Case 1:24-cv-03496-DLF     Document 33     Filed 03/06/25     Page 1 of 3

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SANOFI-AVENTIS U.S. LLC,

Plaintiff,

v.

UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES, et al.,

Defendants.

Case No. 24-CV-3496 (DLF)

UNOPPOSED MOTION OF AMERICAN HOSPITAL ASSOCIATION, NATIONAL
ASSOCIATION OF CHILDREN’S HOSPITALS, INC. D/B/A CHILDREN’S
HOSPITAL ASSOCIATION, ASSOCIATION OF AMERICAN MEDICAL
COLLEGES AND AMERICA’S ESSENTIAL HOSPITALS TO FILE
AMICI CURIAE BRIEF IN SUPPORT OF DEFENDANTS

The American Hospital Association, the National Association of Children’s Hospitals, Inc.

d/b/a  Children’s  Hospital  Association,  the  Association  of  American  Medical  Colleges,  and

America’s  Essential  Hospitals  (collectively,  the  Proposed  Amici)  respectfully  move  this  Court,

pursuant  to  Local  Civil Rule  7(o),  for  leave to  file  the  attached  brief in  support  of  Defendants

(Exhibit A). Proposed Amici also submit a Proposed Order.

Amici  are  four  hospital  associations  whose  members  receive  340B  discounts.  Sanofi-

Aventis U.S. LLC’s “Integrity Initiative” will grievously harm those hospitals and the patients they

care for. Amici therefore have a strong interest in preserving the Health Resources and Services

Administration’s lawful decision to reject that rebate policy, so that Amici’s members can continue

to provide high-quality, affordable medical care to their underserved patients and communities.

“Courts have wide discretion in deciding whether  to grant  a third  party  leave to  file an

amicus  brief.”    Search  of  Info.  Assoc.  with  @mac.com  that  is  Stored  at  Premises

Case 1:24-cv-03496-DLF     Document 33     Filed 03/06/25     Page 2 of 3

Controlled by Apple, Inc., 13 F. Supp. 3d 157, 167 (D.D.C. 2014).  “Generally, a court may grant

leave to appear as an amicus if the information offered is timely and useful,” Ellsworth Assocs. v.

United States, 917 F. Supp. 841, 846 (D.D.C. 1996) (quotation marks omitted), or when  Amici

have  “relevant  expertise  and  a  stated  concern  for  the  issues  at  stake  in    case,”  District  of

Columbia v. Potomac Elec. Power Co., 826 F. Supp. 2d 227, 237 (D.D.C. 2011); see Ellsworth,

917 F. Supp. at 846 (a court should grant a motion to participate as amicus curiae when the movant

has a “special interest in th litigation as well as a familiarity and knowledge of the issues raised

therein that could aid in the resolution of this case”); N. Mariana Islands v. United States, No. 08-

1572, 2009 WL 596986, at *1 (D.D.C. Mar. 6, 2009) (holding that “the filing of an amicus brief

should be permitted if it will assist the judge ‘by presenting ideas, arguments, theories, insights,

facts or data that are not to be found in the parties’ briefs”).

Amici  easily  satisfy  this  standard.    As  the  attached  proposed  brief  demonstrates,  Amici

provide the Court with specific insights, information, and legal arguments about the operation of

the 340B Program and the consequences of the rebate policies.  Amici further demonstrate that if

the  Court  were to  grant  Sanofi’s  summary judgment  motion,  their  member-hospitals  would  be

severely harmed, thereby underscoring their “concern for the issues at stake,” Potomac Elec., 826

F. Supp. 2d at 237, and “special interest” in the litigation, Ellsworth, 917 F. Supp. at 846.

This Court has recognized Movants’ value as Amici in the past.  Specifically, it granted a

similar  motion  in  Novartis  Pharms.  Corp.  v.  Espinosa,  No.  21-cv-1479,  2021  WL  5161783

(D.D.C.  Nov.  5,  2021).    See  Minute  Order  (June  29,  2021).    And  earlier  this  week,  the  Court

granted similar motions in cases brought by Novartis, Bristol Myers Squibb, and Eli Lilly.

Proposed  Amici  consulted  with  counsel  for  Plaintiffs  and  Defendants.  Sanofi  does  not

oppose the Motion. The government takes no position on Amici’s Motion.

2

Case 1:24-cv-03496-DLF     Document 33     Filed 03/06/25     Page 3 of 3

Accordingly, Proposed Amici respectfully ask the Court to grant their motion for leave to

file an amici curiae brief.

March 6, 2025

Respectfully submitted,

                /s/
Chad Golder, Fed. Bar No. 976914
American Hospital Association
2 City Center, Suite 400
800 10th Street, NW
Washington, DC 20001-4956
202-626-4624
cgolder@aha.org
Counsel for Amici Curiae

3

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 1 of 34

EXHIBIT A

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 2 of 34

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SANOFI-AVENTIS U.S. LLC,

Plaintiff,

v.

UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES, et al.,

Defendants.

Case No. 24-CV-3496 (DLF)

AMICI CURIAE BRIEF OF AMERICAN HOSPITAL ASSOCIATION, NATIONAL
ASSOCIATION OF CHILDREN’S HOSPITALS, INC. D/B/A CHILDREN’S HOSPITAL
ASSOCIATION, ASSOCIATION OF AMERICAN MEDICAL COLLEGES AND
AMERICA’S ESSENTIAL HOSPITALS IN SUPPORT OF DEFENDANTS

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 3 of 34

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .......................................................................................................... ii

STATEMENT OF INTEREST ........................................................................................................1

INTRODUCTION ...........................................................................................................................2

ARGUMENT ...................................................................................................................................6

I.

The Structure, History, And Purpose Of The 340B Statute Precludes
Sanofi’s “Integrity Initiative” .....................................................................................6

A.  Sanofi’s “Integrity Initiative” is incompatible with the 340B statute’s

structure..............................................................................................................7

B.  Sanofi’s “Integrity Initiative” is incompatible with the 340B statute’s

history ..............................................................................................................14

C.  Sanofi’s “Integrity Initiative” is incompatible with the 340B statute’s

purpose. ............................................................................................................18

CONCLUSION ..............................................................................................................................25

CERTIFICATE OF COMPLIANCE .............................................................................................27

i

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 4 of 34

TABLE OF AUTHORITIES

Cases

Americans for Clean Energy v. Environmental Protection Agency,

864 F.3d 691 (D.C. Cir. 2017)  .............................................................................................14

American Hospital Association v. Azar, 967 F.3d 818 (D.C. Cir. 2020), rev’d sub nom.

American Hospital Association v. Becerra, 596 U.S. 724 (2022) ........................................19

American Hospital Association v. Becerra, 596 U.S. 724 (2022)  ...............................................5

American Hospital Association v. Department of Health & Human Services,
  No. 4:20-cv-08806, 2021 WL 616323 (N.D. Cal. Feb. 17, 2021)  .........................................9

American Hospital Association v. Hargan, 289 F. Supp.3d 45 (D.D.C. 2017)  .........................19

Astra USA, Inc. v. Santa Clara County, 563 U.S. 110 (2011) ............................................ passim

Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281

(1974)  ...................................................................................................................................10

Bullcreek v. Nuclear Regulatory Commission, 359 F.3d 536 (D.C. Cir. 2004)  .........................13

Cares Community Health v. United States Department of Health and Human Services,

944 F.3d 950 (D.C. Cir. 2019)  ...............................................................................................4

CTS Corporation v. Waldburger, 573 U.S. 1 (2014)  .................................................................18

Director, Office of Workers’ Compensation Programs v. Newport News Shipbuilding
  & Dry Dock Co., 514 U.S. 122 (1995)  ................................................................................25

Garland v. Ming Dai, 593 U.S. 357 (2021)  ...............................................................................10

Gilbert v. National Labor Relations Board, 56 F.3d 1438 (D.C. Cir. 1995)  ..............................12

Guedes v. ATF, 356 F. Supp.3d 109 (D.D.C. 2019)  .....................................................................6

Hall v. McLaughlin, 864 F.2d 868 (D.C. Cir. 1989)  ..................................................................12

Investment Company Institute v. Commodity Futures Trading Commission,

720 F.3d 370 (D.C. Cir. 2013)  .............................................................................................10

Kloeckner v. Solis, 568 U.S. 41 (2012)  ......................................................................................18

Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024)  ...................................................15

Lorillard v. Pons, 434 U.S. 575 (1978)  ......................................................................................12

ii

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 5 of 34

Loving v. Internal Revenue Service, 742 F.3d 1013 (D.C. Cir. 2014)  ........................................18

Morrison v. Olson, 487 U.S. 654 (1988) ......................................................................................2

National Lead Company v. United States, 252 U.S. 140 (1920)  ...............................................16

National Weather Service Employees Organization v. Federal Labor Relations

Authority, 966 F.3d 875 (D.C. Cir. 2020)  ............................................................................12

NextEra Energy Resources, LLC v. Federal Energy Regulatory Commission,

118 F.4th 361 (2024)  ............................................................................................................25

Niz-Chavez v. Garland, 593 U.S. 155 (2021)  ..............................................................................7

