The Health Resources and Services Administration (HRSA) recently indicated that it lacks authority to enforce 340B Drug Pricing Program (340B Program) guidance in response to Eli Lilly and Co.’s notice to 340B covered entities that contract pharmacies will no longer be eligible to receive formulations of its erectile dysfunction drug Cialis at 340B prices. Eli Lilly’s notice challenges HRSA’s longstanding interpretation of the 340B statute in its contract pharmacy guidance that has allowed contract pharmacies to access drugs at 340B prices, effectively inviting HRSA to defend its contract pharmacy guidance and statutory authority in litigation. Notably, HRSA appears to have taken no action against Eli Lilly. Rather, HRSA indicated in a public statement that its guidance documents are unenforceable, which is consistent with the Administration’s broader push to prohibit enforcement actions tied to agency guidance. Given this and HRSA’s response to Eli Lilly, it appears unlikely that HRSA would take action against either manufacturers or covered entities in regard to 340B Program compliance matters unless either side was acting in direct violation of a statutory program requirement or in regard to one of the areas HRSA has been found to have regulatory authority. This client alert provides an overview of these developments and their potential impact on 340B stakeholders.
Section 340B of the Public Health Service Act requires drug manufacturers to sell covered outpatient drugs to covered entities at or below a defined 340B ceiling price.1 In 1996, HRSA issued guidance permitting covered entities to contract with a pharmacy