On March 29, the Supreme Court issued a unanimous opinion written by Justice Ruth Bader Ginsburg, which would prevent clinics and hospitals participating in the 340B prescription drug rebate program (340B Program) from suing drugmakers who overcharged such hospitals for prescription drugs. The case, Astra USA, Inc. v. Santa Clara County, was initiated by two California counties in response to allegations that nine drugmakers had overcharged 340B Program-participating hospitals for prescription drugs. The overcharges were estimated to be more than $1 billion since 1999.
The 340B Program requires drugmakers whose drugs are covered by Medicaid to enter into Pharmaceutical Pricing Agreements (PPAs) with the Department of Health and Human Services, which obligate the drugmakers to provide their products to safety net facilities at the “best price.” The Court acknowledged that evidence existed that the drugmakers had not given 340B Program entities their best price, and further that HHS and the Health Resources and Services Administration had failed to adequately monitor and enforce allegations of overcharging. However, the Court determined that the Veterans Health Care Act of 1992, which created the 340B Program, does not provide for a private right of action for participating entities to enforce the obligations under the program. The Court concluded that, given the lack of a private right of action under the statute, it would be “incompatible with the statutory regime” to allow participating entities to enforce the PPAs, which largely mirror the statutory language and obligations, as third-party beneficiaries. The Court said, “Though labeled differently, suits to enforce §340B and suits to enforce PPAs are in substance one and the same.”
The decision overturned a ruling of the Ninth Circuit Court of Appeals, which would have allowed such lawsuits to proceed.