Healthcare Business News

HHS fights back to keep expanded 340B drug discounts

By Jaimy Lee
Posted: June 12, 2014 - 7:15 pm ET

The drug industry scored a victory last month against the Obama administration's plans to give hospitals millions of dollars in discounts through the 340B program on orphan drugs. But HHS is sticking to its position that the Patient Protection and Affordable Care Act promises breaks on the expensive drugs when they're used for non-orphan indications.

HHS said in a court filing Thursday that the agency plans to appeal a District Court ruling that struck down its regulations on the federal 340B drug discount program—or issue guidance that would replace the rule and compel drugmakers to provide the discounts. The Pharmaceutical Research and Manufacturers of America, a trade group for the drug industry, argued in a lawsuit last year that HHS misinterpreted the law and overstepped its rulemaking authority.

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A PhRMA spokesperson was not immediately available for comment Thursday. “The interpretation is inconsistent with the clear statutory direction,” Mit Spears, PhRMA's executive vice president and general counsel, told Modern Healthcare in 2013.

Orphan drugs are some of the costliest drugs on the market and are designated to treat conditions or diseases that affect fewer than 200,000 Americans. But it's common for drugmakers to seek broader indications for these drugs. Johnson & Johnson's Remicade, for example, is an orphan drug that's now used for common indications such as rheumatoid arthritis. The drug brings in billions of dollars in sales each year. It is J&J's top-selling drug, making up 10% of the company's revenue in 2013.

“We strongly encourage HRSA to maintain its current orphan drug policy so rural and cancer hospitals are not faced with significant drug price increases,” said a spokesman for Safety Net Hospitals for Pharmaceutical Access, an association representing providers participating in the 340B program, referring to HHS' Health Resources and Services Administration.

The 340B program allows participating providers, such as free-standing cancer hospitals and rural hospitals, to buy outpatient drugs with discounts between 20% and 50%. The recent and rapid expansion of the program—hospital enrollment nearly doubled from 2007 to 2014—has sparked concern for drug companies, which have argued that some participating providers and pharmacies are taking advantage of the program and are not using 340B savings or revenue earned to improve care for the poor, uninsured and indigent patients that they serve.

Genentech on June 5 stopped providing discounts on orphan drugs for the four types of participating hospitals—free-standing cancer centers, critical-access hospitals, rural referral centers and sole community hospitals—that gained access to 340B under the Affordable Care Act.

But the lawsuit may have a broader effect on the 340B program than just limiting participating hospitals from getting discounts on orphan drugs.

The judge's ruling could, in fact, affect whether HRSA can move forward this month with plans to release new proposed regulations sent to the Office of Management and Budget for review in May.

“HRSA is assessing the impact of the recent U.S. District Court ruling on the proposed 340B program omnibus rule,” a HRSA spokesman said. “HRSA will convey information about next steps as soon as we know a path forward.”

It may also mean that fewer providers remain enrolled or decide to enroll in the program. A Safety Net Hospitals for Pharmaceutical Access spokesman has said that without the discounts on orphan drugs some hospitals may reconsider 340B participation.

Follow Jaimy Lee on Twitter: @MHjlee

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