Novartis Pharms. Corp. v. Espinosa

Novartis Pharms. Corp. v. Espinosa

Opinion

MEMORANDUM OPINION

This case concerns conditions that plaintiffs Novartis Pharmaceuticals Corporation and United Therapeutics Corporation have imposed on discounted drug purchases by certain safety-net health care providers. The plaintiffs brought this suit to prevent threatened enforcement actions by the Health Resources and Services Administration (HRSA). Before the Court are the plaintiffs' Motions for Summary Judgment, [*3]  Dkt. 19 (Novartis); Dkt. 14 (United Therapeutics), and the defendants' Motions for Summary Judgment, Dkt. 13 (Novartis), Dkt. 16 (United Therapeutics).¹ For the reasons that follow, the Court will grant in part and deny in part the plaintiffs' motions for summary judgment and deny the defendants' motions.

I. BACKGROUND

A. Statutory and Regulatory Framework

In 1992, Congress enacted the Veterans Health Care Act (VHCA), Pub. L. No. 102-585, 106 Stat. 4943. Relevant here, the VHCA added Section 340B to the Public Health Service Act (PHSA), Pub. L. No. 78-410, 58 Stat. 682 (1944), which created a program (the "340B Program") for certain healthcare providers ("covered entities") to purchase certain drugs from drug manufacturers at reduced prices. See § 602, 106 Stat. at 4967-71 (codified at 42 U.S.C. § 256b). Drug manufacturers can participate in the 340B Program by entering into voluntary agreements with the Secretary of Health and Human Services "under which the amount required to be paid . . . to the manufacturer for covered outpatient drugs . . . purchased by a covered entity . . . does not exceed an amount equal to the average manufacturer price . . . reduced by the [statutory] rebate percentage." 42 U.S.C. § 256b(a)(1); see also Astra USA, Inc. v. Santa Clara Cnty., Cal., 563 U.S. 110, 113, 131 S. Ct. 1342, 179 L. Ed. 2d 457 (2011) ("Section 340B . . . imposes ceilings on prices drug manufacturers may charge for medications sold to specified health-care facilities." (internal citations omitted)). The [*4]  statutory scheme starts with a carrot. The 340B Program allows the drugs of participating manufacturers to be eligible for reimbursement under Medicaid and Medicare Part B. See 42 U.S.C. § 1396r-8(a). Because covered entities are mostly "providers of safety-net services to the poor," Astra, 563 U.S. at 113, this price cap helps contain costs for low-income providers, see AstraZeneca Pharmaceuticals LP v. Becerra, No. 21-cv-27-LPS, 543 F. Supp. 3d 47, 2021 U.S. Dist. LEXIS 113254, 2021 WL 2458063, at *1 (D. Del. June 16, 2021); see also 42 U.S.C. § 256b(a)(4) (listing fifteen classes of covered entities).

The benefits of the 340B Program do not come without strings attached. Covered entities cannot receive "duplicate discounts" on drugs purchased at 340B prices. 42 U.S.C. § 256b(a)(5)(A). They also "shall not resell or otherwise transfer the drug to a person who is not a patient of the entity." Id. § 256b(a)(5)(B). To police compliance, manufacturers and the Secretary are permitted "to audit at the Secretary's or the manufacturer's expense the records of the [covered] entit[ies]." Id. § 256b(a)(5)(C). Failure to comply with these requirements can lead to sanctions for covered entities. See id. § 256b(a)(5)(D).

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.