HHS defends expanded 340B drug discounts

HHS is sticking to its position that the healthcare reform law requires discounts on expensive orphan drugs despite the drug industry's legal victory on the issue last month.

In a court filing last week, HHS said it is mulling whether to appeal a federal ruling striking down orphan-drug regulations on the federal 340B drug discount program, or else 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 drug discount provision in the Patient Protection and Affordable Care Act and overstepped its rulemaking authority.

Orphan drugs, designated to treat conditions or diseases that affect fewer than 200,000 Americans, are some of the priciest drugs on the market. But it's common for drugmakers to seek broader indications for these drugs.

Safety net hospitals want the government to keep 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.

With the recent and rapid expansion of the 340B program, which provides 20% to 50% markdowns on outpatient drugs, drugmakers argue that some participating providers and pharmacies are abusing the program by not using 340B savings or revenue to improve care for poor, uninsured and indigent patients as intended. On June 5, Genentech 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 reform law.

The judge's ruling could affect whether HHS' Health Resources and Services Administration 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.

The ruling also could mean that fewer providers enroll or remain enrolled in the program. The Safety Net Hospitals for Pharmaceutical Access spokesman said that without the discounts on orphan drugs, some hospitals may reconsider 340B participation.

Follow Jaimy Lee on Twitter: @MHjlee