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340B Insight provides members and supporters of 340B Health with timely updates and discussions about the 340B drug pricing program. The podcast helps listeners stay current with and learn more about 340B to help them serve their patients and communities and remain compliant. We publish new episodes twice a month, with news reports and in-depth interviews with leading health care practitioners, policy and legal experts, public policymakers, and our expert staff.
Narration (00:03)
Welcome to 340B Insight from 340B Health.
David Glendinning (00:11)
Hello from Washington, DC, and welcome back to 340B Insight, the premiere podcast about the 340B drug pricing program. I'm your host, David Glendinning, with 340B Health. If you've been following 340B news lately, you know the courts have been especially busy. Keeping track of all these cases can be challenging, but the outcomes could have significant implications for hospitals and the patients they serve.
So to help us sort through the latest developments and what they might mean going forward, I recently sat down with Amanda Nagrotsky 340B Health's vice president of legal and policy. Here's that conversation. I am sitting with our very own Amanda Nagrotsky. Amanda, I think we can officially call you a veteran of the podcast by now. So welcome back to 340B Insight.
Amanda Nagrotsky (01:03)
Thanks so much for having me again, David.
David Glendinning (01:05)
And we are here to talk about the courts. And there have been a lot of three forty B court developments recently. So let's jump right into it. Why does it feel like so many major cases are moving at once right now?
Amanda Nagrotsky (01:20)
So there is more litigation in 340B than we've ever seen. Covered entities and manufacturers are pursuing more challenges to Hearse's interpretation of 340B statutory requirements. Much of the active litigation stems from manufacturer contract pharmacy restrictions, which have prompted many states to enact protections from those restrictions. A few manufacturers have filed a significant number of lawsuits challenging those state laws.
other unilateral actions by manufacturers have resulted in litigation as well. Manufacturers that had tried to implement unilateral rebate models without HHS approval in 2024 sued HRSA to challenge the agency's position that standalone rebate models are unlawful. And HERSA's position was upheld by federal courts and decisions on the manufacturers' appeals of those lower court rulings are still pending. We also have a new lawsuit by
drug maker Abby challenging Hearse's interpretation of who counts as a 340B patient under the statute, as well as covered entity challenges to Hearse's interpretation of statutory provisions pertaining to the GPL prohibition and Hearse's policy for 340B child sites. So there are just many cases that are working their way through the courts that have important implications for how hospitals access and use 340B savings.
David Glendinning (02:48)
So you started with the state contract pharmacy protection law. So that's a good place for us to to expand a little bit more. What has been happening in those cases?
Amanda Nagrotsky (02:58)
So manufacturers, ⁓ primarily AB, AstraZeneca, Navartis, as well as Pharma, have collectively filed about 80 lawsuits challenging state contract pharmacy protection laws. So most of the rulings issued so far on a state contract pharmacy issue have been in response to manufacturers' requests to temporarily stop the state law from going into effect.
So if a party obtains a preliminary injunction or their motion for one is denied, generally, you know, judges then proceed to evaluating the facts and law and issue a final decision. Most of the state contract pharmacy cases already have had rulings on preliminary injunctions and are now starting to get into the next phase of resolving the cases on the merits. So a federal judge.
In Mississippi, recently dismissed in its entirety ABV's challenge to the state's contract pharmacy protection law. After the court found that that state law does not conflict with federal 340B requirements or any of the other constitutional claims argued by AB. Manufacturers argue federal law preempts state contract pharmacy laws, whereas the states argue that.
they are regulating drug distribution, that their laws are regulating drug distribution and delivery, which is an area that's squarely within a state's purview, and that there is no conflict with federal law. So the Mississippi decision is a significant victory for 340B hospitals and other covered entities.
David Glendinning (04:39)
You mentioned courts now going past that preliminary injunction stage and reaching the merits of these disputes. Why is that significant? And and what are judges saying in this area of the the merits of the arguments about state authority on this issue?
Amanda Nagrotsky (04:56)
So
if a party secures a preliminary injunction or if one is denied, the underlying merits of the case still need to be decided. In other words, you know, a final determination based on the applicable legal standard and the evidentiary record that's been developed. There's also a higher standard that's used as compared to preliminary injunctions. So the idea is that the plaintiff, you know, in this case, the drug companies and these state contract pharmacy.
