Eli Lilly follows J&J in suing Biden administration over 340B rebates

Dive Brief:

• Eli Lilly is suing the federal government over how hospitals receive savings in a major federal drug discount program.
• Lilly’s lawsuit was filed Thursday in a Washington, D.C. district court against the HHS and the Health Resources and Services Administration, which oversees the program, called 340B. The lawsuit seeks a court ruling that Lilly can go ahead with a plan to pay hospitals rebates instead of upfront discounts when they purchase qualifying drugs.
• It’s the second lawsuit from a major pharmaceutical company last week as drugmakers look to curb 340B discounts. Johnson & Johnson sued the government on Tuesday after regulators rejected its plan to issue rebates for two widely prescribed 340B medications.

Dive Insight:

Drugmakers say they’re trying to crack down on abuse in the 340B program, which was established more than three decades ago in order to make it easier for hospitals serving more vulnerable populations to afford pricey medications.

Since its inception, both the number of covered entities and the volume of drugs purchased in 340B have grown sharply, which drugmakers say is indicative of hospitals gaming the system to profit off the discounted medication.

Meanwhile, hospitals accuse drugmakers of trying to avoid paying the discounts to protect their own profits. That’s because the discounts can be steep — generally 25% to 50% off the cost of a drug, but occasionally higher.

Both Lilly and J&J tried to tweak how they divvy out the discounts this year, by paying cash rebates to hospitals after the providers prove their drug purchases are eligible for 340B. Currently, drugmakers are required to sell eligible drugs at the lower 340B price at the point of sale.

Lilly’s plan is more sweeping than J&J’s, however. J&J wants to effect rebates for two of its medications prescribed by disproportionate share hospitals, which make up less than half of all 340B hospitals but account for a majority of 340B purchases.

In comparison, Lilly wants to rebate all of its drugs for all covered entities in 340B.

HRSA quickly stepped in, warning the drugmakers that such plans are illegal and could result in steep fines (and potentially their removal from Medicare and Medicaid). Both drugmakers’ lawsuits seek to overturn HRSA’s guidance, arguing 340B statute allows them to offer after-the-fact rebates.

The drug discount manager that Lilly wants to contract with to administer its rebate program, Kalderos, has also sued HRSA over the issue.

Lilly and J&J say the rebate plans are the only way they can ensure program integrity, including preventing duplicate discounts between 340B and Medicaid, or between 340B and the maximum fair price in Medicare drug negotiations.

“Lilly brought this lawsuit because HRSA does not have the authority to arbitrarily reject this model, which serves the original goals of the 340B program and improves transparency, efficiency, and program integrity. We look forward to presenting our case in court,” the drugmaker said in a statement Thursday.