The 2010 healthcare reform law expanded 340B eligibility to critical-access hospitals, sole community hospitals, rural referral centers and free-standing cancer hospitals. It also included a provision that excluded these four types of providers from using 340B pricing to buy orphan drugs, which are used to treat to rare diseases and conditions that affect fewer than 200,000 patients.
The orphan-drug exclusion, which was added during reconciliation, “came as a big surprise to the hospitals,” said Ted Slafsky, president and CEO of Safety Net Hospitals for Pharmaceutical Access.
HRSA then issued a proposed rule to clarify the orphan-drug exclusion in May 2011, and the final version states that these hospitals can buy orphan drugs at 340B prices except in instances where the drugs are being used to treat an orphan disease or condition.
Orphan drugs may have more than one orphan indication as well as indications for non-orphan conditions or diseases. They often come with high price tags, making them some of the most expensive drugs on the market.
“The orphan drug exclusion has prevented these hospitals from accessing the full benefit of 340B, and this final regulation will help them advance their mission of serving the nation's most vulnerable patients,” Jeff Davis, SNHPA's associate counsel, said in a statement.
Annual spending on orphan drugs has increased at a faster rate than on non-orphan specialty drugs over the past 10 years, with about 6% of U.S. drug spending last year going to treat orphan diseases or conditions, according to Express Scripts data. Nine of the 35 new drugs approved in 2012 by the Food and Drug Administration were for orphan diseases or conditions.
The clarification provided in the final rule will have a “significant impact” on the newly eligible hospitals that the exclusion applied to and likely means additional cost savings for these facilities, said David Ivill, a partner at law firm McDermott Will & Emery.
Pharmaceutical companies that develop orphan drugs receive incentives such as tax credits and 7-year market exclusivity.
“This rule will provide clarity in the marketplace, maintain the 340B savings for newly eligible covered entities, and protect the financial incentives for manufacturing orphan drugs designated for a rare disease or condition as indicated in the Patient Protection and Affordable Care Act and intended by Congress,” HRSA said in the regulation.
The Pharmaceutical Research and Manufacturers of America, though, is concerned that HRSA's clarification “will undermine Congress' goal of preserving the incentives for orphan drug development that existed before the Affordable Care Act's 340B expansion,” Matthew Bennett, the trade group's senior vice president of communications, said in an e-mailed statement.
The pharmaceutical industry has been critical of the program and has called for changes that would ensure 340B savings would be used to provide direct access to drugs for uninsured and indigent patients rather than allowing providers to determine how to use their 340B savings.
The final rule goes into effect Oct. 1.
Follow Jaimy Lee on Twitter: @MHjlee
