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United States District Court for the District of New Jersey
November 5, 2021, Decided; November 5, 2021, Filed
Civil Action No. 21-00634 (FLW); Civil Action No. 21-00806 (FLW)
WOLFSON, Chief Judge:
[*146] Plaintiffs Sanofi-Aventis U.S., LLC, and Novo Nordisk Inc.1 sue the United States Department of Health and Human Services ("HHS"), former HHS Secretary Alex M. Azar II, former HHS General Counsel Robert P. Charrow, Acting HHS Secretary Norris Cochran, Acting HHS General Counsel Daniel J. Berry, the Health Resources and Services Administration ("HRSA"), former HRSA Administrator Thomas J. Engels, and Acting HRSA Administrator Diana Esposito (collectively, "the Government") for agency action relating to "the 340B Program," a drug-purchasing provision in the Veterans Health Care Act, Pub. L. No. 102-585, 106 Stat. 4943, 4967-71 (1992), codified at the Public Health Services Act, Pub. L. No. 78-410, 58 Stat. 682 (1992); 42 U.S.C. § 256b.
In 1992, Congress enacted the 340B Program to guarantee prescription drug discounts for medically vulnerable populations and to enable providers in underserved areas to maximize their resources by purchasing drugs from participating manufacturers at the discounted rate. Because most 340B providers cannot [**5] afford an in-house pharmacy, or serve large geographical areas where travel is unfeasible or cost-prohibitive, HHS has long interpreted the statute to require manufacturers to ship orders directly to contract pharmacies, such as CVS or Walgreens, which dispense covered drugs to 340B-eligible patients. Contract pharmacies now number in the tens of thousands. Seeking to limit these arrangements for the first time in 2020, manufacturers, including Plaintiffs, implemented various policies. HHS has taken enforcement action in response.
Sanofi challenges three agency actions arising in this context: a 2021 Violation Letter in which HHS threatened to impose Civil Monetary Penalties ("CMPs") on Sanofi for overcharging for drugs through its policy, called an "Integrity Initiative,"2 a 2020 Advisory Opinion ("AO") interpreting § 340B to require Sanofi to ship drugs to multiple contract pharmacies, and a 2010 Administrative Dispute Resolution Rule ("ADR Rule") designed to adjudicate claims arising under § 340B. According to Sanofi, its Integrity Initiative fully complies with the 340B Program, the AO is arbitrary and capricious under the Administrative Procedures Act ("APA"), 5 U.S.C. § 500 et seq., and the ADR Rule is both unconstitutional and arbitrary/capricious. [**6] Novo challenges the AO and the Violation Letter on similar grounds, but it does not challenge the ADR Rule. Plaintiffs and the Government cross-move for summary judgment on all issues. For the following [*147] reasons, I DENY Sanofi's motion as to the ADR Rule and GRANT HHS' motion on the same; GRANT in part Sanofi's and Novo's motions as to the Violation Letters, and PARTIALLY VACATE and REMAND the Letters for further consideration, consistent with this Opinion; and DENY the parties' motions on the AO as moot.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
570 F. Supp. 3d 129 *; 2021 U.S. Dist. LEXIS 214462 **; 2021 WL 5150464
SANOFI-AVENTIS U.S., LLC, Plaintiff, v. U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, et. al., Defendants.NOVO NORDISK INC., Plaintiff, v. U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, et. al., Defendants.
Subsequent History: Appeal filed, 11/26/2021
pharmacy, covered entity, manufacturers, drugs, Novo, ADR Rule, overcharge, notice, regulation, rulemaking, discount, entities, patients, policies, Initiative, appointment, parties, provisions, courts, conditions, deference, reasons, ceiling price, outpatient, decisions, comments, removal, cases, final rule, dispensing
Administrative Law, Judicial Review, Standards of Review, Arbitrary & Capricious Standard of Review, Securities Law, US Securities & Exchange Commission, Arbitrary & Capricious Review, Exceeding Statutory Authority, Evidence, Burdens of Proof, Allocation, Agency Rulemaking, Notice & Comment Requirements, Business & Corporate Compliance, Occupational Safety & Health, Administrative Proceedings, OSHA Rulemaking, Formal Rulemaking, State Proceedings, Informal Rulemaking, Agency Adjudication, Formal Adjudicatory Procedure, Civil Procedure, Remedies, Injunctions, Permanent Injunctions, Constitutional Law, The Presidency, Appointment of Officials, Governments, Federal Government, Executive Offices, Congressional Duties & Powers, Presentment & Veto, Commander in Chief, Foreign Affairs, Public Health & Welfare Law, Providers, Payments & Reimbursements, Drug Companies & Pharmacies, Review of Initial Decisions, Lower Federal Courts, Courts, Authority to Adjudicate, Legislation, Enactment, Vetoes, Separation of Powers, The Judiciary, Congressional Limits, Supremacy Clause, Federal Preemption, Reviewability, Reviewable Agency Action, Deference to Agency Statutory Interpretation, Interpretation, Inferences & Presumptions, Inferences, Special Proceedings, Eminent Domain Proceedings, State Condemnations, Real Property Law, Elements, Involuntary Acquisition & Diminution of Value, Takings, Bill of Rights, Fundamental Rights, Eminent Domain & Takings, Inverse Condemnation, Regulatory Takings, Claims By & Against