The Supreme Court held today in Astra USA, Inc. v. Santa Clara County, that the federal statute governing contracts between the Department of Health and Human Services (HHS) and drug companies to provide discounted drug prices to safety-net health care providers does not allow those providers to sue the companies when prices exceed contractual caps.
Federal law instructs HHS to enter into contracts with drug manufacturers to offer discounted prices for medication to “340B entities,” which include public hospitals, community health centers and other safety-net health care providers. Santa Clara County, which operates several of these providers, claimed that drug manufacturers breached their contract by charging them more than the contracts allow. Santa Clara argued that as the intended beneficiaries of the contracts between the government and the drug manufacturers, the healthcare providers should be allowed to sue to enforce the contract. This would ensure lower drug prices in situations where the federal government, for whatever reason, has chosen not to sue to enforce the contract’s terms.
The Court held that the statute, which mandates the contractual price caps, does not provide a private right to enforce the caps. The Court found that Congress intentionally centralized enforcement of the caps within HHS and therefore, allowing private suits to proceed “could spawn a multitude of dispersed and uncoordinated lawsuits by 340B entities.” This would result in a substantial risk of conflicting decisions related to the price caps. The opinion also noted that Congress’s prohibition against disclosure of pricing information regarding particular manufacturers is inconsistent with a private right of action because it is “the very information necessary to determine whether [a private party’s] asserted rights have been violated.”
As a result of this decision, drug manufacturers will have less incentive to abide by their contractual obligation to sell medication at a discounted rate.