September 28, 2010—The U.S. Supreme Court agreed today to review a federal appellate court decision recognizing the right of 340B covered entities to sue drug manufacturers for allegedly charging them prices above the program's statutorily defined ceiling prices.
The Department of Health and Human Services' Inspector General, meanwhile, announced a major new enforcement initiative to compel drug companies to report their average manufacturer prices (AMPs) in a timely fashion. In 2008, it said, more than half of all manufacturers did not fully comply with quarterly requirements for reporting AMP data and more than three-fourths did not fully comply with their monthly AMP submission requirements. AMP is a key factor in the determination of 340B prices and Medicaid rebates and reimbursement.
Among the concerns raised in the report is the potential inability of both the Health Resources and Services Administration (HRSA) to establish 340B ceiling prices and the Centers for Medicare and Medicaid Services (CMS) to calculate Medicaid rebate and federal upper limit (FUL) amounts if the quarterly or monthly AMPs are not reported in a timely manner.
The Office of Inspector General (OIG) said it is working with CMS to identify and penalize noncompliant manufacturers through the civil monetary penalty process. It noted in a special advisory bulletin to manufacturers that it has the authority to levy penalties of $10,000 per day against those found out of compliance.
Supreme Court's Announcement
The Supreme Court's decision to accept the 340B case, Santa Clara v. Astra (Case No. 97-1273), is a victory for nine leading manufacturers, which are challenging a federal appeals court's December 2009 ruling that 340B providers in Santa Clara and Santa Cruz counties in California have a common law right to sue the firms as the intended beneficiaries of 340B pricing agreements between the companies and the federal government. The 340B statute does not explicitly state that 340B providers possess such a right.
The Supreme Court could announce the date for oral arguments in the case as soon as Oct. 4, the first day of its 2010-11 term.
Lawyers for the manufacturers and the counties could not be immediately reached for comment on today's development in the closely watched and potentially groundbreaking case. They have spent much of the summer sparring in federal district court in San Francisco over the scope of discovery in the lawsuit. Lower courts have granted the counties unprecedented access to the drug firm's closely guarded internal pricing data.
The Drug Discount Monitor will report in greater depth on the fallout from today's Supreme Court announcement and the OIG enforcement initiative in coming days.