Hospitals push back against PhRMA orphan-drug lawsuit

Hospitals are pushing back against a drug-industry lawsuit to remove price discounts on billions of dollars of costly drugs developed to treat rare diseases and sold to rural hospitals and cancer centers for off-label purposes.

The controversy centers on how the Patient Protection and Affordable Care Act extended special pricing under the federal drug-discount program, known as 340B for the section in the Public Health Service Act in which it was established 20 year ago.

A federal lawsuit filed in September against HHS by the drug-industry trade group Pharmaceutical Research and Manufacturers of America argues that the 2010 reform law excluded so-called orphan drugs from an expansion of the discount program.

The ACA broadened eligibility to include children's hospitals, cancer hospitals, critical-access hospitals, and rural referral centers and sole community hospitals. That expansion of the discounts could have a huge financial impact for orphan drugs, which command sizable revenue despite the relative rarity of health conditions they're approved to treat.

Orphan drugs recorded sales industry-wide of about $86 billion in 2012, according to market research firm BCC Research. Drugs in the 340B program are sold at discounts of up to 50%.

So the reform law included a special amendment that said cancer centers and rural hospitals still could not use the 340B program to purchase drugs designated for rare diseases.

That amendment led to a new legal wrinkle in July, when HHS published regulations saying rural and cancer hospitals could still buy orphan drugs through the 340B program, but only for patients who were using them to treat off-label, non-orphan conditions or diseases.

It's a key consideration because some orphan drugs are used more often for their off-label uses than their approved indications. A legal brief filed by the American Hospital Association cited a study that found that some orphan drugs are used off-label 90% of the time.

“The ACA's expansion of the 340B drug discount program enables rural hospitals to provide more patients much needed access to lower-cost medications,” according to an AHA friend-of-the-court brief (PDF) filed in U.S. District Court in Washington. “Interpreting the ACA to exclude all uses of drugs with an orphan designation, including indications for other diseases and conditions, would nullify the benefits of the expansion of the 340B program.”

PhRMA, however, argues in its complaint against HHS that Congress' intent when it wrote the orphan-drug eligibility amendment could not have been clearer, and the Obama administration wrote the rules to grant rural and cancer hospitals discounts to which they were not entitled.

“The statute on its face reflects Congress' clear and unequivocal intent to link the orphan drug exclusion to any drug designated as orphan, rather than to any specific orphan indication,” says a request for summary judgment filed by PhRMA on Dec. 13.

The case, PhRMA v. HHS, is on an expedited briefing schedule, but no trial date has been set.

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