Norwegian Nitrogen Company v. United States, 288 U.S. 294 (1933) ......................................16

Novartis Pharmaceuticals Corporation v. Espinosa, No. 21-cv-1479,

2021 WL 5161783 (D.D.C. Nov. 5, 2021)  ...............................................................15, 16, 25

Novartis Pharmaceuticals Corporation v. Becerra, No. 25-cv-117

(D.D.C. Filed Jan. 15, 2025)  ..................................................................................................8

Novartis Pharmaceuticals Corporation v. Johnson, 102 F.4th 452

(D.C. Cir. 2024)  .................................................................................................14, 15, 16, 17

Pharmaceutical Research and Manufacturers of America v. McClain,

95 F.4th 1136 (8th Cir. 2024) .................................................................................................8

Pharmaceutical Research and Manufacturers of America v. Murrill,
  No. 6:23-cv-00997, 2024 WL 4361597 (W.D. La. Sept. 30, 2024)  ..................................... 8

Rodriguez v. United States, 480 U.S. 522 (1987)  ......................................................................25

Swinomish Indian Tribal Community. v. Azar, 406 F. Supp.3d 18 (D.D.C. 2019)  ....................13

United States v. Griffin, 119 F.4th 1001 (D.C. Cir. 2024)  ..........................................................18

United States v. American Trucking Associations, Inc., 310 U.S. 534 (1940)  ...........................16

United States Sugar Corporation v. Environmental Protection Agency,

113 F.4th 984 (D.C. Cir. 2024)  ............................................................................................18

United Therapeutics Corporation v. Espinosa, No. 21-cv-1686, 2021 WL 5161783

(D.D.C. Nov. 5, 2021)  ..........................................................................................................17

Utility Air Regulatory Group v. Environmental Protection Agency, 573 U.S. 302 (2014)  ........13

Wayman v. Southard, 23 U.S. (10 Wheat.) 1 (1825)  ..................................................................15

iii

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Statutes

42 U.S.C.  § 256b(a)(1) .............................................................................................................. 6

42 U.S.C. § 256b(a)(5)(C)  ............................................................................................. 7, 10, 11

42 U.S.C. § 256b(a)(5)(D)  ......................................................................................................... 7

42 U.S.C. § 256b(d)(2)  .............................................................................................................. 7

42 U.S.C. § 256b(d)(2)(B)(v)  .................................................................................................... 9

42 U.S.C. § 256b(d)(3)  .............................................................................................................. 7

42 U.S.C. § 256b(d)(3)(B)(i)  ..................................................................................................... 9

Federal Register

Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992

Entity Guidelines, 59 Fed. Reg. 25,110 (May 13, 1994)  ............................................. 14, 15

Manufacturer Audit Guidelines and Dispute Resolution Processes,

61 Fed. Reg. 65,406 (Dec. 12, 1996)  ........................................................................... 11, 12

Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Entity Guidelines,

58 Fed. Reg. 68,922 (Dec. 29, 1993)  ................................................................................. 14

Notice Regarding Section 602 of the Veterans Health Care Act of 1992—Rebate Option,

63 Fed. Reg. 35,239 (June 29, 1998)  ................................................................................. 14

Rules

Local Civil Rule 7(o)(5) ............................................................................................................. 1

Fed. R. App. P. 29 ....................................................................................................................... 1

Other Authorities

Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of

Legal Texts (2012)  ........................................................................................................ 13, 25

H.R. Rep. No. 102-384, pt. 2 (1992)  ................................................................................... 6, 19

Adam Gluck, Sanofi Tackles 340B Abuse with Innovative Credit Model (Dec. 16, 2024),
https://www.sanofi.us/en/sanofi-today/your-health/sanofi-tackles-340b-abuse-with-
innovative-credit-model ..................................................................................................... 2

iv

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Jay Asser, Hospitals’ Cash Reserves Diminished in Recent Years, Health Leaders

(Apr. 4, 2024), https://www.healthleadersmedia.com/finance/hospitals-cash-reserves-
diminished-recent-years ...................................................................................................... 21

Laura Dyrda, Hospital average days cash on hand hit 10-year low: S&P,
  Becker’s Hospital CFO Report (Aug. 9, 2024),

https://www.beckershospitalreview.com/finance/hospital-average-days-cash-on-hand-hit-
10-year-low-s-p.html  ......................................................................................................... 21

Letter from Congress of the United States, to Secretary Becerra, Department of Health and

Human Services, (Sept. 27, 2024),
https://d12t4t5x3vyizu.cloudfront.net/spanberger.house.gov/uploads/2024/09/Quill-Letter-
L20840-Letter-to-HHS-on-JJ-340B-Rebate-Model-Version-1-09-27-2024-@-03-08-
PM.pdf .................................................................................................................................. 4

Steven Shill, Healthcare providers face a growing risk of violating debt covenants,
  Healthcare Financial Management Magazine (Feb. 2022),
https://www.bdo.com/getmedia/bdd99fa0-6f39-4f70-b28d-
accf0ba66ea2/0222_HFM_Debt-Covenants.pdf ................................................................ 22

v

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STATEMENT OF INTEREST1

Amici  are  four  hospital  associations  whose  members  receive  340B  discounts.  Sanofi-

Aventis U.S. LLC’s “Integrity Initiative” will grievously harm those hospitals and the patients they

care for. Amici therefore have a strong interest in preserving the Health Resources and Services

Administration’s lawful decision to reject that rebate policy, so that Amici’s members can continue

to provide high-quality, affordable medical care to their underserved patients and communities.

The  American  Hospital  Association  represents  nearly  5,000  hospitals,  healthcare

systems,  and  other  healthcare  organizations  across  the  country.  Its  members  are  committed  to

improving the health of the communities they serve and to helping ensure that affordable care is

available to all Americans.

The  National  Association  of  Children’s  Hospitals,  Inc.  d/b/a  Children’s  Hospital

Association is the national voice of more than 220 children’s hospitals. It advances child health

through innovation in the quality, cost, and delivery of care in children’s hospitals.

The Association of American Medical Colleges is dedicated to improving the health of

people  everywhere  through  medical  education,  healthcare,  medical  research,  and  community

collaborations.  Its  members  include  all  160  LCME-accredited  medical  schools;  nearly  500

academic health systems and teaching hospitals; and more than seventy academic societies.

America’s Essential Hospitals is dedicated to high-quality care for all people, including

those who face social and financial barriers. Consistent with this mission, the association’s more

than 350 members provide a disproportionate share of the nation’s uncompensated care, with three-

quarters of patients uninsured or covered by Medicare or Medicaid.

1  Pursuant  to  Local  Civil  Rule  7(o)(5)  and  Fed.  R. App.  P.  29,  counsel  states  that  all  parties
consented  to  the  filing  of  this  brief.  No  party’s  counsel  authored  any  part  of  this  brief,  and  no
person other than Amici funded its preparation or submission.

1

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 9 of 34

INTRODUCTION2

This  case  is  about  an  undisguised  power  grab.  Sanofi  makes  no  secret  of  its  belief—

hyperbolic as it is—that there is abuse in the 340B program. It makes no secret of its belief that

the Health Resources and Services Administration has not taken sufficient action to address this

alleged abuse. And most important, Sanofi makes no secret of its belief that it must now take the

law into its own hands to fix all of this with its new policy. Sanofi’s motives and intentions do not

“come before the Court clad, so to speak, in sheep’s clothing.” Morrison v. Olson, 487 U.S. 654,

699 (1988) (Scalia, J., dissenting). “his wolf comes as a wolf.” Id.

Amici appreciate that Sanofi does not hide why it wishes to engage in this self-help.3 And

while Sanofi’s complaint artificially separates its new policy into two counts, Sanofi is clear that

the “two core components” of its new policy are linked together and motivated by a single goal.

See Mem. of P. & A. in Supp. of Pl.’s Mot. for Summ. J. (Dkt. 27-1) at 1. Announced in the same

November 22, 2024 letter, both components demand purchase data from 340B hospitals so that

Sanofi can unilaterally enforce the law as part of its self-proclaimed “Integrity Initiative.” Compl.

Ex. E at 1; see Mem. of P. & A. in Supp. of Pl.’s Mot. for Summ. J. (Dkt. 27-1) at 12 (stating that

the “key features” of Sanofi’s new policy “rest on a data request” so that it can “combat continued

2 Amici have filed similar briefs in other cases pending before this Court. We respectfully wish to
bring this Court’s particular attention to pages 2-3 (including footnote 3) and pages 9-11 of this
brief, which contain arguments related to Sanofi’s policy that were not included in our other amici
curiae briefs.

3 E.g., Compl. ¶¶ 10, 49, 53; Ex. E at 2 (“Sanofi is implementing the 340B Credit Model to rein in
the 340B waste and abuse we see today.”); Mem. of P. & A. in Supp. of Pl.’s Mot. for Summ. J.
(Dkt. 27-1) at 12 (“To combat continued problems with duplicate discounts and diversion, Sanofi
decided  to  adopt  the  Credit  Model,  which  is  a  new  model  for  selling  drugs  under  the  340B
program.”); see also Adam Gluck, Sanofi Tackles 340B Abuse with Innovative Credit Model (Dec.
16,  2024),  https://www.sanofi.us/en/sanofi-today/your-health/sanofi-tackles-340b-abuse-with-
innovative-credit-model  (“his  program  will  provide  a  badly  needed  checks-and-balances
approach to eliminate the fraud and abuse of duplicate discounts and diversion.”).

