah Evans Barker’s opinion that struck down and vacated the U.S. Health Resources and Services Administration’s (HRSA) letter to Lilly.

DOJ said Barker’s perception that HRSA changed its position about its 340B enforcement authority was wrong.

“HHS has consistently recognized that its [340B contract pharmacy] guidance is unenforceable and that any enforcement action must be grounded in violations of the statute itself,” DOJ said in its brief. “There is no doubt that HHS has statutory authority to enforce the requirements of the 340B statute. And that is precisely what the enforcement letter at issue here did.”

“HHS has consistently interpreted the statute as prohibiting drug manufacturers from creating extra-textual barriers to a covered entity’s ability to obtain drugs at the 340B price,” DOJ said. “The enforcement letter at issue here applied the agency’s longstanding view that manufacturers may not erect barriers that undermine covered entities’ access to the 340B price.”

In late May, Lilly told the Seventh Circuit Court that Barker’s decision that federal law requires drug manufacturers to deliver 340B purchased drugs to contract pharmacies conflicts with two other courts’ conclusions, “upsets the delicate statutory balance Congress struck, and raises serious constitutional problems.”

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