On May 17, the federal government told six drug companies that their 340B contract pharmacy policies were illegal, and it asked them to provide updates by June 1 on their plans to comply with the law.
At least three of the six sent back defiant responses, and five of the six are still suing the government over its conclusion that their restrictions on 340B pricing in the contract pharmacy setting have resulted in illegal overcharges and must stop immediately.
Manufacturers Eli Lilly and Novartis released their reply letters to the U.S. Health Resources and Services Administration (HRSA) in connection with their lawsuits against HRSA and the U.S. Health and Human Services Department (HHS). Sanofi provided us with a copy of its response. AstraZeneca told a federal district judge that HRSA extended its deadline to respond to June 10, and it told us it “will be in touch when we have more to share.” Novo Nordisk and United Therapeutics did not respond to requests for copies of their replies to HRSA.
In late May, U.S. District Judge Sarah Evans Barker gave Lilly a 10-day extension, from June 1 to June 10, to respond to HRSA’s request in its May 17 violation letter that Lilly “provide an update on its plan to restart selling, without restriction, covered outpatient drugs at the 340B price to covered entities that dispense medications through contract pharmacy arrangements.” Barker rebuked the government for giving Lilly and the other five companies a reporting deadline immediately after the Memorial Day holiday.
Lilly’s letter to HRSA is devoted mainly to repeating its legal case against HHS and HRSA’s conclusions that the company is breaking the law.
Lilly said HRSA’s determination that the company is not in compliance with the 340B statute “is both inconsistent with the agency’s prior conduct and public statements and wrong on the merits. Nor is there any lawful or reasonable basis for your threat to impose civil monetary penalties if Lilly does not accede to the agency’s latest change of position.”
Lilly urged HRSA to rescind its May 17 determination that the company is violating the 340B statute, withdraw its threat to punish Lilly with civil monetary penalties, and await Judge Barker’s final decision.
“At present, it is Lilly’s plan to await and abide by the courts’ final resolution of the merits of the question presented in the instant litigation, and trusts that the agency will, too,” Lilly said. “In the event the courts find that manufacturers must honor an unlimited number of contract pharmacy arrangements, Lilly will work to establish a mechanism that ensures those arrangements are agency relationships where the covered entity actually (1) makes the purchase in advance of the 340B product being dispensed, (2) takes and maintains title, and (3) assumes responsibility for establishing the price, not delegating that to the contract pharmacy.”
Novartis responded on May 27 to HRSA’s June 1 deadline for the company to describe how it planned to begin obeying the law, by giving HRSA a May 31 deadline to “withdraw its threat of enforcement.”
When HRSA failed to meet Novartis’ deadline to withdraw its May 17 letter finding Novartis in violation of the 340B statute, Novartis sued HRSA.
Novartis told HRSA that its May 17 violation letter “appears to be based on a mistaken understanding of Novartis’s policy.” It told HRSA it “honors all grantee covered entity contract pharmacy arrangements, as well as all hospital covered entity contract pharmacy arrangements… within a 40-mile radius of the parent hospital.”
“Novartis is not in violation of the 340B statute, and no penalties or remedies of any sort are warranted based on the facts presented here,” the company said. “That is particularly true with respect to the threatened assertion of civil monetary penalties (CMPs) as spelled out in your letter. Even putting aside the lack of a violation of the statute or other unlawful act, CMPs would be neither appropriate nor legally available in the present case.” The company said it “has not ‘overcharged’ any covered entities, let alone done so in a manner that is knowing and intentional.”
“Novartis is confident that its contract pharmacy policy fully complies with all applicable laws and regulations,” the company said. “Moreover, its policy is fully consistent with the main goal of the 340B program—to serve vulnerable patients within hospital covered entities’ local communities.”
Sanofi told HRSA in a June 1 letter that it “objects to HRSA’s conclusion that its integrity initiative violates Section 340B and urges HRSA in the strongest possible terms not to take any further enforcement action—particularly while the litigation involving Sanofi’s integrity initiative remains pending.”
“As we have explained, Sanofi’s integrity initiative is fully consistent with Section 340B, and HRSA’s contrary determination is arbitrary and capricious,” the manufacturer said. “Any order imposing CMPs would be baseless, inappropriate, unconstitutional, and unjustified in light of the unique features of Sanofi’s integrity initiative. Sanofi has been—and remains—open to meeting with HRSA to explain why its unique integrity initiative fully complies with Section 340B and why CMPs would be inappropriate.”
Sanofi said if HRSA’s position is ultimately upheld in court, the company “will of course comply with its obligations under Section 340B as finally adjudicated at the conclusion of the pending litigation. In the meantime, HRSA should not penalize Sanofi for asking the court to clarify the scope of its legal obligations.”