Judge: HHS has authority to preapprove implementation of 340B ‘rebate models’

A U.S. district court judge for the District of Columbia May 15 ruled the Department of Health and Human Services must preapprove the use of 340B “rebate models” before they can be implemented, which the department has not yet done for any of the models pursued by the plaintiff drug companies. 
 
Judge Dabney Friedrich issued the ruling in a case brought by a number of drug companies, finding that when the statute says that in implementing price reductions, “any rebate or discount” taken into account shall be “as provided by the Secretary,” it means that HHS has the authority to approve or reject the proposed rebate models. “Put another way, the statute contemplates that the Secretary may ‘have as a condition’ or ‘stipulate’ how any rebate or discount is accounted for in the price ultimately paid by covered entities.” 
 
In a statement shared with the media, AHA General Counsel and Secretary Chad Golder said, “When Johnson & Johnson first proposed its rebate model, the AHA wrote to the Department of Health and Human Services asking it to prevent J&J’s brazen attempt to take the law into its own hands. Last night, the district court correctly upheld HHS’ authority to do just that. We urge the Department to stand firm by continuing to reject the drug industry’s efforts to undermine the 340B program and harm the hospitals that serve America’s rural and underserved communities. If HHS changes course now, America’s most vulnerable patients will suffer. Hospitals cannot afford to bear the administrative costs that the drug companies will inflict on them with their rebate models, nor can they afford to advance millions of dollars to these drug companies for any period of time, as the rebate models would force hospitals to do.” 
 
The AHA and other groups have filed friend-of-the-court briefs supporting HHS in 340B rebate model cases brought by Eli Lilly, Bristol Meyers Squibb and Novartis; Sanofi; Kalderos; and Johnson & Johnson. 
 
HHS recently announced that it will be “in a position to provide guidance” about the drug industry’s proposed use of “rebate models” by the end of May. 
 
The AHA May 9 submitted a detailed letter urging it to deny drug companies’ requests to approve their unlawful 340B rebate models.