Big pharma sues to block Illinois drug discount law

The drug manufacturers argue the state law is preempted by a federal law requiring them to sell certain drugs at discounted rates for non-profit hospitals and clinics.(CN) — A group of pharmaceutical companies sued Illinois Attorney General Kwame Raoul to block a state law requiring the drug giants to send discounted drugs to any and all pharmacy providers.“HB 2371 expands the federal 340B program requirements in a way that shifts financial burdens onto manufacturers, reducing revenue without just compensation and with no justified public use,” attorney Matthew Owen, representing AbbVie Inc. and other big pharmaceutical companies in one of two lawsuits filed in Illinois federal court.Drug manufacturers are required to participate in the 340B program and its price controls in order to have their drugs covered by Medicaid and Medicare Part B. The program directs manufacturers to sell certain drugs at heavily discounted rates to select non-profit hospitals and clinics called “covered entities.”The program subsidizes these covered entities by allowing them to buy drugs cheaply — as low as a penny per unit in some cases — while charging patients the drug’s full commercial price.Covered entities pocket the difference, according to Owen. This doesn’t just hurt manufacturers, but also patients.The manufacturers accused covered entities of gaming the system to maximize the number of units they can purchase at those heavily discounted 340B rates, and that Raoul is facilitating the slight of hand.Illinois Governor JB Pritzker signed HB 2371 on Friday to compel drug manufacturers to transfer 340B priced drugs to commercial pharmacies purporting to be working with covered entities.Although the federal law doesn’t mention commercial pharmacies, the Illinois law specifically states drug manufacturers cannot restrict, deny or otherwise interfere with the contractual relationship between covered entities and for-profit pharmacies.In other words, it forces manufacturers to send all the cheap drugs the retailers can sell.Over the years, manufacturers have put some limitations on how many contracts a covered entity can enter into so to limit for-profit pharmacies serving the healthy and wealthy from taking advantage of the 340B system.HB 2371 overrides those limitations and also restricts manufacturers from collecting data related to the federal program from covered entities.“It is beyond dispute that commercial pharmacies and their third-party administrators are profiting from 340B-priced sales. And it is also beyond dispute that, without HB 2371, AbbVie would complete far fewer 340B priced sales. As a result, Illinois’ law forces AbbVie to provide more 340B priced drugs and the corresponding profits to hospitals, their commercial pharmacies and commercial third-party administrators than federal law requires,” Owen said in the 63-page complaint.Novartis Pharmaceuticals made a nearly identical argument in its own complaint, asserting that HB 2371 cannot coexist with federal law.Attorney Stephen Siegel even accused covered entities of using the profits made from the 340B program to make deals with sports teams for naming rights, to launch outside projects or to build luxury apartments and office buildings in the 56-page complaint.Nearly two dozen other states have passed contract pharmacy laws akin to Illinois’s HB 2371, creating a patchwork of variable regulation the plaintiffs say make it impossible for the federal government to manage compliance with the 340B program.The pharmaceutical companies say the Illinois law violates the supremacy clause of the Constitution by changing the terms of the 340B program to require unfettered for-profit pharmacy partnership.If Congress wanted commercial pharmacies to benefit from the discounted prices, they reason, it wouldn’t have applied the law specifically to the limited list of covered entities.“Congress carefully limited the program and adopted certain safeguards to ensure that manufacturers’ discounted drugs would be used to help needy patients rather than become a buy-low, sell-high scheme for commercial entities,” Owen said.AbbVie asked the court to block Raoul from enforcing HB 2371, and to declare the federal program does not require drug manufacturers to provide discounted drugs to any and all for-profit pharmacy partners of covered entities.Allergan Inc., Durata Therapeutics Inc., AbbVie Products LLC, Pharmacyclics LLC and Allergan Sales LLC joined AbbVie’s Friday suit.Neither party could not be reached by press time to comment on the lawsuit.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads