PhRMA's lawsuit challenging the 340B administrative dispute resolution process is being heard in federal district court in Baltimore.

PhRMA Urges Court Again to Strike Down 340B Dispute Resolution Process

Regulations establishing a binding administrative dispute resolution (ADR) process for the 340B program were rushed into place last December to defeat lawsuits, are fatally flawed legally and constitutionally, and should be struck down, the main U.S. trade association for drug manufacturers told a federal judge late last month.

Pharmaceutical Research and Manufacturers of America’s July 26 brief was in response to the federal government’s June 11 filing accusing PhRMA of a “brazen strategy” to upend the entire 340B program, and asking the court to throw out the association’s lawsuit against the ADR final rule. PhRMA sued the U.S. Health and Human Services Department (HHS) and the U.S. Health Resources and Services Administration (HRSA) in January over the ADR final rule and HRSA’s requirements for manufacturer audits of 340B covered entities.

So far, PhRMA’s lawsuit has been one of the quieter theaters in the bruising war over 340B in the federal courts.

Last fall, a group of 340B health centers affiliated with Ryan White Clinics for 340B Access (RWC-340B), and the National Association of Community Health Centers (NACHC) on behalf of its members, separately sued HHS and HRSA to compel them to publish an 340B ADR final rule that Congress had instructed HHS to finalize by September 2010.

Almost immediately after the final rule took effect in January, RWC-340B and NACHC filed ADR petitions with HRSA over drug manufacturers denials of 340B pricing when covered entities use contract pharmacies. HHS has appointed nine voting and two ex officio non-voting members to the ADR Board, but it has not named three-member ADR panels to consider and rule on the RWC-340B and NACHC petitions. This is likely due to the government’s decision to take another route to challenge the drug manufacturers that have placed restrictions on 340B use in the contract pharmacy setting. In May, HRSA sent letters to the companies informing them that the agency has completed an investigation and determined that companies are directly violating the 340B statute and must reinstate the discounts.

Two of the drug manufacturers suing HRSA over its 340B contract pharmacy requirements, Eli Lilly and Sanofi, also are challenging the ADR file rule in the lawsuits. In March, a federal district judge granted Lilly’s motion for a preliminary injunction preventing HHS and HRSA from implementing or enforcing the ADR regulations against Lilly. The judge said Lilly was likely to prevail ultimately “in establishing that HHS failed to comply with the APA’s [Administrative Procedure Act’s] procedural requirements in promulgating the final ADR Rule.”

PhRMA’s lawsuit contends that the ADR rule is arbitrary and capricious in violation of the APA, that the 340B manufacturer audit guidelines that were incorporated into the ADR rule are contrary to law, and that the ADR rule violates the Appointments Clause of the U.S. Constitution.

It has asked the court to declare the ADR rule illegal and unconstitutional and the 340B manufacturer audit guidelines illegal, to permanently enjoin HHS and HRSA from implementing or enforcing the ADR Rule, and to vacate and set the rule aside.

The federal government’s next brief in the case is due Sept. 9, and PhRMA’s next brief on Oct. 12. Oral arguments will be held sometime after that. The plaintiffs and defendants in both the RWC-340B and NACHC dispute resolution lawsuits are scheduled to file their next joint status reports on Aug. 24.