The Big Question on the Minds of Every 340B Stakeholder

By Ted Slafsky

As we pass the third anniversary of the pharmaceutical industry’s surprise decision to significantly scale back access to 340B pricing in the contract pharmacy setting, the key question is:  Why is it taking so long to come up with a resolution?  One of the more puzzling aspects to many of us has been the seemingly slow nature of the legal cases winding through the federal courts.

Over two years ago, six drug manufacturers sued the Department of Health and Human Services (HHS) in various federal court jurisdictions after the department concluded the companies had violated the law and must restore unfettered access to 340B discounts at pharmacies contracting with 340B covered entities. Three legal challenges to the HHS orders were addressed at the federal district court level and appealed to the federal circuit court level.  Two additional, related cases—an October 2021 suit by Boehringer Ingelheim (BI) and a July 2022 suit by Merck—were paused.

The lawsuits were consolidated into three cases: 

• Novartis/United Therapeutics v. HHS in the U.S. Court of Appeals for the District of Columbia Circuit
• Eli Lilly v. HHS in the U.S. Court of Appeals for the 7th Circuit in Chicago
• Sanofi /Novo Nordisk /AstraZeneca v. HHS before the U.S. Court of Appeals for the 3rd Circuit in Philadelphia

Ironically, the case in which oral arguments were heard most recently was the only one yet decided. The case was argued before the 3rd Circuit on Nov. 15, 2022 and an opinion was handed down in favor of the drug manufacturers on Jan. 30, 2023. Ten months have passed since drug company and government attorneys made their respective cases to the judges in the other two appellate court cases. The Novartis/United Therapeutics cases was argued Oct. 24 before the federal appeals court in Washington, D.C. and the Lilly case was argued Oct. 31 before the 7th Circuit based in Chicago. All three cases were heard by three-judge panels.

Timing of Decisions

I was curious to know whether this lag time was unusual. According to research conducted by my 340B Report colleague, Tom Mirga, the median time from oral arguments to a final decision was 3.6 months last year for the 7th Circuit and 3.9 months for the D.C Circuit. Unlike the U.S Supreme Court, where statute requires justices to begin their annual session on the first Monday of October and the session continues until late June or early July, there is no limit on how much (or how little) time a lower court can take to render a decision.  

After conferring with several attorneys, I get a sense that while the amount of time it is taking for a decision is longer than usual, it is far from unprecedented. None of the five lawyers that I reached out to was shocked at the lag time and many of them said that they have been involved in federal civil court decisions that have taken longer than 10 months. One of them pointed out that the court cases before the federal appeals court are usually more complex and that the judges often have other cases that may require more immediate attention such as a national security matter.

Each of the attorneys agreed that the 3rd Circuit decision that determined that “Congress never said that drug makers must deliver discounted Section 340B drugs to an unlimited number of contract pharmacies,” will be considered and likely addressed in the upcoming decisions. A few of the attorneys speculated that the lag time may indicate that the judges are not persuaded by the 3rd Circuit decision and therefore are taking the time to provide their own conclusion.

No End in Sight

Nonetheless, even if the two circuit courts make decisions expeditiously, we should not expect a resolution to the contract pharmacy debate any time soon. From my previous experience following these types of cases, I anticipate that the losing side in either of the upcoming decisions will seek to elevate the case from a three-judge panel to the full appeals court. In addition, if there are conflicting decisions at the appellate level, we can expect one or more of the parties to request the Supreme Court to take up the case. While the Supreme Court accepts only about 100 cases each year, the likelihood increases significantly if there is a split between the circuit courts. 

Many of the attorneys with which I conferred with pointed out that there is only one way to ultimately resolve the case. That is, for Congress to act to clarify the scope of the contract pharmacy program and provide regulatory authority to the Health Resources & Services Administration to enforce the rules. Until that time, we can expect more chaos and frustration, as 340B providers cope with ever-changing policies and drug manufacturers ponder whether they will have liability for their actions.

Ted Slafsky is the Publisher and CEO of 340B Report, the only news and intelligence service exclusively covering the 340B program.  Slafsky, who has over 25 years of leadership experience with the 340B program, is also Founder and Principal of Wexford Solutions.  Ted can be reached at ted.slafsky@340Breport.com.

Disclaimer: The views and opinions expressed in this blog are those of the authors. They do not necessarily reflect the official policy or position of any other agency, organization, employer, or company.