2

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 10 of 34

problems with duplicate discounts and diversion”). Sanofi’s rebate model component, or what it

sometimes  calls  the  “Credit  Model,”  is  designed  to  “identify  potential  duplicate  discounts  and

prevent instances of illegal diversion.”  Compl. Ex. E at 2. Its “Patient Definition” component is

similarly designed to “stop diversion.” Compl. Ex. A at 10.  Under that component, Sanofi seeks

to “validate” hospital-patient information in order to enforce “HRSA’s 1996 guidance” about who

qualifies as a patient under the 340B statute. Compl. Ex. E at 4; Compl. Ex. B at 3 (viewing the

“Patient Definition” component as “assuming a quasi-enforcement role of the statutory diversion

prohibition and HRSA’s 1996 patient definition guidance”).

Even though Sanofi is candid about why it is pursuing its “Integrity Initiative,” it is far less

frank  about  the  consequences  of  it. As  Sanofi  seeks  to  boost  its  own  profits,  this  policy  will

devastate  safety-net  hospitals,  their  vulnerable  patients,  and  the  struggling  rural  and  urban

communities they serve. In that respect, this case is not just about a power grab—it’s also about a

money grab.

Whether Sanofi’s “Integrity Initiative” is a power-grab, a money-grab, or both, one thing

is pellucidly clear: Sanofi’s policy is “incompatible” with the 340B statute. Astra USA, Inc. v. Santa

Clara Cty., 563 U.S. 110, 113 (2011). The text, structure, history, and purpose of the 340B statute

reveal  a  carefully  calibrated  legal  regime  in  which  “Congress  vested  authority  to  oversee

compliance  with  the  340B  Program  in  HHS  and  assigned  no  auxiliary  enforcement  role  to”

program participants. Id. at 117 (emphasis added). Congress also did not permit drug companies

to demand what are, effectively, prospective audits in exchange for providing discounts that are

owed  under  the  340B  statute.  And,  ultimately,  Congress  did  not  permit  drug  companies  to

unilaterally condition 340B pricing on their subjective determination of program compliance or

the surrender of purchase and patient data.

3

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 11 of 34

For good reason. Sanofi’s “Integrity Initiative” will be ruinous for 340B hospitals. As much

as Sanofi tries to malign 340B hospitals, these hospitals treat America’s most vulnerable patients.

They care for a significant share of the nation’s children, cancer patients, and those living in rural

and other underserved communities. For much of this care, 340B hospitals do not get paid at all.

As the D.C. Circuit has noted: “A congressionally mandated study of how eligible providers use

 income from the 340B program found that  help safety-net providers fund

the uncompensated care they supply and expand the services they offer.”  Cares Cmty. Health v.

HHS, 944 F.3d 950, 955 (D.C. Cir. 2019) (cleaned up).

But as a bipartisan group of nearly 200 lawmakers wrote after the first rebate policy was

announced:  “This  unapproved  and  unlawful  change  would  have  severe  consequences  for  our

nation’s safety net providers and the patients they serve.…  A rebate model would create significant

financial challenges for safety-net hospitals.”  Congressional Letter to Secretary Becerra 1, 2 (Sept.

27, 2024), at https://d12t4t5x3vyizu.cloudfront.net/spanberger.house.gov/uploads/2024/09/Quill-

Letter-L20840-Letter-to-HHS-on-JJ-340B-Rebate-Model-Version-1-09-27-2024-@-03-08-

PM.pdf. The letter went on to accurately explain that the rebate model “would reduce resources

available for providing comprehensive services to patients and communities, undermining the core

purpose of 340B.”  Id. at 1.

In particular, these rebate policies will dramatically erode the 340B discount that Congress

intended for them to receive. For starters, hospitals will be forced to advance millions of dollars to

the drug companies. “This approach is to the manufacturer’s financial benefit because the company

retains  those  sums  for  a  longer  time  and  creates  hurdles  for  covered  entities  to  claim  the

discount.” Id.  Already “operating under much lower operating margins than non-340B hospitals,”

id. at 2, America’s 340B hospitals cannot afford to make zero-interest loans without any guarantee

4

Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 12 of 34

of when—or whether—they will be paid the discounts they are owed by law. In fact, hundreds of

hospitals self-reported to Amici that these rebate policies could cause them to violate their bond

covenants, which would lead to catastrophic financial distress and, for some, permanent closure.

340B hospitals also will have  to spend  enormous  amounts to comply  with policies like

Sanofi’s “Integrity Initiative.” These policies have no precedent in the three decades since the start

of the 340B Program. Hospitals therefore have no existing infrastructure to comply with them—

let alone the many different variations and requirements across the hundreds of drug companies

that  could  adopt  them.  340B  hospitals  will  be  forced  to  hire  new  full-time  employees  to  meet

Sanofi’s  demands,  and  they  will  have  to  purchase  new  technologies  to  provide  the  required

purchase data and to track the rebates they are owed. In a world of finite resources, 340B hospitals

will  have  no  choice  but  to  divert  funds  away  from  patient  services  and  towards  burdensome

compliance.

Ultimately, as the Court evaluates this case, it should bear in mind what Justice Kavanaugh

wrote for a unanimous Supreme Court a few years ago: “340B hospitals perform valuable services

for low-income and rural communities but have to rely on limited federal funding for support.”

Am. Hosp. Ass’n v. Becerra, 596 U.S. 724, 738 (2022). Sanofi’s policy shrinks that already-limited

funding  even  further,  endangering  the  care  that  340B  hospitals  provide  for  their  patients  and

communities. But perhaps worse than anything, Sanofi does so in flagrant disregard of the 340B

statute. Sanofi may be dissatisfied with that law or how the Executive Branch is enforcing it, but

that does not permit it to try to enforce the law itself. Nor does it permit Sanofi to co-opt this Court

in its vigilante efforts. If Sanofi is dissatisfied with 340B law or policy, it can seek change in the

political branches. But it cannot take the law into its own hands and then seek judicial permission

for its extra-legal actions.

5

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ARGUMENT

I.

The  Structure,  History, And  Purpose  Of  The  340B  Statute  Precludes  Sanofi’s
“Integrity Initiative.”

The  textual  arguments  in  this  case  are  straightforward.  The  340B  statute,  using  the

unambiguous phrase “as provided by the  Secretary,” gives  HRSA the authority  to approve any

“rebate” model. 42 U.S.C.  § 256b(a)(1).4 The Pharmaceutical Pricing Agreements between HRSA

and the drug companies “set[] out terms identical to those contained in the statute,” and thus confer

the same rebate-approval authority.  Astra, 563 U.S. at 114.

Amici need not repeat those dispositive textual arguments here. Instead, we focus on the

structure, history, and purpose of the 340B statute because they, too, prove that Congress never

intended for drug companies to take the law into their own hands to pursue their own self-interested

plan for program integrity. These traditional tools of statutory construction also demonstrate that

whatever comparisons Sanofi tries to make with hospitals’ “replenishment system” for inventory

management or a previous HRSA-approved rebate model for AIDS Drug Assistance Programs, the

sweeping,  surveillant  nature  of  this  rebate  model  is  “incompatible”  with  “the  statute  Congress

enacted.”  Id. at 113, 121.  Put differently, the 340B statute does not bar all rebate models.  It does,

however, bar the model that Sanofi seeks to impose here.

4 The legislative history supports this plain text. E.g., H.R. Rep. No. 102-384, pt. 2, at 16 (1992)
(“The Committee bill does not specify whether ‘covered entities’ would receive these favorable
prices through a point-of-purchase discount, through a manufacturer rebate, or through some other
mechanism.  A mechanism that is appropriate to one type of ‘covered entity,’ such as community
health  centers,  may  not  be  appropriate  to  another  type,  such  as  State AIDS  drug  purchasing
programs.  The Committee expects that the Secretary of HHS, in developing these agreements,
will use the mechanism that is the most effective and most efficient from the standpoint of each
type of ‘covered entity.’”). This “legislative history not only speaks to the issue; it confirms the
government’s interpretation.” Guedes v. ATF, 356 F. Supp.3d 109, 143 (D.D.C. 2019) (Friedrich,
J.).

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A.  Sanofi’s “Integrity Initiative” is incompatible with the 340B statute’s structure.

A statute’s structure can inform its meaning. So when courts are “called on to resolve a

dispute over a statute’s meaning,” the parties “are entitled … to have independent judges exhaust

all the textual and structural clues bearing on that meaning.”  Niz-Chavez v. Garland, 593 U.S.

155, 160 (2021) (quotation marks omitted and emphasis added). Here, the structure and design of

the 340B statute provide extremely informative “clues.” In particular, the statute contains several

provisions addressing audits, compliance, and dispute resolution that are inconsistent with Sanofi’s

“Integrity Initiative.”

