For over a year, participants in the 340B Drug Pricing Program (340B Program) and others have been waiting for the release of the so-called proposed “Mega-Rule” by the Department of Health and Human Services (HHS).  The proposed Mega-Rule is intended to set forth in formal regulation the various 340B Program requirements.  As of April 9, 2014, the Office of Management & Budget (OMB) reported receipt of the proposed 340B Mega-Rule for review, and it has been anticipated that the proposed rule would be released for public comment in June or July 2014.  However, a recent federal court decision vacating the only formally promulgated 340B Program regulation has called into question the agency’s authority to issue the Mega-Rule.  The agency’s Response, filed on July 12, 2014, raises further questions regarding whether it will proceed with the proposed Mega-Rule. 

On May 23, 2014, the U.S. District Court for the District of Columbia issued a Memorandum Opinion in Pharmaceutical Research and Manufacturers of America v. Department of Health and Human Services, Civ. Action. No. 1:13-cv-01501-RC (D.D.C. May 23, 2014), vacating a final rule promulgated by HHS in which the agency set forth its formal interpretation of the orphan drug exclusion under the 340B Program.  In vacating the regulation, the Court found that while Congress gave HHS specific authority to issue 340B Program regulations to (1) establish an administrative dispute resolution process, (2) provide defined standards of methodology for calculating ceiling prices, and (3) address the imposition of civil monetary penalties, it “has not given HHS the broad rulemaking authority” or other specific authority to issue the orphan drug exclusion rule disputed in the case.   

On June 12, 2014, HHS filed its Response to the Court’s May 23, 2014 Order.  The agency stated that it is examining its options as to how to respond to the Court’s decision, “including whether to appeal and/or whether to propound an interpretative rule or other type of interpretive guidance” that would set forth an identical substantive interpretation of the orphan drug exclusion. 

While the decision in this case applies to the orphan drug exclusion rule, it has raised doubts as to whether HHS has statutory authority to issue the Mega-Rule.  How the agency decides to proceed with the orphan drug exclusion rule will no doubt provide some insights on whether the agency will proceed with the proposed Mega-Rule, or will instead continue to administer the 340B Program through interpretative guidance. 

Reporter, Tracy Weir, Washington, D.C., + 1 202 626 2923, tweir@kslaw.com.