September 13, 2013 –AIDS Healthcare Foundation (AHF) has filed suit against drug manufacturer GlaxoSmithKline (GSK) claiming that the drug maker violated California law when it reportedly declined to credit AHF for alleged overpayments exceeding $2 million over nine years on 340B covered outpatient drugs.[ms-protect-content id=”2799″]
GSK did not respond to a request for comment on the lawsuit.
In a Sept. 6 complaint filed in California Superior Court, AHF says it “discovered within the last six months through routine internal audit activity, and then more detailed claims analysis, that it overpaid GSK by over $2 million for outpatient drugs purchased all the way back to 2005.”
“These drugs were dispensed to patients eligible to receive the discounted drugs under the terms of the 340B program, and AHF was therefore entitled to the discounted price at the time of the drugs’ purchases, but did not receive that price,” the group alleges. “Rather, AHF received the non-discounted price that applied to non-340B eligible patients.”
AHF says it informed GSK in a July 30 letter that it had been overcharged for 7,134 items purchased at non-340B pricing between 2005 and 2013. It says it asked GSK to reclassify those transactions as 340B purchases and requested a credit “of at least $2.2 million as result of that reclassification.”
“AHF did not receive a response to its letter from GSK,” the group says, leaving it with no other recourse than to file suit “to pursue the full amounts it is owed.” While the Affordable Care Act tasked the Health Resources and Services Administration (HRSA) three years ago with promulgating regulations to create a dispute resolution process for covered entities and manufacturers, the agency has repeatedly said it will not do so until Congress makes funding available.
AHF’s suit alleges that GSK violated California law by failing to adhere to its federal obligations under the 340B statute. Specifically, AHF alleges that GSK violated California’s Unfair Competition Law by engaging in an “unlawful, unfair, or fraudulent” business practice, and by using “unfair, deceptive, untrue, or misleading advertising.” Further AHF alleges that GSK has breached its contract with wholesaler Cardinal Health, a contract to which AHF is a third-party beneficiary. In addition, AHF alleges three common law causes of action, including negligence, unjust enrichment, and a breach of the covenant of good faith and fair dealing.
This is not the first time a 340B covered entity has attempted to enforce the 340B ceiling price requirements through litigation. In Astra USA, Inc. v. Santa Clara County, a case that went all the way to the U.S. Supreme Court, a provider filed suit seeking to enforce the Pharmaceutical Pricing Agreement (PPA) between the manufacturer and the Department of Health and Human Services. While the Supreme Court unanimously ruled that covered entities cannot enforce the terms of a PPA, AHF’s suit relies on different theories.[/ms-protect-content]