In these lawsuits challenging state contract pharmacy laws, the manufacturers need to actually prevail ⁓ on the merits and not just show a likelihood of prevailing. But the federal government has recently become somewhat of an X factor here. So after four years of litigation on this issue, the federal government recently began submitting briefs in support, ⁓ so amicus briefs in support of
industry challenges to state protections for contract pharmacy access. And the government argues, like we've seen drug makers argue that the federal 340B statute preempts the state laws. Since the government has taken this position, two recent decisions were decided in favor of the manufacturers using reasoning included in the federal government's amicus briefs. And one of those decisions includes the the first decision on the merits of the case.
So the other decision that favored the drug makers was issued by the ⁓ US Court of Appeals for the Fourth Circuit on laws in West Virginia and Maryland. ⁓ some positive news though, there is that the full Fourth Circuit ⁓ has agreed to rehear cases challenging West Virginia and Maryland laws and may come to a different conclusion than the three judge panel that issued a decision in those cases that were favorable to manufacturers.
I do see these decisions, these recent court decisions, as definitely encouraging and and positive. But obviously there are, you know, appeals that remain pending in multiple jurisdictions. ⁓ and if appeals courts are split as to whether state contract pharmacy laws are preempted by federal law, that could result in a future case before the United States Supreme Court, ⁓ which could have nationwide implications for these state contract pharmacy.
protection laws.
David Glendinning (07:21)
Let's talk about another important case that you mentioned at the top of the program. So what is happening with Abvi's challenge to Hearse's patient definition guidance?
Amanda Nagrotsky (07:32)
So API is suing HRSA, arguing that HRSA's longstanding 1996 patient definition guidelines are unlawful, and that ABV's definition, which is significantly narrower, ⁓ than HERSA's better reflects the 340 B statute. AB had attempted to audit two covered entities last year using its own patient definition. And HERSA did not block ABE from
Conducting those audits, but told Abbey that it wouldn't enforce findings that pertain to Abbey's narrower definition. And the government recently asked the court to dismiss Abbey's lawsuit on several procedural grounds, basically arguing that it's too soon for this case to be in court. You know, HHS and its brief noted that AB had not yet conducted the audits. There were no findings.
For HHS to review or for the audited or prospective covered entities that would be audited to respond to. And the government asserts that essentially additional proceedings need to occur before HHS can issue any final decision concerning the proposed audits. And 340B Health and two of our member hospitals have asked the court to allow us to intervene and participate in the case at these lawsuits.
against Hershe ⁓ as defendants.
David Glendinning (09:02)
I know three forty B Health and member hospitals have successfully intervened as defendants in the past. So maybe you could explain a little bit more about that. Why is intervention so important in a case like this?
Amanda Nagrotsky (09:15)
340B Health believes that it's important that hospitals directly affected by this lawsuit have a strong voice in the case that can fully explain the real world impact of AB's narrower patient definition on patient access, hospital operations, and delivery of care. So remember that the scope of 340B depends on how the term patient is defined. A more
narrow definition would require manufacturers to provide discounts on fewer drugs. So it it really gets to the heart of the ability of covered entities of hospitals to be able to generate 340B savings, which is critical. There are also compliance implications for covered entities in light of the provision in the 340B statute that prohibits covered entities from using 340B drugs for nonpatients. So that's the
Often referred to as the diversion, prohibition. so just the the outcome of this case has a major, could have a major effect on hospital access to 348 savings. And we've seen firsthand that formerly intervening as a party can make a meaningful difference in key litigation like this. So federal judges ⁓ that had blocked manufacturers from
unilaterally implementing rebate models without government oversight, cited arguments from 348 B Health and the two hospital members that ⁓ intervened with us in that lawsuit that are the same hospitals that have joined us in this effort as well.
David Glendinning (10:54)
Let's talk a little bit about ⁓ the decision you referred to on the group purchasing organization or GPO prohibition. It's my understanding that the government is, unlike in some of these other cases, is not appealing that ruling ⁓ against it. So what does that mean exactly?
Amanda Nagrotsky (11:12)
So just to give some context, the 340B statute prohibits DISH children's and cancer hospitals from using a group purchasing organization or arrangement to obtain covered outpatient drugs. So this is known as the GPO prohibition. HRSA issued a policy in 2013 stating that that language in the 340B statute meant that hospitals subject to the GPO prohibition could not use a GPO.
To purchase initial drug inventory when using a 340B replenishment model. So HERSA's interpretation effectively required hospitals to acquire some of their inventory at non-340B and non-GPO prices, which typically meant having to buy at wholesale acquisition costs. A federal district court found that HRSA didn't comply with federal administrative law requirements when it issued the policy in 2013.
The judge was critical of HRSA on the idea that HERSA had never really explained or provided a clear analysis of its views on the compliance requirements for the GPO prohibition. So he set the the 2013 policy aside and the government declined to appeal that decision, like you mentioned, David, which means that the 2013 policy is no longer in effect.
