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340B drug discounts

HHS will enforce disputed rule limiting orphan exclusion from 340B drug discounts


By Jaimy Lee
Posted: June 18, 2014 - 1:30 pm ET
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HHS is moving forward with its plan to allow certain hospitals to receive discounts on orphan drugs when they are used for non-orphan conditions despite a court ruling that said the agency did not have the authority to do so.

The government this week updated a Web page with information about the orphan-drug exclusion rule, asserting that the U.S. District Court for the District of Columbia's ruling in May did not in fact invalidate HHS' interpretation. The rule applies to four types of hospitals that participate in the 340B federal drug discount program, which gives discounts on covered outpatient drugs to healthcare providers that serve large numbers of low-income and indigent patients.

The Health Resources and Services Administration, the HHS agency that administers the 340B program, said participating providers and manufacturers “should attempt to work out any issues in good faith” prior to the start of the new quarter July 1. Manufacturers that do not comply may be required to refund covered hospitals entities or have agreements terminated, an HRSA spokesman said in a statement.

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The administration said in a court filing last week that it planned either to appeal the federal ruling or issue guidance that would replace the rule and continue to require drugmakers to provide the discounts.

The decision by HHS to stand by the rule is a loss for drug companies, which will have to provide discounts in some cases of up to 50% on these drugs.

The Pharmaceutical Research and Manufacturers of America, the trade group for the drug industry, sued HHS in 2013, the same year the final rule was issued, arguing that the federal agency did not have the authority to engage in rulemaking for the exclusion. A spokesperson for PhRMA was not immediately available for comment.

Providers in the 340B program do not have access to discounts on orphan drugs when used to treat the designated orphan disease or condition. These kinds of rare diseases and conditions affect fewer than 200,000 people in the U.S.

Safety Net Hospitals for Pharmaceutical Access, a trade group for hospitals that participate in the 340B program, said it was pleased that HHS “is holding fast on its well-reasoned and legally valid interpretation on the use of orphan drugs in the 340B program.”

The orphan-drug exclusion is part of the Affordable Care Act but was added during reconciliation and was a surprise to hospitals. Orphan drugs are some of the costliest drugs on the market and many of these drugs have multiple indications, including some for orphan diseases or conditions and others for common issues that affect a broader number of patients.

Follow Jaimy Lee on Twitter: @MHjlee


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