Eli Lilly fires back against HHS order to repay providers for violating 340B


UPDATE: May 21, 2021: Late Thursday, drug manufacturing giant Eli Lilly filed a motion in an Indiana district court to halt 340B-related monetary penalties, scant days after the Biden administration set a June 1 deadline for biopharmaceutical companies to comply with new conditions in the drug discount program and allow hospital contract pharmacies access to discounted drugs.

The suit alleges a Monday letter from Diana Espinosa, acting head of the Health Resources and Services Administration, gives “no legal explanation or justification for the arbitrary June 1 deadline.”

Lilly previously filed an almost identical lawsuit January 2020. The Indianapolis-based biopharma said it expected the government to follow the briefing schedule outlined in that suit before mandating compliance with 340B and forcing it to pay “substantial and irretrievable sums of money.”

“If the Court ultimately decides Lilly was required to extend 340B pricing to contract pharmacies, Lilly will comply with that decision. Conversely, if the Court ultimately decides manufacturers are not required to extend 340B pricing to contract pharmacies, then we surely expect the government will comply with that decision. But there is no explanation or justification for the government’s attempt to make Lilly pay now, other than to evade this Court’s review and leave Lilly without recourse for such payments,” the motion reads.

In the petition, Lilly, which brought in $6.2 billion in profit last year, alleges the shifting terms of the program are due to HHS director Xavier Becerra bending to political pressure to “take action” against drug manufacturers, as pharmaceutical prices continue to climb.

Lilly asked the district court to temporarily block HHS from moving against Lilly until the drugmaker’s request for a preliminary injunction is resolved; and for an accelerated legal schedule to settle its claims before the looming June deadline.

An HRSA spokesperson declined to comment on the suit.

Dive Brief:

  • HHS’ Health Resources and Services Administration called out six pharmaceutical companies Tuesday for violating rules under the 340B drug discount program, ordering them to repay affected providers for previous overcharges and warning of more penalties if they don’t comply.
  • In July 2020 some drugmakers stopped giving the 340B ceiling price on their products sold to covered entities and dispensed through contract pharmacies, while others limited sales by requiring specific data or selling products only after a covered entity demonstrated 340B compliance, according to HRSA.
  • In letters from Diana Espinosa, acting administrator of HRSA, the agency requested AstraZeneca, Eli Lilly, United Therapeutics, Sanofi, Novo Nordisk and Novartis give an update on their plans to restart selling covered outpatient drugs at the 340B price to covered entities that dispense medications through contract pharmacies by June 1.

Dive Insight:

Providers and drugmakers have sparred for years over the 340B drug discount program that requires pharmaceutical companies to give discounts on outpatient drugs for providers serving low-income communities.

AHA along with five other provider groups in December filed a federal lawsuit against HHS, alleging the department failed to enforce 340B program requirements and allowed actions from drug companies that undermined the program. That lawsuit was later dismissed.

But with the change in administrations, providers now seem to have an ally in the fight.

Previously, as California’s Attorney General, newly minted HHS chief Xavier Becerra led a group of states pushing the agency to force drugmakers to comply with the law late last year.

Provider groups cheered the move after raising the alarm last year that an increasing number of drug companies were refusing to offer discounts to such eligible hospitals.

“The denial of these discounts has damaged providers and patients and must stop. It is vital that these companies immediately begin to repay the millions of dollars owed to these providers,” 340B Health CEO Maureen Testoni said in a statement.

In separate letters to drugmakers, HRSA outlines complaints against them and their actions, ultimately saying their policies violated the statute and resulted in overcharges that need to be refunded. The companies must work to ensure all impacted entities are contacted and efforts are made to pursue mutually agreed upon refund arrangements, according to the letters.

Any additional violations will be subject to a $5,000 penalty for each instance of overcharging under the program’s Ceiling Price and Civil Monetary Penalties final rule.

The American Hospital Association also praised the agency in a release for “taking the decisive action we’ve called for against drug companies that skirt the law by limiting the distribution of certain 340B drugs through community pharmacies.”

Hospitals in the 340B program provide 60% of all uncompensated care in the U.S. and 75% of all hospital care to Medicaid patients, according to 340B Health.

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