HHS Says It Has Authority to Issue Interpretive Guidance on Contested 340B Orphan Drug Rule Despite Court Order Vacating Final Rule


According to a recent court filing by HHS, the agency should not be precluded from issuing interpretative guidance regarding a provision of the 340B Drug Pricing Program even though a federal district court previously vacated the agency’s July 23, 2013 final rule, 78 Fed. Reg. 44016 (the “Final Rule”), purporting to implement HHS’s interpretation of the challenged provision. 

In September 2013, Plaintiff Pharmaceutical Research and Manufacturers of America (PhRMA) initiated an action in the United States District Court for the District of Columbia seeking declaratory and injunctive relief to block the Final Rule.  The Final Rule relates to the orphan drug exclusion provision of the 340B Program and sets forth HHS’s position that the exclusion would apply only in limited circumstances—i.e., “only to drugs transferred, prescribed, sold, or otherwise used for the rare condition or disease for which the orphan drug was designated under section 526 of the Federal Food, Drug, and Cosmetic Act (FFDCA).”  As we previously reported, the D.C. district court on May 23, 2014 issued an Opinion and Order in which it vacated the Final Rule, explaining that Congress had not authorized HHS to issue the rule.  Following the order, however, the Health Resources and Services Administration, an agency within HHS, posted on its website that it “continues to stand by the interpretation described in [the Final Rule].”

In a recently filed motion requesting that, inter alia, the district court enter a judgment formally vacating the Final Rule, Plaintiff PhRMA contends that HHS lacks substantive rulemaking authority and that the Final Rule cannot survive as an interpretive rule.  In its opposition brief, HHS takes the position that the Final Rule may effectively be implemented via the issuance of agency interpretive guidance, arguing that “HHS has inherent authority to issue interpretive guidance even in the absence of legislative rulemaking authority.”  HHS adds that, because the district court’s order did not specifically address the interpretation of the orphan drug exclusion provision in dispute, HHS is not precluded from issuing interpretive guidance concerning the provision.  Thus, HHS argues that its interpretive guidance with respect to the orphan drug exclusion provision—including its recent website posting reiterating its position on the issue and interpretive rules that it intends to issue in the future—is consistent with the district court’s May 23 ruling.

The case is Pharmaceutical Research & Manufacturers of America v. United States Department of Health & Human Services, No. 1:13-cv-01501 (D.D.C).  HHS’s July 14, 2014 opposition brief is available here

Reporter(s), Greg Sicilian, Atlanta, +1 404 572 2810, gsicilian@kslaw.com.


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