Four insulin manufacturers conspired to deny 340B discounts on their products shipped to contract pharmacies after an effort to lobby the Trump administration failed, a lawsuit alleges.

Insulin Manufacturers Colluded on 340B Contract Pharmacy After Joint Lobbying Push Failed, Lawsuit Alleges

CORRECTION Thursday, Aug. 5, 2021, 8:15 p.m.—Earlier today, we misdescribed Novo Nordisk’s 340B contract pharmacy policy. Beginning on Jan. 1, 2021, Novo Nordisk stopped facilitating bill to/ship to distribution of 340B product to hospital contract pharmacies. We incorrectly said Novo Nordisk later amended its policy to allow 340B contract pharmacies within a 40-mile radius of a hospital. It was Novartis, not Novo Nordisk, that amended its 340B contract pharmacy policy, effective Nov. 16, 2020, to honor hospital contract pharmacy arrangements so long as the contract pharmacy is located within a 40-mile radius of its parent hospital.

UPDATE Thursday, Aug. 5, 2021, 8:15 p.m.—Sanofi late today asked us to update the statement it provided to us yesterday. We have done so. The company says it disagrees with Mosaic Health’s accusations and will vigorously defend itself.

Four insulin manufacturers conspired to cease 340B pricing on drugs shipped to contract pharmacies last year after the failure of a $7 million-plus joint lobbying push to limit 340B discounts for insulin and diabetes medicines, New York health center Mosaic Health alleges in an antitrust class action against the companies. 340B Report reported yesterday about the suit and Mosaic’s request that the court certify the case as a class action on behalf of all 340B entities nationwide with contract pharmacy arrangements that have issued prescriptions for the manufacturers’ products since Sept. 1, 2020.

The four companies—AstraZeneca, Eli Lilly, Novo Nordisk, and Sanofi—issued statements yesterday defending their 340B pricing policies.

Lilly’s was the strongest.

“This lawsuit is baseless and Lilly will vigorously defend itself against the claims,” it said.

Insulin Companies’ Fallback Plan

In a July 30 complaint filed in federal district court in Rochester, N.Y., Mosaic described AstraZeneca, Lilly, Novo Nordisk, and Sanofi’s allegedly coordinated 340B pricing actions as their fallback position after their main thrust—the effort to lobby the Trump administration—failed.

Through mid-summer 2020, the lawsuit says, the four manufacturers spent millions collectively lobbying the federal government to limit 340B drug discounts with respect to diabetes medicines. It says according to federal lobbying disclosure reports, during the second and third quarters of 2020 the four companies collectively spent upwards of $6.4 million on in-house lobbying and $1.1 million on external lobbyists to influence 340B policy.

The lawsuit claims the companies sought to

  • limit the level of hospital participation in 340B
  • limit which patients could qualify for 340B discounts
  • require that all discounts be passed through to patients at the point of sale
  • restrict the availability of contract pharmacy 340B discounts.

The July 30 court filing did not include drug company or lobbyist memos, talking points, email messages, or other hard evidence supporting these specific assertions. The plaintiffs could potentially get access to these communications if the federal judge moves forward on the case.

“Defendants used common lobbyists and appear to have communicated directly with each other about their lobbying campaign,” the lawsuit says. The companies “also engaged in high levels of communications through industry associations,” including Pharmaceutical Research and Manufacturers of America (PhRMA), a different passage in the lawsuit says.

“It is likely during that joint lobbying effort, defendants planned their restrictions on contract pharmacy 340B drug discounts as a fallback position if their lobbying efforts failed,” the lawsuit says.

Trump’s Executive Order

The lawsuit says the failure became evident on July 24, 2020, when President Trump and U.S. Health and Human Services (HHS) Secretary Alex Azar—the latter an ex-president of one of the defendants, Lilly USA—announced an executive order requiring HHS to issue regulations requiring federally funded health centers to pass along all of their 340B savings on insulin and injectable epinephrine to low-income uninsured patients.

