Today, the D.C. Circuit Court of Appeals issued its decision regarding HRSA’s enforcement authority to prevent contract pharmacy restrictions imposed by Novartis and United Therapeutics.  Novartis limits hospital covered entities to only one contract pharmacy and United Therapeutics will not deliver to contract pharmacies registered after November 2020 and requires claims submission to 340B ESP.  The D.C. Circuit limited its decision to a review of these policies only and determined that HRSA was incorrect that these restrictions violate the 340B statute.  The court held that the 340B statute “does not categorically prohibit manufacturers from imposing conditions on the distribution of covered drugs to covered entities.”  The court left open the possibility that other contract pharmacy restrictions might violate the statute.

Covered entities are likely to view the decision as undermining the congressional intent of the 340B program and undercutting HRSA guidance allowing covered entities to use an unlimited number of contract pharmacy arrangements to serve their patients.  It also conflicts with the recently-finalized alternative dispute resolution process established by HRSA to manage disputes between covered entities and manufacturers.  While this decision is a significant blow to covered entities, it does not address state laws that require manufacturers to deliver 340B drugs to contract pharmacies.

This decision is the second of three circuit court opinions addressing whether HRSA’s enforcement actions against manufacturer restrictions on the use of contract pharmacies were proper.  In January 2023, the Third Circuit similarly sided with manufacturers in concluding that manufacturer restrictions were allowable.  The Seventh Circuit, which held oral arguments in October 2022 on whether Eli Lilly’s contract pharmacy restrictions are lawful, is pending.