gavel on top of a pile of bills and pills

Federal Court Halts Implementation of 340B Dispute Resolution Rule

By Sravya Chary

The U.S. District Court for the Southern District of Indiana’s recent decision to grant Eli Lilly’s motion for a preliminary injunction rightfully halted the implementation of a dispute resolution rule for the 340B Drug Pricing Program.

The Alternate Dispute Resolution Final Rule (“ADR Final Rule”), issued on December 10, 2020, attempted to settle oft-occurring battles between pharmaceutical manufacturers and 340B covered entities. A few weeks later, the Department of Health and Human Services (HHS) released a 340B advisory opinion defining the department’s understanding of the statute.

The 340B Drug Pricing Program was established by Congress in 1992 with the intent to stretch federal resources to serve the nation’s most vulnerable patients. In practice, however, the program has deviated from its original intent.

The ADR Final Rule attempted to ensure that 340B discounted drugs could be accessed through 340B contract pharmacies. It stipulated that 340B contract pharmacies would receive the same discount on pharmaceuticals as 340B covered entities, such as safety net hospitals. And it imposed a penalty on manufacturers who failed to offer this discount to contract pharmacies. However, it did little to guarantee that these discounts would benefit patients.

In response, three pharmaceutical manufacturers, Eli Lilly, AstraZeneca, and Sanofi filed separate lawsuits with the goal of reversing HHS’ 340B advisory opinion. Further, on January 25, 2021, Eli Lilly filed a motion for a preliminary injunction to challenge the ADR Final Rule.

On March 16, 2021, the U.S. District Court for the Southern District of Indiana granted Eli Lilly’s motion for a preliminary injunction, thus halting implementation of the ADR Final Rule. Eli Lilly’s motion was filed on the premise that the ADR Advisory Rule did not follow the Administrative Procedure Act.

U.S. District Judge Sarah Evans Barker found that the ADR Rule was “[…] determined to have been promulgated without an adequate, fair opportunity for advance notice and comment, [and therefore] Plaintiffs would be deprived the right […] to provide meaningful input into the agency’s decision at the time […] a harm which the Court would be unable to fully remedy after the fact.”

This fair, legal assessment plays an important role in ensuring that the discounts incurred from the 340B program do not act as an additional revenue stream for 340B entities and contract pharmacies, while showing little-to-no direct benefit for 340B patients.

According to Alliance for Integrity and Reform 340B (AIR340B), “[contract] pharmacies are not proven to benefit patients even when they receive discounts through the 340B program. In fact, the only data that exist on whether patients see a benefit from this growing program shows that in most cases they do not.”

Further, the Berkeley Research Group estimated that 340B drugs dispensed through contract pharmacies had a 72% profit margin compared to the 22% profit margin of drugs purchased at wholesale acquisition cost.

Moving forward, HHS must find another avenue to resolve disputes between pharmaceutical manufacturers and 340B entities in a fair and unbiased manner. Additionally, HHS must ensure 340B discounted drugs are accessible through contract pharmacies in a manner that guarantees these discounts benefit vulnerable patients, rather than for-profit intermediaries.


The above opinions are wholly my own and in no way represent the opinions of my affiliated institutions.

Sravya Chary

Sravya Chary is a manager in the pharmaceutical industry, a Master of Bioethics (MBE) candidate at Harvard Medical School, and a Petrie-Flom student fellow for the 2020-2021 academic year.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.