In a significant ruling on May 21, 2024, the U.S. Court of Appeals for the District of Columbia upheld a lower court decision favoring pharmaceutical companies regarding the distribution of discounted drugs under the 340B program. The court found in favor of two drug companies, Novartis Pharmaceuticals Corporation and United Therapeutics Corporation, marking a notable victory for drug manufacturers over the Department of Health and Human Services (HHS).
Key Takeaways from the Ruling
Background of the 340B Program: The 340B Drug Pricing Program mandates that drug manufacturers provide outpatient drugs at significantly reduced prices to eligible healthcare organizations and covered entities such as acute care hospitals that serve vulnerable populations. Since its enactment in 1992 and subsequent expansion under the Affordable Care Act, the program has grown substantially, with the number of covered entities and participating contract pharmacies increasing dramatically.
The Court’s Findings: The crux of the case revolves around whether pharmaceutical companies can impose limits on the distribution of 340B discounted drugs. According to the court’s ruling, manufacturers are not categorically prohibited from imposing such conditions. Specifically, the court found that the 340B statute does not forbid manufacturers from limiting the distribution of discounted drugs by contract.
The court held: “In sum, we hold that section 340B does not categorically prohibit manufacturers from imposing conditions on the distribution of covered drugs to covered entities. We further hold that the conditions at issue here do not violate section 340B on their face.”
Implications for Providers: This decision has significant implications for healthcare providers that rely on the 340B program. Providers are likely to see manufacturers impose contractual terms more often to limit the distribution of discounted prescriptions, including limits on the number of pharmacies eligible to receive shipments under a 340B program.
Conclusion
The appellate court’s decision underscores the ongoing complexities and contentious nature of the 340B Drug Pricing Program. We will likely hear more from the courts on these issues in the future.
