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Eli Lilly and the Department of Health and Human Services have come under intense scrutiny from a federal appeals court as they take different positions on the federal drug access program. to drugs for low-income Americans.
Eli Lilly and HHS say the federal law governing the program is clear but comes to “different conclusions” about what’s required of drugmakers who provide discount products, said Judge Frank Easterbrook of the US Court of Appeals for the Seventh Circuit in Monday’s ruling.
The lawsuit is part of a dispute over whether the state’s 340B drug rebate program requires pharmaceutical giants to hand over expensive products to for-profit pharmacies.
Congress did not give HHS the authority to create new rules when establishing the legal framework for the drug deregulation program, argued John O’Quinn, a Kirkland & Ellis partner representing Lilly, in the trial.
But the agency’s efforts to force Lilly to offer some lower-cost products that the agency says “could change the landscape,” O’Quinn said.
In a statement for HHS, Justice Department attorney Alisa Klein argued that “the purpose” of the 340B program is to help providers get drugs to people in low-income communities. That makes Lilly’s position that discount products not available to contract pharmacies impossible, he said.
The appeal joins a broader battle between drug makers and the government that has raged through US courtrooms. The U.S. Court of Appeals for the District of Columbia Circuit is presiding over a similar battle between Novartis and HHS, and is the site of an October hearing on both sides’ interpretations of what is required. under 340B.
Easterbrook said both sides should be briefed in court.
Fight for revenge
Congress created the 340B program to help health care providers ensure that low-income patients can access their medications. Drug manufacturers are willing to offer their products to certain providers at very low prices in exchange for participating in Medicaid and Medicare Part B.
However, in 2020, drug manufacturers began to limit the supply of these low-cost products to some of the medicines that contract with health care entities, citing concerns about additional costs and fraud.
That same year, HHS issued an advisory opinion requiring drug manufacturers to increase contract medicine requirements.
The agency has since withdrawn that proposal, but has continued to pursue drug manufacturers with a series of individual letters notifying them of non-compliance and threatening financial penalties.
The U.S. District Court for the Southern District of Indiana has vacated the letter used against Lilly, although it said the drug maker did not have the right to stop the payments.
Lilly also appealed, arguing that the Seventh Amendment would hold the company without a “written obligation” to provide 340B compensation products “to effective contractual remedies without limitation.”
Still, Easterbrook questioned Lilly’s decision to appeal, as “it appears the company won in district court.”
HHS said in its brief that the federal law does not “allow drug manufacturers to add conditions to their obligations under Rule 340B. That would be tantamount to letting the fox be take care of the hen house.”
The case is Eli Lilly v. Becerra, 7th Cir., No. 21-03128, 10/31/22.
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