Eli Lilly Sues HRSA

(Reuters) – Eli Lilly (NYSE:LLY) announced on Thursday that it has initiated a lawsuit against the federal Health Resources and Services Administration (HRSA).

The lawsuit contends that HRSA has allegedly hindered the company’s efforts to modify its drug discount offerings to hospitals. The dispute revolves around the federal 340B program, which mandates that drugmakers provide discounts to qualified healthcare providers serving low-income populations. Participation in this program is essential for drugmakers to secure funding from government health insurance programs such as Medicare and Medicaid.

Eli Lilly asserts that its program aims to provide cash directly to 340B covered entities weekly, ensuring they do not pay more than the 340B ceiling price. However, the HRSA, a part of the U.S. Department of Health and Human Services, has reportedly rejected Lilly's proposed model, claiming it does not align with 340B law. This assertion was detailed in a lawsuit filed in a federal court located in Washington D.C.

HRSA has not yet responded to a request for comment from Reuters.

Lilly's legal action follows a similar lawsuit by Johnson & Johnson (NYSE:JNJ), which sued the Health and Human Services Department earlier this week. Johnson & Johnson accuses the agency of obstructing its plan to sell its psoriasis treatment Stelara and blood thinner Xarelto to certain hospitals at the full price before applying drug rebates.

The 340B program has faced extensive legal scrutiny over the years. Last year, a U.S. appeals court ruled that drug manufacturers are permitted to limit healthcare providers' use of outside pharmacies for dispensing drugs under the 340B program. This ruling came after HHS directed drugmakers to cease limiting sales to contract pharmacies.