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Sanofi, Eli Lilly Pile on Challenges to HHS’s Drug Discount Push

Jan. 14, 2021, 10:30 AM

Lawsuits are piling up against an HHS advisory opinion that drugmakers must provide steep discounts to pharmacies in contract with low-income health providers.

Eli Lilly and Co., Sanofi-Aventis U.S. LLC, and AstraZeneca Pharmaceuticals LP are asking federal courts to strike down an opinion that calls on drug manufacturers to give contract pharmacies the same discounts they provide to health institutions under the 340B drug pricing program.

The opinion, by Department of Health and Human Services General Counsel Robert Charrow, isn’t legally binding. But companies allege it’s unlawful and puts them on the hook for honoring a practice they say falls beyond the scope of the program. They also fear that a newly established alternative dispute resolution board for 340B spats will rely on the opinion when making its decisions.

Because the ADR panel will consist of HHS representatives, it “will treat the Advisory Opinion as binding in any ADR proceeding, almost certainly find that Sanofi’s integrity initiative violates Section 340B as interpreted by HHS, and potentially impose crippling sanctions,” Sanofi said in a lawsuit filed with the U.S. District Court for the District of New Jersey.

The legal challenges fit into a broader battle waged over the reach of the federal 340B program. Drug companies in recent months have reduced the number of pharmacies allowed access to drug discounts to narrow a program they call overgrown and fraught with abuse.

Drugmakers say their actions are meant, in part, to cut back on giving discounts for the same drug twice. But health centers say that if drugmakers continue to remove pharmacies from their discount list, the financial loss will be disastrous to the facilities and patients that depend on them.

Other major drug companies are considering bringing their own lawsuits against HHS over the advisory opinion, an individual familiar with the matter said.

An HHS spokesperson said the agency doesn’t comment on pending litigation.

Scaling Back

Covered entities “had long expected drug manufacturers to take aggressive action to limit the scope of the 340B program,” said Emily Cook, a McDermott Will & Emery LLP partner who advises health-care providers. The lawsuits are “consistent with what we’ve seen from covered drug manufacturers historically.”

“This is just another opportunity for them to voice their objection to the 340B program as a whole,” Cook said.

AstraZeneca argues “the widespread proliferation” of arrangements with contract pharmacies has “transformed the 340B program from one intended to assist vulnerable patients into a multi-billion-dollar arbitrage scheme that benefits national for-profit pharmacy chains and other for-profit intermediaries,”according to its complaint filed in the U.S. District Court for the District of Delaware.

Drug companies believe that the law is on their side.

Nothing in the 340B “statute allows, let alone mandates, the use of contract pharmacies or that manufacturers respect an unlimited number of covered entity—contract pharmacy relationships. In fact, the opposite is true,” Eli Lilly said in its own complaint filed in the U.S. District Court for the Southern District of Indiana.

The Charrow opinion forces the company “to forego billions of dollars in revenue generated by its participation in the 340B Program” in order to get coverage and reimbursement from the government, Eli Lilly added.

Meanwhile, health centers have taken action to stop drug companies from scaling back discounts.

A group of HIV-AIDS clinics sued the HHS to force Eli Lilly, AstraZeneca, and Novartis Pharmaceuticals to refund overpayments of certain drugs, arguing that the companies’ practices put vulnerable low-income patients at risk.

The National Association of Community Health Centers, in a separate lawsuit in October, sued the HHS for failing to implement a mechanism to resolve discount disputes. The HHS released a final rule Dec. 10 to create such a mechanism, which was scheduled to take effect Wednesday.

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

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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