The Department of Health and Human Services has filed a Cross-Motion for Summary Judgment supporting the previous administration’s position that pharmaceutical manufacturers do not have the unilateral right to implement rebate programs for 340B drugs. The MSJ brief argues that HHS was well within its statutory authority to prevent the manufacturers from unilaterally implementing the rebate programs, that the “proposed cash rebate model would have upended the way the 340B program has operated for more than thirty years,” and that HHS’s action was not arbitrary and capricious.
Congress enacted the 340B program to enable hospitals that serve underserved populations, such as uninsured and low-income patients, to purchase outpatient drugs at a discount, allowing these hospitals to stretch limited federal resources, to reduce the price of outpatient drugs for patients, and to expand health services to the patients and communities they serve. In order to incent pharmaceutical manufacturers to participate in the 340B program, manufacturers seeking to sell pharmaceuticals to the Medicaid program are required to participate.
In late 2024, three pharmaceutical manufacturers, Elli Lilly, Bristol Meyers Squibb, and Novartis, approached the Health Resources and Services Administration (“HRSA”) about their plans to administer the 340B program for certain drugs on a rebate model, rather than making the discounts available when initially purchased by the hospitals. HRSA advised all three of the companies that implementing their rebate models would be inconsistent with the statutory requirements of the 340B program and would require approval by the Secretary of HHS. Each of the three companies filed suit in the federal District Court for the District of Columbia alleging that HRSA’s action violated the Administrative Procedures Act and was arbitrary and capricious. The cases were consolidated.
Basing its arguments on the statutory language and the legislative history creating the 340B program, HHS asked the Court to grant summary judgment in its favor and to deny the pharmaceutical companies’ motions for summary judgment.
The American Hospital Association and other hospital associations have filed an amicus brief in support of HHS’s position. The AHA brief argues that the pharmaceutical manufacturers’ “rebate policies will be ruinous for 340B hospitals.” The brief also quotes from a bipartisan letter of 200 lawmakers sent to HHS, stating: “This unapproved and unlawful change would have severe consequences for the nation’s safety net providers and the patients they serve….A rebate model would create significant financial challenges for safety-net hospitals.
The attorneys at Whatley Kallas, LLP will continue to follow this case as it proceeds. Whatley Kallas is representing several hospitals in their pursuit of claims under the 340B program.
HHS’s motion and brief are linked here and the AHA and other hospital associations’ amicus brief is linked here.