Novartis wordmark on a building
Drugmaker Novartis is offering refunds to 340B covered entities on certain purchases of two radiopharmaceuticals.

Novartis to Appeals Court: Our New 340B Contract Pharmacy Policy Doesn’t Affect Our Case Before You

Drug maker Novartis told a federal appeals court in Washington, D.C. Tuesday its revised 340B contract pharmacy policy “does not impact the legal arguments at issue” in its 340B contract pharmacy case awaiting the court’s decision.

If the court disagrees, it could set back resolution of the case for months.

The federal government, which says Novartis is breaking the law and is appealing the same lower court ruling as the company but on other grounds, had not filed a response to Novartis’ letter as of this morning.

Novartis tightened its policy significantly on Monday. Effective May 3, it will let hospitals without an in-house pharmacy contract with just one outside pharmacy to dispense 340B-purchased Novartis drugs. Under its existing policy, in place since November 2020, a hospital can direct Novartis to ship 340B-purchased drugs to multiple contract pharmacies (1) only if the hospital uploads all 340B claims data originating from its contract pharmacies to drug industry contractor 340B ESP and (2) only for pharmacies within 40 miles of the parent hospital’s location.

Non-hospital 340B covered entities are and will continue to be exempt from the company’s conditions.

Background

The U.S. Health Resources and Services Administration told Novartis in May 2021 its policy was illegal. It said Novartis had to withdraw the policy and give hospitals refunds for overcharges or it would face civil monetary penalties.

Novartis sued. A federal district judge ruled in November 2021 that HRSA was wrong to tell Novartis (and another company, United Therapeutics) that the 340B statute bars manufacturers from imposing any conditions on 340B sales. But she declined to declare Novartis and United Therapeutics’ specific policies legal.

She said although the 340B statute does not stop manufacturers from attaching any conditions on offers of 340B sales to covered entities, it does not permit all conditions. Any future federal enforcement action against Novartis and United Therapeutics “must rest on a new statutory provision, a new legislative rule, or a well-developed legal theory that Section 340B precludes the specific conditions at issue here,” the judge said.

The federal government, Novartis, and United Therapeutics all appealed to the U.S. Court of Appeals for the District of Columbia Circuit. It heard arguments in October 2022 and is expected to rule at any time.

Two other federal appeals courts have heard companion cases. In January, one of them, the U.S. Third Circuit Court of Appeals in Philadelphia, held that manufacturers may impose limits on deliveries of 340B drugs. It pointed out, though, that if a manufacturer banned all use of contract pharmacies, an entity without an in-house pharmacy might be unable to access 340B pricing on the manufacturer’s products. The other appeals court, the U.S. Seventh Circuit Court of Appeals in Chicago, is expected to rule in its contract pharmacy case at any time.

The government has until April 17 to decide whether it will ask for a rehearing before all 14 judges on the Third Circuit Court.

Novartis’ Letter to Court

Novartis was the sixth manufacturer to tighten its conditions on 340B pricing since the Third Circuit Court ruled. Others are expected to follow their lead.

In its April 4 letter to the D.C. Circuit Court, Novartis said it changes to its contract pharmacy policy “mirror in material respect the policies of the manufacturers” in the case that the Third Circuit Court decided—AstraZeneca, Novo Nordisk, and Sanofi. Novartis said its new policy also mirrors United Therapeutics’ policy. “Because the government’s consistent position across this and the other appeals on the same issue is that no restrictions on contract pharmacy deliveries are permissible under the statute, Novartis’s revised policy does not impact the legal arguments at issue in this appeal,” Novartis told the court.