In a unanimous decision today, the Supreme Court limited certain health care facilities’ ability to sue drug manufacturers for overcharging them in Astra USA v. Santa Clara County.
Section 340B of the Public Health Services Act imposes ceilings on prices that drug manufacturers may charge for medications sold to specified health care facilities (called 340B entities). The 340B ceiling-price program is superintended by the Health Resources and Services Administration, part of the Department of Health and Human Services. In the 340B Program’s contract, called the Pharmaceutical Pricing Agreement (PPA), manufacturers agree to charge covered entities no more than predetermined ceiling prices.
Santa Clara County, operator of several 340B entities, filed suit against drug company Astra and eight other pharmaceutical companies, alleging that they were overcharging 340B entities in violation of the PPAs. Asserting that 340B entities are the intended beneficiaries under the PPAs, the County sought compensatory damages for breach of contract. The District Court dismissed the complaint, concluding that the PPAs conferred no enforceable rights on 340B entities. Reversing, the Ninth Circuit held that, while 340B entities have no right to sue under the statute, they could proceed against drug manufacturers as third-party beneficiaries of the PPAs.
The Supreme Court reversed the Ninth Circuit, holding that suits by 340B entities to enforce ceiling-price contracts running between drug manufacturers and the Secretary of HHS are incompatible with the existing statutory regime, which gives HHS authority to seek relief, and that 340B entities have no private right of action under the statute and no ability to sue the drug companies.