Sanofi Aventis US LLC v. United States Department of Health and Human Services, No. 21-3167 (3d Cir. 2023)Annotate this Case
Drug makers participating in Medicare or Medicaid must offer their drugs at a discount to certain “covered entities,” which typically provide healthcare to low-income and rural individuals, 42 U.S.C. 256b, 1396r-8(a)(1), (5) (Section 340B). Initially, few covered entities had in-house pharmacies. A 1996 HHS guidance stated that covered entities could use one outside contract pharmacy each; a 2010 HHS guidance stated that covered entities could use an unlimited number of contract pharmacies. Drug makers thought that contract pharmacies were driving up duplicate discounting and diversion and adopted policies to limit any covered entity’s use of multiple contract pharmacies. A 2020 HHS Advisory Opinion declared that Section 340B required drug makers to deliver discounted drugs to an unlimited number of contract pharmacies.
In 2010, Congress told HHS to establish a process for drug makers and covered entities to resolve Section 340B–related disputes. In 2016, HHS issued a notice of proposed rulemaking and accepted comments on the proposed ADR Rule. HHS subsequently listed the proposed rule as withdrawn. In 2020, HHS stated that it had just “paus[ed] action on the proposed rule,” responded to the four-year-old comments. and issued a final ADR Rule.
Drug companies sued. The Third Circuit held that Section 340B does not require drug makers to deliver discounted drugs to an unlimited number of contract pharmacies. HHS did not violate the APA by purporting to withdraw the proposed ADR Rule before later finalizing it.