Lilly sues US agency over blocking of drug-rebate program

(Reuters) – Eli Lilly (NYSE:) said on Thursday it sued the federal Health Resources and Services Administration (HRSA) over allegedly blocking the company’s plan to change the way it offers drug discounts to hospitals.

The case centers on the federal 340B program, in which drugmakers provide discounts to eligible healthcare providers that serve low-income populations. Drugmakers must participate in the program to receive funds from government health insurance programs like Medicare and Medicaid.

Eli Lilly said its program is designed to pay cash directly to 340B covered entities every week, ensuring they pay no more than the 340B ceiling price.

The company added that the HRSA, which is part of the U.S. Health and Human Services Department, rejected Lilly’s model stating that it was inconsistent with the 340B law, Lilly said in a lawsuit filed in a federal court in Washington D.C.

HRSA did not immediately respond to a Reuters request for comment.

Lilly follows fellow drugmaker Johnson & Johnson (NYSE:), who sued the Health and Human Services Department on Tuesday, accusing the agency of blocking its plan to sell its psoriasis treatment Stelara and blood thinner Xarelto to some hospitals at full price before applying drug rebates.

The 340B program has been the focus of broad legal scrutiny over the years.

A U.S. appeals court last year said drug manufacturers can limit health providers’ use of outside pharmacies for dispensing drugs under the 340B program. HHS had ordered the drugmakers to stop curtailing sales to contract pharmacies.