Lawsuits Challenge 340B Drug Pricing Program: Eli Lilly and J&J vs. HRSA

Eli Lilly and Johnson & Johnson (J&J) have filed lawsuits against the Health Resources and Services Administration (HRSA) regarding their proposed rebate models for the 340B Drug Pricing Program. This dispute centers on how pharmaceutical manufacturers, including Eli Lilly and J&J, interact with HRSA under the program. Wat follows is an overview of the ongoing 340B Drug Pricing Lawsuit.

Key Points of the Dispute

Johnson & Johnson (J&J) Lawsuit

Johnson & Johnson proposed a rebate model for its drugs Stelara and Xarelto, moving from point-of-sale discounts to post-dispensing rebates. This model would require 340B covered entities to purchase the drugs at commercial prices and then submit claims for rebates.
HRSA rejected this proposal, stating it violated J&J’s obligations under the 340B statute. If the rebate model were implemented, HRSA threatened to terminate J&J’s Pharmaceutical Pricing Agreement (PPA), affecting J&J’s involvement in Medicaid and Medicare Part B.
J&J argues that the 340B statute allows the use of rebate models. They believe this approach is essential to comply with the Inflation Reduction Act’s requirements. J&J seeks a court declaration that its rebate model is lawful and an injunction against HRSA’s enforcement actions.

Eli Lilly Lawsuit

Eli Lilly proposed a comprehensive rebate program using a platform developed by Kalderos. Under this model, 340B covered entities would pay full price for drugs upfront and receive weekly cash rebates for verified 340B eligible sales.
HRSA prohibited Eli Lilly from implementing this rebate model. This led to Eli Lilly’s lawsuit, arguing that their model enhances transparency, improves cash flow for covered entities, and ensures compliance with the Inflation Reduction Act. They claim HRSA’s rejection was arbitrary and capricious.

Arguments and Positions

Manufacturers’ Arguments

Both J&J and Eli Lilly assert that their rebate models are crucial for guaranteeing that discounts benefit vulnerable patients directly and for preventing duplicate discounts and diversion.
They argue that the current system lacks transparency and creates arbitrage opportunities. Their proposed models would enhance transparency and efficiency.

HRSA and Hospital Groups’ Positions

HRSA and various healthcare organizations, including the American Hospital Association, oppose the rebate models. They maintain that these models violate the 340B statute, create additional administrative burdens, and could put financial strain on hospitals, particularly safety-net facilities.

Legal and Regulatory Context

The 340B Drug Pricing Lawsuits allege that HRSA’s actions violate the Administrative Procedure Act (APA) and are arbitrary and capricious. The manufacturers are seeking court declarations that their rebate models are lawful and injunctions against HRSA’s enforcement actions.

Implications

The outcomes of 340B Drug Pricing Lawsuit may significantly affect the 340B Drug Pricing Program, influencing how discounts are provided to covered entities and how manufacturers comply with federal drug pricing regulations. This legal dispute highlights ongoing tensions between drug manufacturers, HRSA, and healthcare providers concerning the interpretation and implementation of the 340B program.