A federal appeals court ruled on Tuesday that drugmakers are not restricted from setting contractual limits on the distribution of discounted drugs under a federal drug discount program known as 340B.
The 340B program requires drug manufacturers to offer discounts to certain health systems and hospitals serving low-income populations. But drugmakers and legislators have accused some systems of abusing the program, and as a result, some manufacturers have set their own limits around participation. Some, for example, have put limits on the number of pharmacies they’ll ship to.
The federal government has argued that drugmakers are not allowed to impose such conditions on how their products are distributed to 340B entities. On Tuesday, a panel of three federal appeals judges disagreed.
The panel concluded that “section 340B merely requires manufacturers to propose to sell covered drugs to covered entities at or below a specified monetary amount. Section 340B is thus silent about delivery conditions,” according to documents from the US Court of Appeals for the District of Columbia Circuit.
“As explained below, we think that this silence preserves — rather than abrogates — the ability of sellers to impose at least some delivery conditions,” Judge Gregory Katsas wrote in an opinion.
The judges added that they “do not foreclose the possibility that other, more onerous conditions might violate the statute.”
Novartis, which was an appellee in the case, said Wednesday that the ruling “further validates our view of the 340B statute and that our contract pharmacy policy is fully consistent with the statutory requirements governing the program.”
United Therapeutics, another appellee, declined to comment. The Health Resources and Services Administration, which brought the appeal alongside the Department of Health and Human Services, told Endpoints News that it is “reviewing the D.C. Circuit Court’s decision.” HHS did not respond to a request for comment as of press time.
The pharmaceutical industry’s DC-based lobbying group praised the decision on Wednesday. Deputy VP of public affairs Nicole Longo said in a statement that it “further underscores the need for Congress to comprehensively fix the 340B program and ensure it works to lower costs for vulnerable patients.”
Six bipartisan lawmakers released a draft bill in February that aims to improve the “stability and transparency” of the 340B drug discount program, including a proposal to institute user fees to help oversee the program.
The Third Circuit Court of Appeals sided with pharma companies in a similar case last January, ruling that “legal duties do not spring from silence.”