These provisions  send  two  unmistakable messages  about  Congress’  intent  for the  340B

Program.  First,  Congress  did  not  intend  for  participants  in  the  340B  Program  to  engage  in

unconstrained self-enforcement. Quite the contrary. The 340B statute contemplates that HHS will

always have a role in enforcing program requirements. Consider the following provisions:

(cid:120)  42  U.S.C.  §  256b(a)(5)(C)  provides  for  audits  to  enforce  the  statute’s  prohibitions  on
diversion  and  duplicate  discounts.  This  provision  gives  audit  responsibility  to  the
“Secretary  and  the  manufacturer  of  a  covered  outpatient  drug”—not  the  manufacturer
alone. Id. It also gives the Secretary—and not the manufacturer—the authority to develop
procedures “relating to the number, duration, and scope of audits.” Id.

(cid:120)  42  U.S.C.  §  256b(a)(5)(D)

for
relatedly  provides
noncompliance”  with  the  diversion  and duplicate  discount  provisions,  but  only  after  an
audit is completed and only after the covered entity is given an opportunity for “notice and
hearing.” Id. This subsection also specifies that the sanction will be “an amount equal to
the reduction in the price of the drug,” i.e., exactly what Sanofi will refuse to pay up-front
(without any audit, notice, or hearing) under its “Integrity Initiative.” Id.

for  “dditional  sanction

(cid:120)  42 U.S.C. § 256b(d)(2) directs the Secretary to “provide for improvements in compliance
by covered entities with the requirements of this section in order to prevent diversion and
violations of the duplicate discount.” Id. It also specifies certain compliance improvements,
including  the  “imposition  of  sanctions,  in  appropriate  cases  as  determined  by  the
Secretary.”  Id. (emphasis added).

(cid:120)  42 U.S.C. § 256b(d)(3) formalizes a statutory ADR process with HHS playing a central
role. Not only does the statute require the Secretary to “promulgate regulations to establish
and  implement”  the ADR  process,  but  it  requires  that  these  regulations  “designate  or
establish  a  decision-making  official  or  decision-making  body  within  the  Department  of

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Health and Human Services to be responsible for reviewing and finally resolving claims.”
Id. (emphasis added).

These structural features make clear that Congress did not want drug companies to engage

in self-help. Critically, the Supreme Court has recognized this statutory design. As the Court held

in  Astra,  Congress  “centralized”  340B  “enforcement  in  the  “government,”  creating  a  “unitary

administrative  and  enforcement  scheme.”  563  U.S.  at  119-120  (quotation  marks  and  citations

omitted).  Congress  did  not  give  an  “auxiliary  enforcement  role”  to  participants  in  the  340B

program.  Id. at 117.  Sanofi knows this.  It made this exact point in opposing 340B Health’s Motion

to Intervene, arguing that “Astra forbids the private enforcement of 340B program requirements

in all  forms.” Pls.’ Joint Opp’n  to Mot. to Intervene  (Dkt. 22) at 10,  Novartis Pharm. Corp. v.

Becerra, No. 25-cv-117 (D.D.C. filed Jan. 15, 2025) (second emphasis added and quotation marks

omitted); see id. at 9-10 (quoting Astra twice  more for same proposition).

It made no difference to the Astra Court that there had been various “reports of inadequate

HRSA enforcement.” 563 U.S. at 121. Sanofi points to similar reports in this case.  See Compl. ¶¶

37-38. But in Astra, the Court explained that Congress was aware of those kinds of reports when

it amended the 340B statute in 2010, and yet it still did not unleash program participants to go out

and fend for themselves. Rather, Congress chose to reinforce the ADR process and to “strengthen

and  formalize  HRSA’s  enforcement  authority.”  563  U.S.  at  121-122.5  Thus,  Astra  holds  that

5 There is active litigation throughout the country about state legislation addressing drug company
limitations on contract pharmacy arrangements. E.g., Pharm. Rsch. & Mfrs. of Am. v. McClain, 95
F.4th 1136 (8th Cir. 2024)  cert. denied, --- S. Ct. ----, No. 24-118, 2024 WL  5011712 (Dec. 9,
2024); Pharm. Rsch. & Mfrs. of Am. v. Murrill, No. 23-cv-00997, 2024 WL 4361597, at *9 (W.D.
La. Sept. 30, 2024), appeal docketed, No. 24-30673 (5th Cir. Oct. 21, 2024). In those cases, drug
companies or their trade association, PhRMA, made arguments about Astra’s holdings on HRSA’s
centralized enforcement scheme. The AHA opposed those arguments, explaining that Astra did not
address preemption of state laws or the subject of contract pharmacies. Should Sanofi attack Amici
as  hypocritical  for  relying  on  Astra  here,  it  is  important  to  underscore  just  how  different  the
contract pharmacy context is from this one. In the contract pharmacy context, courts—including
this one—have found the statute to be silent on the subject. But in this context, Sanofi is pursuing

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participants in the 340B Program—be they covered entities in that case or drug companies in this

one—cannot seek to unilaterally enforce the statute themselves.

Second, the 340B statute does not contemplate audits or other enforcement before payment

at  discounted  340B  pricing. All  of  the  enforcement  processes  included  in  the  statute  are  to  be

conducted after covered entities have paid discounted 340B prices. Accordingly, the 340B statute

contemplates: 1) some awareness of a past violation, which then kicks off; 2) a review of completed

transaction records, followed by; 3) a determination and remedy by HHS, either under the ADR

process,  see  42  U.S.C.  §  256b(d)(3)(B)(i),  or  through  agency-imposed  sanctions  and  civil

monetary penalties, see id. §§ 256b(a)(5)(D), 256b(d)(2)(B)(v). See generally Am. Hosp. Ass’n v.

HHS, No. 4:20-cv-08806, 2021 WL 616323, at  *6 (N.D. Cal. Feb. 17, 2021) (“Congress made

explicit  that  alleged  340B  Program  violations  are  to  be  first  adjudicated  by  HHS  through  an

established ADR process. This process provides the agency an initial opportunity to develop rules

and regulations applicable to the enforcement of the 340B Program requirements.”). Neither the

audit process nor the ADR process contemplates a regime where drug companies can conduct their

own free-wheeling self-enforcement before providing 340B discounts, with the authority to refuse

such pricing based on a drug company’s unilateral belief that violations of the statute are occurring.

For  this  reason,  Sanofi  is  especially  wrong  that  Section  340B  authorizes  the  “Patient

Definition” component of its “Integrity  Initiative.” It  contends that  “othing in Section 340B

requires  that  Sanofi  must  nonetheless  provide  340B  pricing  for  drugs  that  Sanofi  knows  have

already been dispensed to individuals who are not patients of the covered entity.” Mem. of P. & A.

its unlawful rebate “Integrity Initiative” because it believes that: i) covered entities are violating
the 340B statute’s prohibitions against diversion and duplicate discounts; and ii) a federal agency
is not doing a good enough job enforcing those express statutory prohibitions. There are no silences
about those subjects, and Astra speaks directly to HRSA’s role in superintending the 340B Program
through audits and dispute resolution.

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in Supp. of Pl.’s Mot. for Summ. J. (Dkt. 27-1) at 30. But when Sanofi demands purchase data

from hospitals, it does not already know that someone is not a patient. Sanofi may want purchase

information so that it can figure out who is not a patient.  But there is a world of difference between

actually “knowing,” on the one hand, and demanding purchase data “in order to know,” on the

other.

As clearly as the 340B statute precludes diversion, it also sets forth a carefully calibrated

regime where suspected diversion first must be audited and then addressed in the ADR process.

See 42 U.S.C. § 256b(a)(5)(C); 42 U.S.C. § 256b(d)(3)(B)(iv). That regime does not permit Sanofi

to demand purchase data from 340B hospitals simply because it wants to know, in advance, who

may not be a patient under HRSA’s 1996 guidance.  As Sanofi admits, if it later determines that

someone is not a patient, it can “claw back the discount from the diverting covered entity on the

back end.” Mem. of P. & A. in Supp. of Pl.’s Mot. for Summ. J. (Dkt. 27-1) at 31.  But the 340B

statute, decades-old agency guidance, and Astra all require Sanofi to follow certain procedures to

get to that point. They  do not allow Sanofi to demand  purchase data  from  340B  hospitals  as a

precondition for discounts, long before an audit or ADR process is completed, so that the company

can self-police diversion and self-enforce HRSA’s patient definition. HRSA got this exactly right.

See Compl. Ex. F at 2 n.1; Garland v. Ming Dai, 593 U.S. 357, 369 (2021) (“ reviewing court

must ‘uphold’ even ‘a decision of less than ideal clarity if the agency’s path may reasonably be

discerned.’”  (quoting  Bowman  Transp.,  Inc.  v.  Ark.-Best  Freight  Sys.,  Inc.,  419  U.S.  281,  286

(1974));  Inv.  Co.  Inst.  v.  CFTC,  720  F.3d  370,  372-373  (D.C.  Cir.  2013)  (“So  long  as  CFTC

provided  a  reasoned  explanation  for  its  regulation,  and  the  reviewing  court  can  reasonably  ...

discern the agency’s path, we must uphold the regulation, even if the agency’s decision has less

than ideal clarity.… CFTC’s regulation clears this low bar.”).

