Lilly sues U.S. to change hospital drug discount payments

The Wall Street Journal – Friday, November 15, 2024
By Peter Loftus

Eli Lilly sued a federal health agency that has blocked the company’s plan to tighten the way it provides lucrative drug discounts to hospitals.

Lilly is the second drugmaker this week to go to court over the issue, a sign that the pharmaceutical industry is so fed up with the drug discounts that it is trying to overhaul them.

The drugmaker, the biggest in the U.S. by market value, filed the lawsuit Thursday in federal court in Washington, D.C., against the heads of the Department of Health and Human Services and one of its agencies, seeking a court ruling that would allow Lilly to proceed with its plan.

Lilly’s lawsuit follows one filed Tuesday by Johnson & Johnson, challenging the federal Health Resources and Services Administration’s rejection of J&J’s plan to overhaul how it provides required drug discounts to certain hospitals.

The agency also denied Lilly’s plan, saying it wasn’t consistent with the 340B law. “HRSA does not have the authority to arbitrarily reject this model, which serves the original goals of the 340B program and improves transparency, efficiency and program integrity,” Lilly said.

HRSA didn’t immediately respond to a request for comment.

The lawsuits are the latest flare-up in a battle over the federal 340B program, created in 1992 to require drugmakers to sell at a discount outpatient drugs to hospitals and clinics that serve low-income and uninsured patients.

Drugmakers say the program has strayed from its original intent by allowing large hospital systems to buy drugs cheaply and then dispense them at a markup. Hospitals say they rely on the discounts to defray costs of serving disadvantaged patients.

Like J&J, Lilly proposed changing the way it provides the required discounts. Under Lilly’s plan, hospitals covered by the 340B program would order drugs upfront at full price, and then receive cash rebates from Lilly representing the discount, instead of getting the discounted price right away.

Lilly said the change was intended partly to prevent hospitals from billing the federal-state Medicaid program for drugs acquired at 340B prices, which is prohibited by law.

The company also said the current way of providing the discount is ripe for abuse because it can allow hospitals to apply 340B prices to prescriptions that shouldn’t be eligible, such as those reimbursed by Medicaid.

Lilly and other drugmakers pay separate mandatory rebates to Medicaid, which covers lower-income patients, and federal law bars duplicate discounts for the same prescription.

Access this article at its original source.