“The executive order did little to accomplish any of defendants’ goals,” the lawsuit said, and they turned to focusing on “collusively eliminating or limiting contract pharmacy 340B drug discounts for their drugs,” especially for their rapid-acting and long-acting insulin products and non-insulin diabetes products. According to the lawsuit, these products account for about 80% percent of covered entities’ 340B savings on all Sanofi, Lilly, Novo Nordisk, and AstraZeneca covered outpatient drugs.

“Indeed, on July 24, 2020, the very same day that the executive order was issued,” AstraZeneca sent a letter to the U.S. Health Resources and Services Administration (HRSA) informing it that, effective Oct. 1, 2020, it would recognize only one contract pharmacy per covered entity for those lacking an in-house pharmacy, the lawsuit says.

Sanofi wrote to HRSA four days later, on July 28, to inform it that, also effective Oct. 1, 2020, covered entities would need to begin submitting 340B contract pharmacy claims level data to a company vendor to continue to be eligible for 340B bill to/ship to replenishment orders for Sanofi products dispensed through contract pharmacies.

On Aug. 19, Lilly informed HRSA that, effective Sept. 1, it would stop honoring requests for 340B pricing on all of its products shipped to 340B contract pharmacies, with an exception for entities lacking an in-house pharmacy. Lilly also said it would honor 340B contract pharmacy arrangement for certain insulin products if entities agreed to pass along all 340B savings on the products to patients.

The lawsuit acknowledges that Lilly in May informed HRSA that it was ceasing 340B pricing on shipments to contract pharmacies of a single product, Cialis. “But while the May 18 letter cited global concerns with contract pharmacies, it announced the decidedly narrower action of simply ceasing to offer discounts on Cialis,” the lawsuit says. It says it is significant that Lilly announced its broader restrictions, including those on its insulin products and non-insulin medicines, to HRSA in August “in coordination with AstraZeneca and Sanofi.”

Novo Nordisk informed HRSA about its 340B contract pharmacy restrictions on Dec. 1. They took effect Jan. 1. The company said it would no longer facilitate bill to/ship to 340B contract pharmacy arrangements for hospitals, with an exception for those lacking an in-house pharmacy. The company later amended its policy to allow 340B contract pharmacies within a 40-mile radius of a hospital.

“In Near Lockstep”

“Defendants announced their planned restrictions in near lockstep, between July 2020 and December 2020,” the lawsuit says. “Likewise, defendants imposed their restrictions in near lockstep, between September 2020 and January 2021.”

“The nature and timing of the parallel conduct described above, set within the context of this industry, is strongly suggestive of conspiracy, rather than of independent action,” it says.

“Defendants coordinated their restrictions in a manner that cannot adequately be attributed to either coincidence or conscious parallelism,” the lawsuit says.

It says AstraZeneca and Sanofi’s actions were particularly revealing.

“AstraZeneca was the first defendant to reveal its plans to restrict contract pharmacy 340B drug discounts,” the lawsuit says. “But it did not do so publicly. Rather, AstraZeneca informed its regulator, HRSA, that it would restrict contract pharmacy 340B drug discounts beginning on October 1, 2020. AstraZeneca provided that information to HRSA on July 24, 2020. AstraZeneca did not publish its plans at that time.”

“Yet, Sanofi, the second defendant to reveal its plans to restrict contract pharmacy 340B drug discounts, did so within three days of AstraZeneca’s non-public announcement,” the lawsuit continues. “Moreover, Sanofi revealed that it too would implement those restrictions beginning on October 1, 2020, the same date that AstraZeneca had communicated privately to HRSA.”

“The timing coordination between AstraZeneca and Sanofi cannot be attributed to Sanofi responding to AstraZeneca’s letter to HRSA revealing its plans because AstraZeneca did not make any public announcement in July about its plans,” the lawsuit says. “Nor can the coordination be attributed to coincidence. After at least a decade of offering contract pharmacy 340B drug discounts, the odds of two direct competitors—AstraZeneca and Sanofi—revealing novel restrictions, starting on the same day (October 1, 2020), just three days apart are near zero.”