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It  is  important  to  reemphasize  that  Congress  expressly  gave  the  Secretary  discretion  to

establish  audit  procedures  to  enforce  the  prohibitions  against  diversion.  See  42  U.S.C.  §

256b(a)(5)(C). Pursuant to that discretion, in 1996 the Secretary began requiring manufacturers to

demonstrate “reasonable cause” before conducting an audit. Manufacturer Audit Guidelines and

Dispute  Resolution  Processes,  61  Fed.  Reg.  65,406,  65,409  (Dec.  12,  1996);  see  id.  at  65,406

(explaining that the “reasonable cause” standard “will ensure that the audits are performed where

there  are  valid  business  concerns  and  are  conducted  with  the  least  possible  disruption  to  the

covered  entity”  (emphasis  added)).  The  Secretary  did  not  want  a  free-for-all  where  dozens  of

different drug companies had “the right to routinely conduct an audit as a normal business practice

without the need for Departmental approval.” Id.

Sanofi’s “Integrity Initiative,” by contrast, is not based on individualized suspicion of any

covered  entity  or  even  “reasonable  cause”  that  a  particular  violation  has  occurred.  It  casts  an

exceedingly wide net, demanding purchase data as a matter of course, all based on the belief that

some abuse surely must be occurring. The 340B statute and decades-old agency guidance bar this

kind of fishing expedition. E.g., 42 U.S.C. § 256b(a)(5)(C) (giving Secretary, not drug companies,

the authority to determine the “number” of audits). Sanofi cannot, as part of its normal business

practices,  require  covered  entities  to  provide  swaths  of  information  in  advance,  before  it  pays

covered entities at the 340B price.

In fact, the same HHS audit guidelines that set forth the “reasonable cause” standard also

responded to public comments insisting that “anufacturers should not be required to continue

to sell to a covered entity at the mandated price once an audit has been initiated, particularly since

reasonable  cause  has  already  been  demonstrated.”  61  Fed.  Reg.  at  65,408.  HHS,  acting  in  its

statutory discretion to establish audit procedures, rejected that proposal:

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Manufacturers must continue to sell at the statutory price during the audit process.
Once  the  audit  has  been  completed  and  the  manufacturer  believes  that  there  is
sufficient evidence to indicate prohibited entity activity, then the manufacturer may
bring the claim to the Department through the informal dispute process. Not until
the entity is found guilty of prohibited activity and a decision is made to remove
the entity from the covered entity list, will the manufacturers no longer be required
to extend the discount.

Id.6

Thus, the Secretary, acting within his statutory authority, did not want drug companies to

unilaterally  deny  340B  discounts  in  advance  based  on  mere  suspicion  of  prohibited  activity—

precisely what Sanofi is now seeking to do with its “Integrity Initiative.” Both Congress and HHS

sought  to  channel  disputes  through  an  orderly  audit  and ADR  process,  during  which  covered

entities would continue to be paid the discounted 340B pricing. This again proves that any effort

by Sanofi to police the 340B statute in its sole discretion—before providing 340B discounts and

only in exchange for purchase data—is incompatible with the structure and design of the statute.7

6 Congress was presumably aware of this guidance when it amended the 340B statute in 2010 to
codify an audit as a prerequisite for the ADR process. See Lorillard v. Pons, 434 U.S. 575, 581
(1978)  (“here,  as  here,  Congress  adopts  a  new  law  incorporating  sections  of  a  prior  law,
Congress  normally  can  be  presumed  to  have  had  knowledge  of  the  interpretation  given  to  the
incorporated law, at least insofar as it affects the new statute.”); cf. Astra, 563 U.S. at 121-122.
7 HRSA’s rationale for rejecting the rebate  models—especially as set forth  in  Footnote 1 of its
December 13, 2024 letter to Sanofi, see Compl. Ex. F at 2 n.1—flows directly from its 1994 and
1996  guidances  (as  well  as  Astra).  Any  counts  alleging  that  HRSA  acted  arbitrarily  and
capriciously by failing to address or distinguish certain issues in its rejection letters are therefore
meritless. See Hall v. McLaughlin, 864 F.2d 868, 872-873 (D.C. Cir. 1989) (“Where the reviewing
court can ascertain that the agency has not in fact diverged from past  decisions, the need for a
comprehensive and explicit statement of its current rationale is less pressing.… he decision of
the Secretary in the present case—though of less than ideal clarity—must be upheld. We conclude
that the Secretary did not swerve from her prior  decisions. Consequently, her explanation need
only be sufficient to permit the court to discern the path she has taken.” (quotation marks omitted));
see also Nat’l Weather Serv. Emps. Org. v. FLRA, 966 F.3d 875, 884 (D.C. Cir. 2020) (“Although
not articulated by the Authority, this distinction is sufficiently evident that the court is confident
that the Authority has not arbitrarily departed from its established precedent.); Gilbert v. NLRB, 56
F.3d 1438, 1445 (D.C. Cir. 1995) (“here the circumstances of the prior cases are sufficiently
different from those of the case before the court, an agency is justified in declining to follow them,

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Statutory structure matters. E.g., Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 321 (2014)

(rejecting  an  interpretation  would  be  “inconsistent  with—in  fact,  would  overthrow—the Act’s

structure and  design”);  Swinomish  Indian  Tribal  Cmty.  v. Azar,  406  F.  Supp.3d  18,  25  (D.D.C.

2019)  (“‘The  structure  of  the  statute  is  also  relevant  in  understanding’  its  meaning.”  (quoting

Bullcreek v. Nuclear Regul. Comm’n, 359 F.3d 536, 541 (D.C. Cir. 2004))); see generally Antonin

Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 167 (2012) (“Perhaps

no interpretive fault is more common than the failure to follow the whole-text canon, which calls

on the judicial interpreter to consider the entire text, in view of its structure and of the physical and

logical relation of its many parts.” (emphasis added)). Here, the structural features discussed above

are incompatible with the conditions that Sanofi would impose with its “Integrity Initiative.”

Contrary  to  that  policy,  the  statute  does  not  permit  Sanofi  to  engage  in  unbridled  self-

enforcement.  Congress  granted  HHS  the  authority  to  “superintend”  and  “control”  the  340B

Program. Astra, 563 U.S. at 113-14. “That control could not be maintained were” hundreds of drug

companies  permitted  to  impose  their  own  individual  policies  regarding  rebates  and  patient

definitions. Id. at 114. Nor could it be maintained if every drug company were permitted to pre-

condition  payment  on  the  surrender  of  different  data  depending  on  what  any  given  company

demands  at  any  given  time.  Instead,  the  340B  statute  (and  the  time-honored  HHS  guidelines

established  under  its  statutory  authority)  sets  forth  procedures  where  subjective  manufacturer

suspicions about diversion and duplicate discounts do not permit drug companies to withhold 340B

discounts until purchase data is turned over or program compliance is verified. Anything else—

and the court may accept even a laconic explanation as an ample articulation of its reasoning.”
(quotation marks omitted)).

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including and especially Sanofi’s “Integrity Initiative”—“runs contrary to how the  Program

is supposed to work.” Ams. for Clean Energy v. EPA, 864 F.3d 691, 710 (D.C. Cir. 2017).

B.  Sanofi’s “Integrity Initiative” is incompatible with the 340B statute’s history.

In  keeping  with  this  statutory  structure  and  design,  HHS  has  long  and  consistently

interpreted  the 340B  statute  to  preclude  what  Sanofi  seeks  to  do  here. As  the  D.C.  Circuit  has

recognized, this “agency guidance” is relevant to the analysis.  Novartis Pharms. Corp. v. Johnson,

102 F.4th 452, 460 (D.C. Cir. 2024). Here, the guidance squarely supports HRSA’s conclusion.

In 1993, HRSA sought public comment to inform its superintendence of the 340B Program,

particularly  with  regard  to  the  statutory  bars  on  diversion  and  duplicate  discounts.  See  Notice

Regarding Section 602 of the Veterans Health Care Act of 1992 Entity Guidelines, 58 Fed. Reg.

68,922  (Dec.  29,  1993).  Five  months  later,  the  agency  issued  a  Final  Notice  stating:  “A

manufacturer  may  not  condition  the  offer  of  statutory  discounts  upon  an  entity’s  assurance  of

compliance with section 340B provisions.” Final Notice Regarding Section 602 of the Veterans

Health Care Act of 1992 Entity Guidelines, 59 Fed. Reg. 25,110, 25,113 (May 13, 1994).8 HRSA

also specifically stated that drug companies may not require hospitals to submit information about

“drug acquisition” and “purchase” as a condition for 340B discounts. Id. at 25,113-114.9

8  The only time in thirty years that HRSA exercised its statutory authority to approve a rebate
model,  in  the  narrow  and  distinguishable  context  of  State AIDS  Drug Assistance  Programs,  it
reemphasized  this  longstanding  limitation  on  drug  company  behavior.    See  Notice  Regarding
Section 602 of the Veterans Health Care Act of 1992—Rebate Option, 63 Fed. Reg. 35,239, 35,240
(June 29, 1998) (“In addition, manufacturers and covered entities are referred to 59 FR 25113 for
a reminder that ‘a manufacturer may not condition the offer of statutory discounts upon an entity’s
assurance of compliance with section 340B provisions.’”).

