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AstraZeneca Wins Bid to Quash HHS’s Drug Discount Demand

Feb. 16, 2022, 11:35 PM

The Health and Human Services Department violated procedural rules in demanding that AstraZeneca Pharmaceuticals LP provide steeply-discounted medicines through a government program embroiled in litigation, a federal judge ruled.

The Wednesday decision is the latest turn in an ongoing saga between drugmakers and the Biden and Trump administrations over a discount program geared for low-income patients. The U.S. District Court for the District of Delaware vacated and sent back to the HHS a letter notifying AstraZeneca that it must resume discounts it had limited for covered providers that dispense drugs through for-profit pharmacies.

Judge Leonard P. Stark held that the letter ran afoul of the Administrative Procedure Act. He ordered that the parties decide how and whether the case should proceed.

AstraZeneca and other drugmakers in 2020 limited shipments of discounted products to off-site pharmacies. In May, the Biden administration sent letters calling on the companies to resume discounts. AstraZeneca urged the court to declare the letter unlawful.

Critics and drugmakers have claimed the arrangements between 340B providers and contract pharmacies are rife with abuse and have led to major financial losses. But the HHS argued that drugmakers need to honor the agreements, regardless of the number.

Stark said that “Congress did not clearly intend for drug manufacturers to be required to facilitate sales of covered drugs for dispensing by an unlimited number of contract pharmacies.”

The letters marked the HHS’ second attempt at enforcing its interpretation. the Trump administration had advanced the same position in the form of an HHS advisory opinion, which the court had previously concluded was “legally flawed.”

The Biden administration later withdrew the opinion, though legal experts noted the move wasn’t enough to ditch lawsuits over its position on 340B.

“Because the Violation Letter rests on essentially the same flawed statutory interpretation that the Court already rejected, the Violation Letter cannot stand,” Stark wrote.

More than a dozen drug companies have imposed similar limits on 340B discounts, including Amgen Inc., AbbVie Inc. and Bristol Myers Squibb.

The case is AstraZeneca v. Becerra, D. Del., No. 1:21-cv-00027, 2/16/22.

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editor responsible for this story: Alexis Kramer at akramer@bloomberglaw.com