Bristol-Myers Squibb Co has taken legal action against the U.S. Health Resources and Services Administration (HRSA) and the Department of Health and Human Services (HHS). The lawsuit was filed in response to HRSA's refusal of Bristol-Myers' proposed rebate model for the 340B Drug Pricing Program, which the company believes is in violation of federal law. The pharmaceutical company asserts that the statute overseeing the program permits manufacturers to opt for either rebate or discount pricing strategies and claims that HRSA's rejection undermines this provision.
The 340B Drug Pricing Program mandates that drug manufacturers sell medications at reduced prices to eligible healthcare providers, referred to as "covered entities," under specified conditions. Historically, Bristol-Myers has utilized the discount model, which involves upfront price reductions. However, the company argues that this approach has led to program abuses, including violations of safeguards meant to prevent overlap with Medicaid Drug Rebate Program rebates and diversion of discounted drugs to ineligible recipients. Bristol-Myers alleges that these challenges are exacerbated by intermediaries such as commercial pharmacies and third-party administrators who benefit from price variations.
In light of these concerns and what it deems as inadequate enforcement by HHS, Bristol-Myers announced plans in October 2024 to transition to a rebate model for the 340B Drug Pricing Program. This model would entail covered entities paying the commercial price initially and receiving a rebate later to achieve the 340B price. Bristol-Myers argues that this shift, explicitly permitted by the 340B statute, would enhance program integrity by minimizing opportunities for abuse. Despite the statutory authorization for both pricing models, HRSA determined that Bristol-Myers' proposed switch to a rebate model was incongruent with the 340B statute and necessitated pre-approval, prompting Bristol-Myers to challenge this decision through legal channels.