Sanofi, Novartis Split Courts on HHS Drug Discount Enforcement

Two federal courts handed down diverging rulings over the government’s ability to force pharmaceutical giants to resume previously-limited drug discounts, with one backing the HHS and the other saying it was out of line.

The rulings, in cases brought by Novartis Pharmaceuticals Corp., Sanofi-Aventis U.S. LLC and others, throw additional wedges into a swirl of litigation surrounding the 340B program, which assists low-income Americans by requiring drugmakers to offer products to certain health-care entities at discounted prices.

The Health and Human Services Department “lacks the authority” to force drugmakers to resume offering the discounts absent “a new statutory provision, a new legislative rule, or a well-developed legal theory,” the U.S. District Court for the District of Columbia said Nov. 5 in Novartis and United Therapeutics Corp.‘s litigation.

But Sanofi and Novo Nordisk Inc. faced a different fate at the U.S. District Court for the District of New Jersey, where Chief District Judge Freda Wolfson Nov. 5 upheld the HHS’ assessment that drugmakers can’t impose discount restrictions.

The pharmaceutical companies “may not unilaterally create and establish policies—whatever the underlying rationale—wherein they dictate how many contract pharmacies a covered entity may designate to receive delivery of covered drugs,” the New Jersey court said.

The drugmakers are challenging letters the HHS sent in May threatening penalties if they don’t lift limits on discounts provided to pharmacies contracting with health providers covered under the 340B program.

“We believe the ruling validates our view of the 340B statute and that our contract pharmacy policy is fully consistent with the statutory requirements governing the program,” Novartis said in a statement.

Sanofi and United Therapeutics didn’t immediately respond to requests for comment. Novo Nordisk declined to comment on pending litigation. HHS’ Health Resources and Services Administration, which oversees 340B matters, declined to comment.

Discount Law

Drugmakers in 2020 limited discounts to off-site contract pharmacies dispensing medications for covered entities. Late that year, the HHS issued an advisory opinion going against such practices. The agency has since withdrawn the opinion to fend off litigation but has individually pressed drugmakers to resume discounts through a series of letters that threatened penalties.

In the D.C. decision, Judge Dabney Friedrich set aside the HHS’ letters to Novartis and United Therapeutics. The “plain language, purpose, and structure” of the 340B statute doesn’t “prohibit the manufacturers from imposing any conditions on their offers of 340B-priced drugs to covered entities,” Friedrich wrote.

Friedrich, however, stopped short of granting the drugmakers’ requests to “declare that their policies are permissible under Section 340B” and declined to offer injunctive relief.

The HHS’ letters fared better in the New Jersey court.

Wolfson upheld the agency’s determination that Sanofi and Novo Nordisk must stop their policies of restricting offers to covered entities. However, she vacated and remanded to HHS part of the letter determining the drugmakers “owe credits or refunds to covered entities” and face monetary penalties “to the extent that such determinations may depend on the number of permissible contract pharmacy arrangements under the 340B statute.”

The HHS previously came under fire over its enforcement letter in the U.S. District Court for the Southern District of Indiana. In a case brought by Eli Lilly & Co., the court vacated HHS’ letter to the company and sent it back to the agency for further consideration.

The cases are Sanofi-Aventis U.S., LLC v. Dep’t of Health & Human Servs., D.N.J., No. 3:21-cv-00634, 11/5/21; Novartis Pharms. Corp. v. Espinosa, D.D.C., No. 21-cv-01479, 11/5/21.