On May 15, the U.S. District Court for the District of Columbia rejected manufacturers’ attempts to unilaterally implement rebate models for the 340B Drug Pricing Program and upheld the Health Resources and Services Administration’s (HRSA’s) authority to deny them. America’s Essential Hospitals, along with three other national associations, filed friend-of-the-court briefs urging the court to reject the manufacturers’ unlawful rebate models.
The court further dismissed challenges by three manufacturers — Eli Lilly, Bristol Myers Squibb, and Novartis — and a rebate implementation software company — Kalderos — as premature, finding HRSA has not yet issued final decisions denying their rebate proposals. For Sanofi, the one company for which HRSA has made a final decision denying a rebate proposal, the court did vacate HRSA’s decision to outright reject a rebate model, finding HRSA had failed to mitigate Sanofi’s legitimate concerns about duplicate discounts and diversion. The court directed HRSA to further consider the proposal and provide a more detailed explanation for the rejection; however, Sanofi cannot unilaterally implement its rebate proposal in the meantime. Additional agency guidance on rebate models is expected within the month, based on HRSA statements during litigation.
The court acknowledged hospital arguments about the significant burden shifting to hospitals under such a model and the distinction from 340B rebates provided to AIDS Drug Assistance Programs or the inventory replenishment models. While the court did not reject the concept of rebate models entirely and seemed to share manufacturer concerns about program compliance, this decision protects covered entities from unilateral manufacturer actions.
The association will continue to monitor HRSA’s final decisions on the three manufacturers’ and Kalderos’ proposals, as well as its reconsideration of Sanofi’s proposal. HRSA indicated to the court that it would issue guidance within 30 days of the May 2 hearing in this case. Plaintiffs and the government also have opportunities to appeal the decision. In addition, a similar suit filed by Johnson & Johnson is ongoing before the same D.C. District Court.
Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.
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