A federal appeals court has revived a proposed class action accusing four major drugmakers of conspiring to restrict a government-mandated drug discount program, allegedly driving up costs for safety-net hospitals and clinics serving low-income patients.
The lawsuit, brought by Mosaic Health Inc. and Central Virginia Health Services Inc., claims Sanofi SA’s (NASDAQ:SNY) Sanofi-Aventis U.S., Eli Lilly and Co (NYSE:LLY)., Novo Nordisk A/S (NYSE:NVO), and AstraZeneca Plc’s (NASDAQ:AZN) AstraZeneca Pharmaceuticals LP coordinated to limit price breaks on diabetes drugs provided through the Section 340B Drug Discount Program.
The program requires manufacturers of Medicare and Medicaid-covered drugs to sell them to eligible providers at or below a set ceiling price.
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For years, the drugmakers offered these discounts for purchases made through retail pharmacies, helping lower costs for vulnerable patient populations. But starting in 2020, the companies allegedly moved in lockstep to restrict access.
According to plaintiffs, the firms lobbied the federal government, sometimes through shared lobbying firms and industry groups, to curb the program’s scope for diabetes medications. When those efforts failed, they each announced similar discount limits within months of one another.
AstraZeneca was the first to notify the Department of Health and Human Services in July 2020 that it would end 340B discounts for most contract pharmacies starting October of that year. Sanofi followed days later, conditioning discounts on providers sharing prescription-claims data with a Sanofi vendor.
In August 2020, Eli Lilly announced it would stop honoring discounts except in limited cases, imposing additional requirements plaintiffs said were impractical. Novo Nordisk then declared in December 2020 that it would halt most 340B discounts beginning January 2021.
The plaintiffs argue these coordinated restrictions caused significant financial harm to clinics and their low-income patients.
They initially filed suit in federal court, alleging violations of federal and state antitrust laws and state common law. The district court dismissed the complaint and denied their request to amend, finding insufficient evidence of a conspiracy.
However, the U.S. Court of Appeals ruled that the proposed amended complaint plausibly alleges a horizontal price-fixing conspiracy.
The court pointed to similarities in timing, substance, and effect of the defendants’ policies, along with circumstantial “plus factors” such as shared economic motives, actions contrary to individual self-interest, and extensive interfirm communications.
The appellate panel vacated the district court’s dismissal and sent the case back, directing that plaintiffs be allowed to file their second amended complaint.
New analysis reveals that states are losing billions in Medicaid rebates due to ineligible claims on discounted 340B drugs, driving up the overall net cost of prescription drug coverage.
Researchers released a report examining how state laws requiring drug manufacturers to work with contract pharmacies under the 340B Drug Pricing Program could impact state Medicaid programs.
According to the report, these laws could result in an additional $1.2 billion in annual Medicaid spending, with $437 million allocated directly to state budgets.
In December 2024, the Health Resources and Services Administration (HRSA) warned Sanofi about its proposed credit model for certain outpatient drugs under the 340B program.
Last year, Bristol-Myers Squibb Co. (NYSE:BMY) filed a lawsuit against HRSA and the U.S. Department of Health and Human Services, alleging that HRSA’s rejection of its proposed rebate model for the 340B Drug Pricing Program violates federal law.
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