9 Although that guidance did allow manufacturers to request “standard information,” Final Notice
Regarding Section 602 of the Veterans Health Care Act of 1992 Entity Guidelines, 59 Fed. Reg. at
25,113-114, there is nothing “standard” about Sanofi’s current demands. Most important, the term
“standard information” must be understood in light of the rest of HRSA’s guidance. By explicitly
barring  demands  for  “drug  acquisition”  and  “purchase”  information,  the  term  “standard
information” cannot include exactly the kind of data that Sanofi now demands under its “Integrity

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HHS’s analysis is precisely the type of agency interpretation that can assist this Court in

construing the 340B statute. As the Supreme Court explained in Loper Bright Enters. v. Raimondo,

603  U.S.  369,  394  (2024),  “courts  may—as  they  have  from  the  start—seek  aid  from  the

interpretations of those responsible for implementing particular statutes.” Here, that responsibility

is HHS’s. What’s more, this particular HHS interpretation was “issued contemporaneously with

the statute at issue” and has “remained consistent over time.” Id. It is therefore “especially useful

in determining the statute’s meaning.” Id. And last but not least, the 340B statute “empowers” HHS

“to  prescribe  rules  to  ‘fill  up  the  details’”  of  the  340B  statute’s  oversight  scheme.  Id.  at  395

(quoting  Wayman  v.  Southard,  10  Wheat.  1,  43  (1825)).  Thus,  as  this  Court  “exercise

independent judgment in determining  the meaning  of  statutory  provisions,”  id. at 394, HRSA’s

well-established position that drug companies cannot condition or withhold 340B discounts on the

handover of drug acquisition or purchase data should be given “great weight,” id. at 388 (internal

quotation marks omitted), and “due respect,” id. at 403; see id. at 430 (Gorsuch, J., concurring)

Initiative.” Nor can it include the scope and quantity of data at issue here, which is far greater than
the contract pharmacy-related data at issue in Novartis, 102 F.4th 452. And if all of that were not
enough—and  it  surely  is—another  portion  of  the  Final  Notice  seems  to  equate  “standard
information” with “routine information necessary to set up and maintain an account.”  Final Notice
Regarding Section 602 of the Veterans Health Care Act of 1992 Entity Guidelines, 59 Fed. Reg. at
25,112.  Not  only  did  Novartis  not  consider  the  full  text  of  HRSA’s  guidance  (including  and
especially its statements regarding “drug acquisition” and “purchase” information), but unlike the
policies at issue in Novartis, the burden and administrative cost of these rebate policies are much
more than “minimal.”  Novartis, 102 F.4th at 463; see infra at Section I.C.

Another especially powerful clue about the meaning of “standard information” is that the
purchase and patient data demanded under the “Integrity Initiative” was not required in 1994 when
HRSA issued its guidance, nor did Sanofi require it until the fall of 2024. Amici recognize that this
Court previously considered the role that past practice plays in evaluating manufacturer conditions.
Novartis Pharms. Corp. v. Espinosa, No. 21-cv-1479, 2021 WL 5161783, at *7 (Nov. 5, 2021).
Amici agree that the 340B statute may allow some conditions beyond those “previously imposed,”
id., but we respectfully submit that consistent practice for nearly three decades—including at the
time  when  HRSA’s  guidance  was  initially  provided—should  at  least  count  for  something  in
evaluating what is deemed “standard.”

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(“his Court has also long extended great respect to the contemporaneous and consistent views

of the coordinate branches about the meaning of a statute’s term.” (quotation marks omitted).10

The  D.C.  Circuit’s  decision  in  Novartis  Pharms.  Corp.  v.  Johnson,  does not  undermine

HHS’s interpretation of the 340B statute.  Nor does it authorize Sanofi’s “Integrity Initiative.” See

Novartis, 102 F.4th at 464 (“We do not foreclose the possibility that other, more onerous conditions

might violate the statute.”); Novartis Pharms. Corp., 2021 WL 5161783, at *9 (“The statute’s plain

language, purpose, and structure do not  … permit all conditions.” (emphasis in original)). That

decision upheld a United Therapeutics policy requiring “covered entities to provide claims data

associated with all 340B contract pharmacy orders to a third-party platform, to facilitate efforts to

police  diversion  and  duplicate  discounts.”  Novartis,  102  F.  4th  at  458;  see  Novartis,  2021 WL

5161783, at *4 (“United Therapeutics also requires all covered entities using contract pharmacies

to regularly provide claims data to  via a third-party platform, among other

things, allowing  to confirm that contract pharmacies are genuinely acting on

behalf  of  a  covered  entity.”  (quotation  marks  omitted)).  But  United  Therapeutics’  policy  was

meaningfully  different  from  Sanofi’s  policy.    It  dealt  only  with  contract  pharmacies  and  drug

company limits related to distribution. See Novartis, 102 F.4th at 461-462 (“HRSA invokes the

statutory audit and dispute-resolution mechanisms.… hey serve to ensure compliance with the

10 Accord Nat’l Lead Co. v. United States, 252 U.S. 140, 145–146 (1920) (“reat weight will be
given to the contemporaneous construction by department officials, who were called upon to act
under the law and to carry its provisions into effect, especially where such construction has been
long continued, as it was in this case for almost 40 years before the petition was filed.”); United
States v. Am. Trucking Ass’ns, Inc., 310 U.S. 534, 549 (1940) (“The Commission and the Wage
and  Hour Division,  as  we have  said,  have  both  interpreted  Section  204(a)  as  relating  solely  to
safety of operation. In any case such interpretations are entitled to great weight. This is particularly
true here where the interpretations involve ‘contemporaneous construction of a statute by the men
charged  with  the  responsibility  of  setting  its  machinery  in  motion;  of  making  the  parts  work
efficiently and smoothly while they are yet untried and new.’” (quoting Norwegian Nitrogen Co.
v. United States, 288 U.S. 294, 315 (1933))).

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various obligations that section 340B imposes.… HRSA reasons that this enforcement scheme is

carefully calibrated, which tends to suggest that it is exclusive. Perhaps so, but that at most shows

that  section  340B  establishes  the  precise  metes  and  bounds  of  audits  and  administrative

adjudications. It does not suggest that contractual limits on distribution are unlawful.” (emphasis

added and internal citation omitted)).

The  differences  between  these  contexts  are  determinative.  In  the  contract  pharmacy

context,  Novartis  found  the  statute  to  be  silent  as  to  distribution.  Id.  at  460.  Here,  the  statute

includes “carefully calibrated” compliance, audit, and dispute resolution procedures that do not

permit unilateral drug company enforcement. Id. at 462. In the contract pharmacy context, drug

companies and HRSA could not audit those pharmacies because the 340B statute does not provide

for audits of third parties. Here, drug companies can audit 340B hospitals, provided they follow

the appropriate processes. These distinctions are dispositive, as they directly implicate the textual

and structural features discussed above that are incompatible with the rebate model.

More fundamentally, the scope of the policy at issue here, and the consequences to hospitals

for  violating  it,  are  even  more  drastic  than  anything  at  issue  in  Novartis.  United Therapeutics’

policy  did  not  deny  340B  discounts  to  hospitals  altogether.  It  refused  to  sell  only  to  contract

pharmacies if data was not provided. See Pl.’s Compl. (Dkt. 1) Ex. 3 at 6, United Therapeutics

Corp. v. Espinosa, No. 21-cv-1686, 2021 WL 5161783 (D.D.C. Nov. 5, 2021). A hospital still could

obtain 340B pricing if it distributed a drug from its in-house pharmacy. Here, Sanofi’s “Integrity

Initiative” would completely deny hospitals their 340B discounts if those covered entities refuse to

surrender important purchase data or assure program compliance.

It is not too much to say that Sanofi’s policy, unlike United Therapeutics’ policy, strikes at

the heart of the 340B Program. Not merely addressing where 340B drugs can be sold, Sanofi’s

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policy touches on the core function of the Program—whether 340B discounts are provided at all.

This  runs  headlong  into  HRSA’s  three-decade-old  ban  on  drug  companies  conditioning  340B

discounts  on  their  own  satisfaction  about  a  covered  entity’s  compliance  or  the  handover  of

purchase data. Because Novartis adjudicated a far narrower set of drug company conditions, it has

no bearing on the policy at issue here.

C.  Sanofi’s “Integrity Initiative” is incompatible with the 340B statute’s purpose.

Purpose  also  can  be  relevant  to  statutory  interpretation—particularly  where,  as  here,  it

aligns with the statute’s text, structure, and history. See Loving v. IRS, 742 F.3d 1013, 1016 (D.C.