But to be very clear, the GPO prohibition in the statute still applies. The court didn't decide whether Hearsa's interpretation was a correct or incorrect representation of the GPO language in the statute, and you know, indicated that it would be up to Hursa to come out with guidance that, you know, complies with federal law that explains its policy.
So the decision really does not provide clarity as to what the rules are that hospitals should follow to comply with the GPO prohibition when using a replenishment model. So three forty Be Health will continue monitoring for any developments around this, including any future action by HRSA or anything meaningful in audits of covered entities.
David Glendinning (13:23)
And we know the government is taking a different approach in the child side case in the wake of a recent federal dis court decision ⁓ on that issue. So what's happening there?
Amanda Nagrotsky (13:34)
Yeah. So in that case, a federal district court ruled that HERSA acted unlawfully when it reinstated requirements from its 1994 guidance in 2023. So this 1994 guidance was not in effect from 2020 to 2023, and that was announced during COVID. But the reinstated rules that are the subject of this challenge effectively delay access to 340B for new.
Child sites for up to 23 months because the rules require that child sites appear on a reimbursable line of a filed Medicare cost report and be registered with the agency before accessing 340 B price drugs. So the court held that Hearsa not have the statutory authority to impose those requirements and set aside Hearsa's reinstatement of the 1994 rules. But unlike the the GPO case, the court
actually here evaluated whether or not Hearse's interpretation of the statute was correct. And again, finding that that it was not in this in the child side case. So the federal government has appealed the decision. A briefing schedule in the case is expected to come out soon. And you know, once we see the briefs on appeal, I think we'll have a better sense of of what the government plans on focusing on in its appeal.
David Glendinning (15:02)
Certainly so much going on in the courts as hospitals try to keep track of all these cases. W what should they be watching most closely for over the next several months?
Amanda Nagrotsky (15:14)
I'll start with Abby's patient definition lawsuit because of the you know really significant implications of that case, especially ⁓ 340B hospitals and covered entities. So looking to see if 340B Health, along with the two hospital members that have, you know, moved to intervene in the case, whether we are ⁓ in fact permitted by the court to do that. And also looking to see if that case.
really advances to the the merits. Additional merits rulings and state contract pharmacy litigation, I think, are going to be really important to watch for and seeing if there are if something comes from the Fourth Circuit's rehearing of the cases involving Maryland and West Virginia laws that we talked about earlier. You know, looking to see on the the GPO case if there's anything
new that comes from HERSA, any new guidance from HRSA or you know anything in audit results that that pertain to the GPO prohibition, progress, you know, seeing what happens with the the government's appeal on the child side case. That case is really, really significant. The ability to 340B in outpatient locations without having to wait
until those sites appear on a file cost report and are registered in hearse's database. That's a huge thing. And and the delay that Hearsa's policy has created for hospitals has been an issue that 34 DB Health and others have advocated on for such a long time. There's also, you know, other policies in the works that could prompt future litigation. ⁓ so we know that Hearsa's
Rebay pilot notice is currently under review at the White House. And also, you know, expecting CMS to proposed ⁓ cuts to Part B drug reimbursement for 4EB hospitals, you know, in connection with the drug acquisition cost survey that the agency conducted of hospitals earlier this year. Certainly there's, you know, history for litigation brought by hospitals to challenge Part B.
payment cuts in the past. So 340 B Health will continue participating in litigation that affects our hospital members and we will of course share noteworthy developments in the cases as they occur.
David Glendinning (17:45)
Amanda, we appreciate you taking the time to walk through all these court decisions, appeals and other developments both in and out of the courts. So we know it takes up a great amount of your time. So thank you for taking some more of it to explain it all to us.
Amanda Nagrotsky (17:59)
Thank you very much for having me, David.
David Glendinning (18:02)
Our thanks again to Amenda Nagratsky for joining us and helping us make sense of a very active period in 340B litigation. As we discussed today, these cases involve different legal issues and are moving through different courts, but together they will play an important role in shaping the future of 340B. We will continue monitoring these developments closely and keeping our listeners and member hospitals informed as new decisions are issued.
We will be back in a few weeks with our next episode. Until then, thanks for listening and be well.
Narration (18:37)
Thanks for listening to 340B Insight. Subscribe and rate us on Apple Podcasts, Google Play, Spotify, or wherever you listen to podcasts. For more information, visit our website at 340bpodcast.org. You can also follow us on Twitter at 340B Health and submit a question or idea to the show by emailing us at podcast at 340bhealth.org.