A federal judge in Delaware yesterday declined to add hospital groups as third parties to a drugmaker’s lawsuit challenging the federal government’s 340B program contract pharmacy enforcement mechanisms. But he left the door open to letting the groups participate as litigants in the future.
In an April 26 ruling from the bench, U.S. District Judge Leonard Stark said he would let the six groups—American Hospital Association (AHA), 340B Health, America’s Essential Hospitals, the Association of American Medical Colleges (AAMC), Children’s Hospital Association (CHA), and ASHP (American Society of Health-System Pharmacists)—file one or more friend of the court briefs in the case, and would let them “have a small amount of time” during a hearing, now set for June 10, “to argue their views, if they wish.”
The June hearing will be on drug manufacturer AstraZeneca and the government’s competing motions to have the case summarily decided in their favor. Astra Zeneca wants Stark to strike down the U.S. Health and Human Services (HHS) General Counsel’s December advisory opinion that drugmakers must offer 340B pricing on their products no matter how the drugs are dispensed. It also wants Stark to strike down HHS’s 340B administrative dispute resolution regulations. The hospital groups sought to intervene in AstraZeneca’s lawsuit against HHS to defend the 340B advisory opinion, but not the 340B ADR rules.
“The bottom line is, I’m willing to hear the [hospital groups] on the legal issues that are in front of me,” Stark said in denying the groups’ motion to be added to the case as intervenors. He said they want to make sure that their interpretations of the 340B statute and of the HHS advisory opinion on 340B contract pharmacy are “fully advocated for.”
Stark said he could “let them do that” by filing an amicus brief, “and I will find that helpful, I’m confident, in my decision making process, as well.”
He referred later to “the helpful briefing I will get from the amicus briefing from the hospital associations.”
However, Stark said, the six groups did not satisfy requirements established under precedent in the Third U.S. Judicial Circuit, which includes Delaware, to be recognized as third parties in the lawsuit. He also said he saw no good reason to use his broad discretion to grant them third-party status.
Stark noted that he was denying the hospital groups’ motion to be named third parties “without prejudice to the hospital associations moving again at a later stage of these proceedings if they think the parties or the court have done something at that point that would materially alter” the legal analysis that led him to deny their motion.
“So, for example, if things were to play out” that AstraZeneca prevails on its position that it does not need to make its drugs available at 340B price to contract pharmacies, “and the government decides it does not need to appeal, I am of course not saying I would grant a motion to intervene, but I am saying I would hear that motion.”
William Schultz, an attorney for the hospital groups, emphasized during yesterday’s hour-long hearing the risks to his clients if AstraZeneca wins its case and the government walks away from the ruling. Schultz served as HHS General Counsel in the Obama administration.
“If HHS loses, the decision of this court could bind the government in any future proceeding with AstraZeneca, and the hospitals could be denied the 340B discounts,” Schultz said. “It could, for example, decide what the law is in an HHS administrative dispute resolution proceeding….It could also impact HHS’s ability to institute civil monetary proceedings to bring AstraZeneca into compliance with what it believes is the law.”
“We submit that HHS will not adequately represent the hospitals’ interest,” Schultz said. “The hospitals and HHS do not see eye to eye on the program,” he said, and have been “in a contentious dispute” since last June, when Eli Lilly became the first company to deny 340B pricing on drugs dispensed by contract pharmacies. The hospital groups have urged HHS “to inform these companies that these policies are illegal….But HHS refused to do anything,” Schultz said.
Schultz also noted that the hospital associations have been engaged in litigation with HHS “for years” over significant reductions in Medicare Part B drug reimbursement for hospitals’ 340B-purchased drugs. “It’s not part of this case, but all this shows that we don’t see eye to eye on everything, to say the least.”
“We can’t predict and have no control over what HHS will do in the future and how it will litigate this case,” Schultz said. “We don’t have any control over whether it will stand by the general counsel’s opinion, and we also don’t have any control over whether it will appeal the case if it loses.”
“Our participating is the only way we can protect the hospitals’ interest,” he said.
Lawyers for HHS and AstraZeneca found themselves mostly agreeing that the hospitals groups had no right under law to be named intervenors in the lawsuit. The two sides also agreed that it would be wrong for Stark to use his discretion to let them participate.
AstraZeneca filed a motion for summary judgment in its favor on April 13. The federal government will file its own motion for summary judgement next week Tuesday, May 4. It recently filed nearly identical motions for summary judgment in 340B contract pharmacy cases brought against it by drug manufacturers Lilly and Sanofi.
AstraZeneca then will file papers opposing the government’s motion on Friday, May 14. The government will respond on Monday, May 24. Stark is tentatively scheduled to hear a final round of oral arguments on Thursday, June 10, but said during the hearing that he would like to move the date up to June 7 or 8.