Cir.  2014)  (Kavanaugh,  J.)  (“n  ultimately  determining  whether  the agency’s  interpretation  is

permissible or instead is foreclosed by the statute,  must employ all the tools of statutory

interpretation, including text, structure, purpose, and legislative history.” (quotation marks omitted

and  emphasis  added));  see also  U.S.  Sugar  Corp.  v.  EPA,  113  F.4th  984,  999  (D.C.  Cir.  2024)

(“Reading  Section  112(d)(3)  to  require  EPA  to  use  the  data  it  ‘has’  in  its  possession  until  the

moment  a  rule  is  promulgated  would  frustrate  the  statutory  purposes  of  the  Clean Air Act.”);

United States v. Griffin, 119 F.4th 1001, 1025 (D.C. Cir. 2024) (“We reject Griffin’s reading, which

is so squarely at odds with that clear purpose.”). Of course, “even the most formidable argument

concerning the statute’s purposes could not overcome the clarity ... in the statute’s text,” Kloeckner

v. Solis, 568 U.S. 41, 55 n.4 (2012), and “no legislation pursues it purposes at all costs.” CTS Corp.

v. Waldburger, 573 U.S. 1, 12 (2014). But if purpose is considered at all—and it should be here—

it is important to understand what the 340B statute’s purpose actually is and how Sanofi’s policy

bulldozes it.

The  purpose  of  the  340B  Program  is  indisputable  and  well-recognized.  Drawing  on

language from a congressional report, courts have held that the “program was intended to enable

certain hospitals and clinics ‘to stretch scarce Federal resources as far as possible, reaching more

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eligible patients and providing more comprehensive services.’” Am. Hosp. Ass’n v. Hargan, 289

F. Supp.3d 45, 47 (D.D.C. 2017) (quoting H.R. Rep. No. 102–384, pt. 2, at 12 (1992)); see Am.

Hosp.  Ass’n  v.  Azar,  967  F.3d  818,  822  (D.C.  Cir.  2020),  rev’d  sub  nom.  Am.  Hosp.  Ass’n  v.

Becerra, 596 U.S. 724 (2022) (quoting same language from the House Report). Thus, while the

statute’s  provisions  regarding  diversion  and  duplicate  discounts  indicate  that  Congress  did  not

want covered entities to obtain 340B discounts fraudulently (i.e., “at all costs”), those provisions

and  the  HHS-superintendence  provisions  must  be  considered  in  light  of  this  purpose—not  as

separate, equally important purposes, as the drug companies occasionally insist in their briefs. In

fact, the same congressional report also makes clear that “in developing  procedures, the

Secretary will make every effort to minimize the administrative and financial burdens that these

audits impose on ‘covered entities.’” H.R. Rep. No. 102–384, pt. 2, at 17 (1992) (emphasis added).

Putting all of this together, these statements make clear that Congress wanted any anti-fraud efforts

to interfere as little as possible with the statute’s true purpose of allowing 340B hospitals to stretch

their limited financial resources as far as possible to better serve patients.

Sanofi’s policy flouts this statutory  purpose.  Far from helping 340B  hospitals  to  stretch

financial resources, it squeezes them. The key function of the 340B Program is to allow “covered

entities (including eligible hospitals) to purchase drugs from manufacturers at heavily discounted

rates.” Azar, 967 F.3d at 822. But Sanofi’s policy eats  away at those intended discounts in two

main ways.

First, Sanofi’s policy will require hospitals and other covered entities to float significant

sums  to  drug  companies.  The American  Hospital Association  surveyed  its  membership  while

preparing this amicus brief, and it learned that 340B hospitals anticipate, on average, multi-million-

dollar annual losses as a result of just the announced policies. Hundreds of 340B hospitals have

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reported  that  they,  in  turn,  will  have  to  restrict  or  close  healthcare  service  lines,  thus  directly

harming the patients that the 340B program is supposed to help.

For example, Baptist Hospital in Pensacola, Florida reports that if forced to comply with

just  the  announced  rebate  policies,  it  would  have  to  advance  $33  million  per  year  to  the  drug

companies. Not only would it be handing the drug companies any interest it could earn on that

sum, but Baptist fears that it will not be reimbursed for 100% of the rebates they are rightly owed

under the law. What’s more, Baptist reports that, due to these upfront costs, it likely would not be

able to keep certain drugs in stock. In particular, it would have to pay more than $9 million a year

in upfront costs for just five oncology medications; Baptist Hospital has explained to Amici that it

would need to take a hard look whether they could continue to offer these costly medications to its

cancer patients. More  generally, Baptist  Hospital uses  its  340B savings to  further its  charitable

mission of delivering health care services to all individuals within the Pensacola and Northwest

Florida communities. One service in particular that has benefited from 340B savings is oncology

care  for  underinsured  patients.  That  program  would  be  in  real  jeopardy.  As  Baptist  Hospital

explained,  the  “rebate  program  would  severely  curtail  our  ability  to  provide  nonessential

community services and our ability to remain in certain service lines with high drug expenses.”

Similarly,  UC  San  Diego  Health  in  San  Diego,  California  reports  an  estimated  annual

financial impact of more than $25 million in connection with just a small subset of drugs from the

initial rebate proposals. As additional manufactures release their own versions of a rebate model,

the tens-of-millions-of-dollars of impact will multiply. This strain on the health system will directly

affect  patients. UC San  Diego Health uses  its  340B savings  to  offer free medication to eligible

patients. Manufacturer rebate policies pose an imminent risk to UC San Diego’s ability to maintain

these  financial  assistance  programs.  In  addition,  the  rebates  would  jeopardize  UC  San  Diego

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Health’s  ability  to  use its  340B  savings  to  help  vulnerable  patients  with  medication  treatment

management, i.e.,  services  that  help  patients  understand  and  use  their  medications  safely  and

effectively, and adhere to the prescribed course of care.

Stories  like  these abound.  But  another  way  to  measure  the  financial  impact  of Sanofi’s

policy  is  to  look  at  hospitals’  cash-on-hand. According  to  an August  7,  2024  report  from  the

independent ratings agency S&P Global, median days cash-on hand have plummeted to a 10-year

low for U.S. hospitals. See Laura Dyrda, Hospital average days cash on hand hit 10-year low:

S&P, Becker’s Hospital CFO Report (Aug. 9, 2024), at https://www.beckershospitalreview.com

/finance/hospital-average-days-cash-on-hand-hit-10-year-low-s-p.html.

Indeed,

a

second

independent report confirms that, from February 2022 to February 2024, the number of days cash-

on-hand for hospitals and health systems has declined by 25.4%.  See Jay Asser, Hospitals’ Cash

Reserves  Diminished

in  Recent  Years,  Health  Leaders

(Apr.

4,

2024),

at

https://www.healthleadersmedia.com/finance/hospitals-cash-reserves-diminished-recent-years.

According to that report, “he steep decrease … highlights continued financial uncertainties for

the  sector,  as  having  lower  cash  reserves  means  hospitals  are  less  prepared  for  unexpected

emergencies  or  sudden  market  changes.”  Id.  The  unilateral  imposition  of  a  policy  in  which

hospitals must advance millions of dollars from their cash reserves to Sanofi easily qualifies as a

“sudden market change” that many 340B hospitals are not financially prepared for.

To put an even finer point on it, Sanofi’s policy puts hospitals at risk of violating their bond

covenants. 340B hospitals rely on bond financing to raise money for new projects that enhance

patient  care. Those  bonds  typically  include  covenants  requiring  hospitals  to  maintain  a  certain

amount  of  days  cash-on-hand.  See  Steven  Shill,  Healthcare  providers  face  a  growing  risk  of

violating  debt  covenants,  Healthcare  Financial  Management  Magazine  (Feb.  2022),  at

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https://www.bdo.com/getmedia/bdd99fa0-6f39-4f70-b28d-accf0ba66ea2/0222_HFM_Debt-

Covenants.pdf.  Following the announcement of  these rebate policies,  more  than 200 hospitals

self-reported to the AHA that their cash-on-hand would drop low enough to risk violating their

bond covenants. This would have calamitous effects on 340B hospitals, including downgrades in

credit ratings, increased borrowing costs, lack of access to state-of-the-art medical equipment, and

more.  Worst  of  all,  “iolating  a  debt  covenant  can  have  a  downward  spiral  effect  on  an

organization’s ability to continue as a going concern.” Id. (emphasis added).  That consequence—

closing a hospital’s doors—is obviously antithetical to the 340B statute’s purpose.

Second, the rebate policies will further gobble up the intended 340B discounts by raising

administrative  costs.  Sanofi’s  “Integrity  Initiative”  requires  a  340B  hospital  to  do  two  things:

provide  data  to  drug  companies  and  then  track  whether  it  received  the  discount. At  both  ends,

hospitals will be required to spend considerable resources, all to obtain a discount that they are

entitled  to  under  law.  Amici’s  member  hospitals  report  that,  among  other  things,  they  will  be

required to hire new full-time employees, develop or purchase new software, and incur the costs

of filing disputes to challenge inevitable unjustified denials of the 340B discounts. As this Court

knows, moreover, Sanofi is not the only drug company to impose a rebate policy. Not every drug

company will impose the same requirements, use the same data fields or feeds, accept the same

electronic or manual formatting, rely on the same vendors, have the same contractual language, or

provide rebates on the same timetables. Indeed, the “Patient Definition” component of Sanofi’s

“Integrity  Initiative”  is  unique  to  that  company.    So  when  thinking  about  these  new  costs  and

burdens, the Court—like Amici’s members—must think about them exponentially.

For example, CHRISTUS Children’s Hospital is the only free-standing academic pediatric

hospital in San Antonio, Texas that is exclusively focused on pediatric and high-risk maternal care.

