Healthcare Business News

HHS reissues disputed 340B policy on orphan-drug discounts

By Jaimy Lee
Posted: July 21, 2014 - 7:15 pm ET

HHS issued an interpretive rule (PDF) that requires drug companies to provide discounts on orphan drugs sold through a federal program just months after a judge struck down the government's previous version of the rule.

The drug industry has contested the Obama administration's interpretation of a provision in the Patient Protection and Affordable Care Act, arguing that the government didn't have the authority to issue the legislative rule in 2013. The Pharmaceutical Research and Manufacturers of America, the drug industry's lobbying group, sued HHS last year, and a federal judge ruled against HHS in May. The administration, however, took the position that the outcome allowed it to reissue the same policy in a different form.

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The new version of the rule, posted to the Federal Register on July 21, requires drug companies to provide discounts between 20% and 50% on orphan drugs used for non-orphan conditions or diseases to freestanding cancer hospitals, critical-access hospitals, rural referral centers and sole community hospitals that participate in the 340B program.

A spokeswoman for PhRMA said the group's position hasn't changed and it continues to believe that the Health Research and Services Administration, which oversees the 340B program, doesn't have the authority to issue rulemaking around the provision.

“The end result of this government power play is that the same rule with the same legal effects would be dressed in new clothing,” PhRMA lawyers said in court documents filed July 18.

PhRMA has asked the court to provide more information about whether the rule can survive in interpretive form or to vacate the rule because HHS doesn't have the rulemaking authority.

For now, the rule is considered a victory for safety net hospitals that participate in the program. Orphan drugs are some of the most expensive drugs on the market and discounts on these therapies may be a contributing reason why some hospitals enroll in the 340B program.

“The agency's position on this issue has been correct all along,” said a spokesman for Safety Net Hospitals for Pharmaceutical Access, a trade group that represents hospitals that participate in the 340B program. “Orphan drug discounts are essential to helping these healthcare providers treat underserved patients.”

The purpose of the 340B program is to offer discounts on covered outpatient drugs to providers that serve a large number of uninsured or indigent patients. The providers can then keep the savings, or revenue, from the discounts.

Follow Jaimy Lee on Twitter: @MHjlee

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