The D.C. District Court permanently enjoined the U.S. Department of Health & Human Services (HHS) Health Resources and Services Administration (HRSA) from implementing its July 23, 2013 final rule on “exclusion of Orphan Drugs for Certain Covered Entities under 340B Program” (the “Orphan Drug Rule”). The Orphan Drug Rule initially became effective October 1, 2013, and permitted “new” covered entities established under the Affordable Care Act, (free-standing cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals), to access 340B pricing on orphan drugs, so long as the drugs were not to be used for an orphan indication.  (See our July 22, 2013, post for more detail about the Orphan Drug Rule, and our October 3, 2013 post for more detail about the lawsuit.)

In an opinion filed May 23, 2014, D.C. District Judge Rudolph Contreras held that HHS did not have the rulemaking authority to promulgate the Orphan Drug Rule.  The court granted summary judgment to plaintiff Pharmaceutical Research & Manufacturers of America, ordering that the Orphan Drug Rule be vacated.  Accordingly, the “new” covered entity types listed above are no longer authorized to purchase drugs designated for an orphan condition under the 340B Drug Discount Program – even if they intend to use the drug for a non-orphan condition/indication.

Open questions in the wake of the D.C. District Court’s opinion include:

• Will the “new” covered entities refund manufacturers for orphan drugs purchased between October 1, 2013 and May 23, 2013?
• Will the D.C. District Court’s discussion regarding the scope of HHS’s/HRSA’s rulemaking authority have implications for/delay the proposed 340B rule that is widely rumored to be pending at the Office of Management and Budget for release this summer?
• How will manufacturers and covered entities “flip the switch” to ensure appropriate compliance with the orphan drug exclusion (and how quickly can that be done)?

Manufacturers of orphan drugs are strongly encouraged to promptly review their 340B chargeback validation processes to ensure compliance with the Affordable Care Act, which excludes the covered entities listed above from accessing 340B Drug Discount Program prices for “a drug designated by the Secretary under section 526 of the Federal Food, Drug, and Cosmetic Act for a rare disease or condition.”