According to the lawsuit, the four companies’ plan to boost their profits by coordinating to cease or limit 340B discounts when entities use contract pharmacies “worked only with buy-in from each of the other defendants.”

“Historically Unprecedented Change in 340B Pricing Practices”

“If any defendant had acted alone, it would have risked losing significant market share in the lucrative markets for diabetes treatments; and, over time, safety-net providers could have purchased drugs from that defendants’ competitors to access contract pharmacy 340B drug discounts,” the lawsuit says. “But, by acting together, defendants safeguarded themselves against competition in the lucrative diabetes medication markets. Defendants’ conspiracy has succeeded in raising prices, by eliminating contract pharmacy 340B drug discounts, while protecting their market position from competition from one another.”

The lawsuit notes that 99.6% of other drug companies that have signed 340B pharmaceutical pricing agreements with HHS “have continued to offer contract pharmacy 340B drug discounts without restrictions.”

“Defendants’ common attribute, as the very few drug companies restricting contract pharmacy 340B drug discounts, is their joint domination of the three key diabetes medication markets,” the lawsuit says. “As of July 2020, defendants controlled the entire market for each of those markets: (i) rapid-acting analog insulins; (ii) long-acting analog insulins, and (iii) incretin mimetics. They had no competition.”

“So, while nearly every pharmaceutical company in the country continued to offer contract pharmacy 340B drug discounts, defendants, competitors with one another primarily as to the lucrative diabetes medications described above, coordinated an historically unprecedented change in 340B pricing practices nearly simultaneously,” the lawsuit says.

Manufacturers’ Reactions

Lilly, AstraZeneca, Novo Nordisk, and Sanofi yesterday all defended their 340B contract pharmacy policies when asked about the lawsuit.

Lilly’s comment

We have offered to supply our penny priced insulins at the 340B price to any contract pharmacy that commits to passing the discount directly to the patient without limitation. Lilly has fully supported the 340B program since its inception in 1992 and continues to act in full compliance with the statute.

Novo Nordisk’s comment

We are aware of the lawsuit filed by Mosaic Health Inc. and disagree with the allegations. Novo Nordisk continues to support the 340B drug program, which serves as a critical safety net to increase access to outpatient drugs among uninsured and vulnerable patients. Under Novo Nordisk’s 340B policy, covered entities continue to be able to purchase the company’s covered outpatient drugs at the discounted 340B price for the benefit of their patients. However, the 340B program has been the subject of significant and well-documented abuses, resulting in program intermediaries such as contract pharmacies profiting at the expense of patients. As such, Novo Nordisk’s policy restricts when it will accept requests to transfer discounted outpatient drugs (or cause those drugs to be transferred) to commercial contract pharmacies. Grantee organizations, such as Community Health Centers and Federally Qualified Health Centers, among others, are exempt from the policy and can continue to purchase the company’s covered outpatient drugs at the discounted 340B price. Since this matter is the subject of pending litigation, we are not able to comment further.

Sanofi’s comment

We are aware of the lawsuit. We disagree with the allegations and will vigorously defend ourselves against the claims. We continue to support the 340B drug program and its core objective of increasing access to outpatient drugs for uninsured and vulnerable populations and we remain committed to strengthening this mission.

AstraZeneca’s comment

AstraZeneca remains strongly committed to the 340B Program and to ensuring that any patient prescribed an AstraZeneca product has access to that medicine. The Company’s approach to contract pharmacy arrangements fully complies with all operative requirements and continues to support the mission of the program to provide a healthcare safety net to help vulnerable patients affordably access medicines. AstraZeneca hopes the Administration is willing to work with us and the biopharmaceutical industry to implement patient-centered changes that ensure patients, not hospitals, pharmacies or other middlemen, benefit from manufacturer provided 340B discounts.