Supreme Court Decides 340b Entities Cannot Sue Pharmaceutical Manufacturers For Noncompliance With Pharmaceutical Pricing Agreement

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On March 29, 2011, the Supreme Court of the United States decided Astra USA, Inc. v. Santa Clara County.1 In a unanimous decision, the Court determined that 340B entities, including public hospitals and community health centers that provide health services to the poor, could not sue pharmaceutical manufacturers for failing to comply with the Pharmaceutical Pricing Agreement (PPA) that the manufacturers entered into with the Health Resources and Services Administration (HRSA), a unit of the Department of Health and Human Services (HHS).

In essence, the 340B program provides that covered entities, such as the plaintiffs, are to be charged no more than the pre-determined ceiling price derived from the "average" and "best" prices and rebates calculated under the Medicaid Drug Rebate Program. If a manufacturer overcharges a covered entity, HRSA may require the manufacturer to reimburse the covered entity.

Santa Clara County — an operator of several 340B entities — sued, as an alleged third-party beneficiary, Astra and eight other pharmaceutical manufacturers, alleging the companies overcharged 340B healthcare facilities in violation of the PPAs that the companies signed. Both Astra and Santa Clara County agreed that the 340B statute does not provide for a private right of action.

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