Eli Lilly & Co. v. United States HHS

Eli Lilly & Co. v. United States HHS

Opinion

ORDER

This cause is before the Court on a virtual cornucopia of claims: Defendants' Motion to Dismiss, or in the alternative, for Summary Judgment [Dkt. 87], filed on April 19, 2021; and Plaintiffs' Cross Motion for Summary Judgment [Dkt. 89] and Motion for Preliminary Injunction [Dkt. 94], filed on May 10, 2021 and May 20, 2021, respectively. Plaintiffs Eli Lilly and Company and Lilly USA, LLC (collectively, "Plaintiffs" or "Lilly") have [*3]  brought this action against Defendants United States Department of Health and Human Services ("HHS"), Health Resources and Services Administration ("HRSA"), Diana Espinoza, in her official capacity as Acting Administrator of HRSA, Xavier Becerra, in his official capacity as Secretary of HHS, and Daniel J. Barry, in his official capacity as Acting General Counsel of HHS (collectively, "Defendants") under the Administrative Procedures Act ("APA"), challenging various agency actions involving the 340B Drug Pricing Program ("340B Program"), which Congress created in 1992 to expand low-income Americans' access to affordable prescription medicines. See Veterans Health Care Act of 1992, Pub. L. No. 102-585, § 602(a), 106 Stat. 4943, 4967.

Currently before us for decision are Plaintiffs' various legal challenges to a December 30, 2020 Advisory Opinion ("Advisory Opinion") released by HHS's Office of the General Counsel and a May 17, 2021 enforcement letter ("May 17 Letter") from HRSA, both relating to drug manufacturers' obligations under the 340B statute when dealing with covered entities that dispense medications through contract pharmacy arrangements.¹ Plaintiffs seek a judgment declaring that in issuing the Advisory Opinion and the May 17 Letter Defendants violated the APA [*4]  by having been issued without Defendants following the required procedures, exceeding the agency's statutory authority, violating the Constitution, and by being arbitrary and capricious or otherwise not in accordance with law. Plaintiffs seek to have their implementation and/or enforcement enjoined. Plaintiffs also seek a declaratory judgment holding that Defendants lack the lawful authority to require Lilly to offer or provide 340B discounts to contract pharmacies.

On July 30, 2021, the Court conducted a hearing at which oral arguments were made on the pending motion for preliminary injunctive relief, directed at enforcement of the May 17 Letter, and the cross-motions for summary judgment as to all Plaintiffs' claims related to the Advisory Opinion and the May 17 Letter. Pursuant to Federal Rule of Civil Procedure 65(a)(2), we now hereby consolidate our ruling on the preliminary injunction with our ruling on summary judgment. Having carefully reviewed and considered the parties' written briefs and oral arguments, the administrative record, and the applicable legal principles, we hold, for the reasons detailed below, that the Advisory Opinion is invalid under the APA as arbitrary and capricious, and that the May 17 Letter [*5]  while not contrary to law, unconstitutional, or violative of notice and comment procedures, is likewise arbitrary and capricious and thus violative of the APA, warranting an order setting aside and vacating their findings and directives and remanding the May 17 Letter to the agency for further consideration/action consistent with the opinions explicated here.

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