Eli Lilly and Johnson & Johnson Sue US Government Over 340B Rebate Models

Legal Action:
Both Eli Lilly and Johnson & Johnson (J&J) have filed lawsuits against the Health Resources and Services Administration (HRSA) over their proposed 340B rebate models12.

340B Program:
The 340B Drug Pricing Program allows hospitals serving low-income and uninsured populations to purchase outpatient drugs at discounted prices. Drugmakers must participate in the program to have their products covered under Medicaid and Medicare Part B2.

J&J's Proposal:
J&J proposed transitioning from point-of-sale discounts to post-dispensing rebates for Stelara and Xarelto. HRSA declared this model illegal without prior secretarial approval and threatened to suspend J&J's pharmaceutical purchasing agreement if implemented13.

Eli Lilly's Proposal:
Eli Lilly proposed a wide-ranging 340B rebate program using a platform developed by Kalderos. The model would apply to all drugs and covered entities, requiring entities to allow the manufacturer to vet and approve 340B claims. HRSA rejected this proposal, leading to the lawsuit14.

Arguments:
Both companies argue that their rebate models are necessary to comply with the Inflation Reduction Act and to prevent duplication of manufacturer discounts. They claim that HRSA's rejection of their models is arbitrary and capricious, violating the Administrative Procedure Act13.

Impact:
The lawsuits reflect rising tensions among drugmakers, hospitals, and HRSA, with hospitals and HRSA arguing that the rebate plans violate 340B statute and create additional administrative burdens2.

Sources:

1. https://essentialhospitals.org/jj-eli-lilly-separately-sue-hrsa-to-authorize-340b-rebates

2. https://www.beckershospitalreview.com/pharmacy/drugmakers-340b-rebate-fight-explained.html

3. https://www.mintz.com/insights-center/viewpoints/2146/2024-11-19-unpacking-johnson-johnsons-lawsuit-over-340b-rebate

4. https://investor.lilly.com/news-releases/news-release-details/lilly-statement-new-340b-litigation