## Facts

- Federal law sets ceiling prices drug manufacturers may charge certain safety-net providers designated as “covered entities” under § 340B of the Public Health Service Act.
- To participate in Medicaid and the § 340B program, manufacturers must sign a standardized Pharmaceutical Pricing Agreement (PPA) with the Secretary of Health and Human Services (HHS) promising to charge covered entities no more than the statutory ceiling price.
- Santa Clara County operated public hospitals and clinics that qualified as § 340B covered entities.
- The County alleged that multiple manufacturers systematically overcharged covered entities in violation of the ceiling-price obligation incorporated into the PPAs.
- The County sought compensatory damages in a putative class action, asserting it and other covered entities were intended third-party beneficiaries of the PPAs.
- The statutory scheme places program administration with HHS’s Health Resources and Services Administration (HRSA), which may require reimbursement for overcharges and may terminate a manufacturer’s PPA (and thus jeopardize Medicaid eligibility).
- Congress later reinforced administrative enforcement by directing HHS to create formal administrative procedures for resolving overcharge complaints, with limited judicial review and civil penalties payable to the Government.

## Issues

1. Whether § 340B covered entities may sue drug manufacturers as third-party beneficiaries for breach of PPAs to enforce ceiling-price obligations, despite § 340B’s lack of a private right of action.
2. Whether federal courts may rely on federal common law contract principles to create a private enforcement path where Congress established an agency-centered remedial scheme.

## Decision

- The Supreme Court reversed the Ninth Circuit and held that § 340B covered entities may not bring third-party-beneficiary suits to enforce PPA pricing terms.
- The Court concluded that allowing PPA-based contract claims would function as private enforcement of § 340B and would be incompatible with Congress’s remedial design.
- The decision was unanimous (8–0); Justice Kagan did not participate.

## Legal Principles

- When Congress withholds a private right of action in a regulatory statute and assigns enforcement to a federal agency, courts generally may not permit contract claims that effectively enforce the statute through another label.
- A standardized government “form contract” that primarily incorporates statutory and regulatory obligations does not, by itself, create privately enforceable rights for regulated beneficiaries when such enforcement would circumvent the statutory scheme.
- Courts should not use federal common law third-party-beneficiary doctrine to create a private remedy where Congress structured centralized administrative enforcement, including control over confidentiality and consistent application.

## Conclusion

Because the PPAs merely implement § 340B’s statutory ceiling-price duties and Congress committed enforcement to HHS through an agency-centered mechanism, covered entities cannot sue manufacturers as third-party beneficiaries to recover alleged overcharges.


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