Circuit sides with manufacturers in latest 340B contract pharmacy case

Last week, the US Court of Appeals for the District of Columbia (DC) ruled that Section 340B of the Public Health Service Act does not prohibit pharmaceutical manufacturers from imposing conditions on the distribution of discounted drugs to covered entities in the program, noted Sophia Gaulkin and Alan Kirschenbaum of law firm Hyman Phelps & McNamara.

In  United Therapeutics Corporation v. Carole Johnson, et al./Novartis Pharmaceuticals v. Carole Johnson (consolidated cases), the Court found that the conditions set by Swiss pharma giant Novartis (NOVN: VX) and US biotech United Therapeutics (Nasdaq: UTHR) on covered entities did not violate the 340B statute, although more restrictive conditions could violate the law.

The 340B statute requires drug manufacturers to sell certain drugs at discounted ceiling prices to covered entities, which are defined by statute to include certain types of safety net hospitals, health centers, and clinics receiving federal grants. Initially, drug manufacturers were required to offer these discounts only to the in-house pharmacies of covered entities. In 2010, the Health Resources and The DC Circuit joins the Third Circuit, which decided in favor of manufacturers on similar grounds (see  here).