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Court rejects 340B drug-price suits

March 29, 2011 at 12:37 PM

WASHINGTON, March 29 (UPI) -- The U.S. Supreme Court ruled unanimously Tuesday that local providers of medical service for the poor cannot sue drug companies for overcharging.

Section 340B of the Public Health Services Act puts ceilings on prices drug manufacturers may charge for medications sold to specified healthcare facilities. The facilities are called 340Bs, local providers of medical care for the poor. The ceiling-price program is supervised by the Health Resources and Services Administration, part of the Department of Health and Human Services.

The 340B program is tied to the earlier-enacted, much larger Medicaid Drug Rebate Program, under which manufacturers gain Medicaid coverage for their drugs, court records say. To qualify for participation, a manufacturer must enter into a standardized agreement with Health and Human Services to provide rebates to states on their Medicaid drug purchases.

Santa Clara County, Calif., which operates several 340B entities, sued Astra USA Inc. and eight other pharmaceutical companies, alleging they were overcharging 340B entities in violation of their agreements. The county seeks damages for breach of contract.

A federal judge dismissed the complaint, but a federal appeals court reversed. The appellate court agreed 340B entities had no rights under the law, but could sue drug makers as third-party beneficiaries of the agreements between the companies and Health and Human Services.

In a unanimous opinion by Justice Ruth Bader Ginsburg, the Supreme Court reversed the appeals court, saying suits by 340B entities to enforce ceiling-price contracts between drug manufacturers and Health and Human Services "are incompatible with the statutory regime" -- had no basis in federal law.

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