Three major pharmaceutical companies — Amgen Inc. AMGN, Eli Lilly and Co LLY, and UCB SA UCBJY UCBJF — are suing U.S. Secretary of Health and Human Services (HHS) Robert F. Kennedy Jr. over the way his department is handling a drug discount program.
What Happened: The companies allege that HHS cost them millions of dollars in losses due to improperly certifying ineligible clinics under Section 340B of the Public Health Service Act.
In November 2024, Bristol-Myers Squibb Co BMY filed a lawsuit on Tuesday against the HRSA and HHS, alleging that HRSA’s rejection of its proposed rebate model for the 340B Drug Pricing Program violates federal law.
Also Read: How 340B Drug Discounts Are Driving Up Medicaid Costs By Billions
Section 340B requires drugmakers to offer significant discounts to certain healthcare providers serving vulnerable populations. However, eligibility is strictly defined, and the Secretary of HHS is responsible for certifying and recertifying participating clinics.
Endpoints News published a copy of the lawsuit online Monday.
At the center of the complaint is Sagebrush Health Services, which operates 13 clinics across Nevada, Connecticut, and South Carolina. The drug companies claim Sagebrush clinics received Section 340B certifications based on state and local funding to treat sexually transmitted diseases — a qualification included in the statute. However, the plaintiffs argue the clinics did not meet the statutory criteria and should not have received the discounted drug pricing.
Why It Matters: The HHS’s actions resulted in unjustified financial burdens on pharmaceutical manufacturers, the plaintiffs claim.
According to the lawsuit, these improper certifications allowed Sagebrush and potentially other clinics to access steeply discounted drugs despite being ineligible.
The drugmakers assert that this program misuse incentivizes providers to apply for 340B status even when they do not meet the legal requirements.
Federal officials sought to dismiss portions of the case. They argued that some claims were invalid because the plaintiffs had not exhausted administrative remedies and that certain claims were moot due to the decertification of some disputed clinics.
However, the court rejected both arguments, allowing the bulk of the case to proceed.
The pharmaceutical companies are seeking declaratory and injunctive relief under the Administrative Procedure Act. They allege that the HHS's certification decisions were arbitrary and capricious, violating federal law and undermining the intent of the 340B program.
In July, a federal court sided with the HHS, rejecting Johnson & Johnson's JNJ effort to reshape its participation in the 340B Drug Pricing Program.
The ruling comes after months of legal back-and-forth following Johnson & Johnson’s proposal to shift from upfront drug discounts to a rebate model—an approach the agency never formally approved.
In December, HRSA warned Sanofi SA SNY about its proposed credit model for certain outpatient drugs under the 340B program.
HRSA asserts that the credit system, effective Jan. 6, violates Sanofi’s legal obligations under the 340B statute.
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