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It  serves  some  of  South  Texas’  most  vulnerable  women,  children,  and  families.   CHRISTUS

Children’s reports to Amici that having to comply with the drug companies’ rebate policies will

impose significant costs and administrative burdens.  As for costs, it predicts $3.5 million in up-

front  increases  in  drug  expenses  annually,  creating  a  considerable  cash  flow  issue  for  the

hospital.  As for administrative burdens, CHRISTUS Children’s predicts that it will have to hire

new  staff  to  manage  the  drug  companies’  data  demands  and  to  monitor  whether  the  hospital

receives  the  rebates  that  it  is  owed.   CHRISTUS  Children’s  also  expects  that  it  (and  its  other

affiliated  CHRISTUS  Health  340B  hospitals)  would  need  to  develop  or  buy  new  software  to

manage and track such rebate issues, which carries further costs.  And the hospital expects that it

will need to challenge denial decisions when drug companies choose not to provide appropriate

340B discounts, once again resulting in increased administrative and legal expenses.

Unfortunately,  this  sizable  administrative  expense  means  fewer  340B  resources  will  be

available  for  patients  and  for  the  San  Antonio  and  South  Texas  communities.   CHRISTUS

Children’s relies on the 340B Program to purchase critical lifesaving drugs for cancer treatments,

chemotherapy,  and  other  expensive  medicines  necessary  to  treat  numerous  pediatric  medical

conditions.  For instance, savings from the 340B Program allow CHRISTUS Children’s to provide

high-quality  treatment  and  novel  therapies  for rare  diseases,  such  as  pediatric  Spinal  Muscular

Atrophy and Duchenne Muscular Dystrophy; patients from San Antonio and South Texas no longer

must  travel  long  distances  to  receive  these  curative  high-cost  gene  therapies.  Other  initiatives

CHRISTUS  Children’s  has  implemented  with  its  340B  savings  include:  1)  improved  access  to

high-quality care by opening community-based maternal-fetal and pediatric subspecialty clinics to

serve  Bexar  County  patients  closer  to  their  homes;  2)  comprehensive  medical  and  surgical

programs  for  children  with  complex  conditions  (including  wraparound  services  and  care

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coordination);  and  3)  partnerships  with  community-based  non-profit  organizations  for  family

support services, behavioral health, care coordination, and education to improve the overall health

of the communities CHRISTUS Children’s serves. Without support from 340B savings, many of

these  programs—which  provide  hope,  healing,  and  new  beginnings  for  children,  expectant

mothers, and families in Texas—will suffer as a direct result of these unlawful rebate policies.

Likewise, Dallas County Medical Center is a small Critical Access Hospital in Fordyce,

Arkansas. It uses its 340B savings to provide uncompensated care to the rural population of South-

Central Arkansas. Complying with the rebate policies will inflict substantial administrative costs

on its 25-bed facility—on top of the costs of having to float its cash reserves to the drug companies

while hoping that all of its claims are actually rebated.  Already thinly-staffed, it will have to hire

expensive outside contractors, along with new full-time employees, to assist with the compliance

and operations of the rebate policies. Over time, these contractors, FTEs, and other administrative

expenses are likely to cost more than the 340B discounts bring in. If all the discounts are doing is

breaking-even (or worse) on compliance and administrative costs and not allowing Dallas County

Medical Center to help its patients, it will have to weigh the benefit of participating in the 340B

Program at all—something Congress certainly did not intend when enacting the 340B statute.

For all of these reasons, Sanofi’s policy is incompatible with Congress’ purpose in enacting

the 340B statute. Amici recognize, of course, that “it frustrates rather than effectuates legislative

intent simplistically to assume that whatever furthers the statute’s primary objective must be the

law.” Rodriguez v. United States, 480 U.S. 522, 526 (1987). But what if Sanofi’s policy is doing

the  “frustrating”—here,  by  dramatically  draining  the  discount  Congress  intended  to  provide?

Amici also recognize, as this Court did, that the 340B statute’s diversion and duplicate discount

provisions “suggest[] that Congress did not intend  Section 340B’s purpose  to be  pursued  at  all

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Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 32 of 34

costs.”  Novartis,  2021  WL  5161783,  at  *7.  But  what  if  the  literal  costs  of  Sanofi’s  policy

overwhelms that statutory purpose? At some point, even if Congress did not intend to pursue its

purpose at  all  costs,  the  costs  to  that  purpose  will  be  great  enough  to  shed  light  on  a statute’s

meaning. See NextEra Energy Res., LLC v. FERC, 118 F.4th 361, 371 (2024) (“ourts should

prefer textually permissible readings that would advance statutory or regulatory goals over ones

that  would  frustrate  them.  These  are  bedrock  principles  of  statutory  construction.”  (internal

citations omitted)); see generally Scalia & Garner at 63 (“A textually permissible interpretation

that furthers rather than obstructs a document’s purpose should be favored.”).

This  is  one  of  those  cases.  When  combined  with  text,  structure,  and  history,  the

consequences of Sanofi’s self-proclaimed “Integrity Initiative” cannot be squared with Congress’

intent in enacting the 340B statute.11

CONCLUSION

The 340B statute does not permit drug companies to unilaterally withhold discounts from

340B hospitals in exchange for the surrender of purchase data or what are, in essence, pre-payment

audits.  The  Health  Resources  and  Services  Administration  therefore  correctly  exercised  its

statutory authority to reject both components of Sanofi’s “Integrity Initiative.” Accordingly, this

Court should deny Sanofi’s Motion for Summary Judgment.

11 It also is worth underscoring that “very statute purposes, not only to achieve certain ends, but
also to achieve them by particular means—and there is often a considerable legislative battle over
what those means ought to be.”  Dir., OWCP v. Newport News Shipbuilding & Dry Dock Co., 514
U.S. 122, 136 (1995). As explained above, Congress had a precise intention about what “means”
should be used to enforce the statute’s prohibitions on diversion and duplicate discounts—namely,
the audit and ADR processes. The rebate policies are incompatible with those “means,” thereby
violating statutory purpose in a second (but equally consequential) way.

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Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 33 of 34

March 6, 2025

Respectfully submitted,

                /s/
Chad Golder, Fed. Bar No. 976914
American Hospital Association
2 City Center, Suite 400
800 10th Street, NW
Washington, DC 20001-4956
202-626-4624
cgolder@aha.org
Counsel for Amici Curiae

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Case 1:24-cv-03496-DLF     Document 33-1     Filed 03/06/25     Page 34 of 34

CERTIFICATE OF COMPLIANCE

I hereby certify this brief complies with Local Rule 7(o)(4) and Fed. R. App. P. 29(a)(5)

and 32(g)(1) because it does not exceed 25 pages.  The Brief also complies with the typeface and

type-style requirements of the Local Rules because it is double-spaced and has been prepared using

Microsoft  Word  in  a  proportionally  spaced  12-fond  (Times  New  Roman)  in  the  text  and  the

footnotes.

                  /s/
    Chad Golder

27

Case 1:24-cv-03496-DLF     Document 33-2     Filed 03/06/25     Page 1 of 2

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SANOFI-AVENTIS U.S. LLC,

Plaintiff,

v.

UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES, et al.,

Defendants.

Case No. 24-CV-3496 (DLF)

ORDER

Upon consideration of the March 6, 2025 unopposed Motion for Leave to File Amicus Brief

in Support of Defendants, filed by the American Hospital Association, the National Association

of Children’s Hospitals, Inc. d/b/a Children’s Hospital Association, the Association of American

Medical Colleges, and America’s Essential Hospitals, and the entire record herein, it is hereby, for

good cause shown:

1.

ORDERED  that  the  March  6,  2025  Motion  for  Leave  to  File  Amicus  Brief  in

Support of Defendants, filed by the American Hospital Association, the National Association of

Children’s  Hospitals,  Inc.  d/b/a  Children’s  Hospital  Association,  the  Association  of  American

Medical Colleges, and America’s Essential Hospitals shall be and hereby is GRANTED; and it is

further

2.

ORDERED that the American Hospital Association, the National Association of

Children’s  Hospitals,  Inc.  d/b/a  Children’s  Hospital  Association,  the  Association  of  American

Medical Colleges, and America’s Essential Hospitals shall be and hereby are GRANTED LEAVE

to file an amicus brief in support of Defendants; and it is further

Case 1:24-cv-03496-DLF     Document 33-2     Filed 03/06/25     Page 2 of 2

3.

ORDERED that the Clerk shall cause the amici curiae brief attached to the March

6, 2025 Motion for Leave to File Amicus Brief in Support of Defendants, filed by the American

Hospital  Association,  the  National  Association  of  Children’s  Hospitals,  Inc.  d/b/a  Children’s

Hospital  Association,  the  Association  of  American  Medical  Colleges,  and  America’s  Essential

Hospitals to be filed and entered on the docket in the above-captioned proceeding; and it is further

4.

ORDERED that the Clerk shall cause copies of this Order to be delivered to all

parties of record.

So ORDERED this ___________ day of _________________, 2025

_______________________________
DABNEY L. FRIEDRICH
United States District Judge

2

