Appeals court rules in favor of drug manufacturers in 340B case

An appeals court has upheld a lower court ruling on 340B siding with drug manufacturers, a decision that could have significant implications for healthcare providers and vulnerable populations.

The U.S. Court of Appeals for the District of Columbia ruled in favor of Novartis Pharmaceuticals Corporation and United Therapeutics Corporation over the Department of Health and Human Services and the Health Resources and Service Administration on May 21. The issue at hand was whether pharmaceutical companies can limit the distribution of discounted drugs in the 340B program, and the court determined that they can.

Providers benefit from the 340B program through insurance reimbursements that exceed the marked-down cost of the drugs. The court noted that the ceiling price set by a statutory formula is generous to purchasers, with prices sometimes as low as a penny per unit.

However, drug manufacturers argued that there is abuse in the system from diversion and duplication when pharmacies distribute the drugs. They claimed that everyone involved has a financial incentive, including the covered entity, the pharmacy, and the third-party administrator.

The government argued that manufacturers imposing their own contractual terms on providers violates the statute, but the district court and appeals court both agreed that 340B does not prohibit manufacturers from limiting the distribution of discounted drugs by contract.

This ruling could impact the way drugs are distributed to healthcare providers serving vulnerable populations, as well as the financial incentives involved in the 340B program. The decision has sparked debate among stakeholders, with some urging the Department of Health and Human Services to take action to address what they see as harmful drug company policies.