The Orphan Drug Wars: HHS’s Rebuttal to Its Recent Loss to PhRMA

by BakerHostetler
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On June 18, 2014, the U.S. Department of Health and Human Services (HHS) publicly stated that the recent decision of the U.S. District Court for the District of Columbia to vacate HHS’s regulation covering orphan drugs and the Section 340B Drug Pricing Program (340B Program), would not prevent the agency from moving forward with its interpretation as described in the HHS final regulation. The HHS final regulation, issued July 23, 2013, permits 340B covered entities affected by the orphan drug exclusion to purchase orphan drugs at 340B prices when orphan drugs are used for any indication other than treating the rare disease or condition for which the drug received an orphan designation.

While HHS acknowledges the court’s decision, HHS argues that the court’s decision was based on HHS’s alleged lack of statutory authority. In addition, HHS highlighted, in the agency’s public statement, that the court did not “invalidate HRSA’s interpretation of the statute.” Consequently, “HHS/HRSA continues to stand by the interpretation described in its published final rule, which allows the 340B covered entities affected by the orphan drug exclusion to purchase orphan drugs at 340B prices when orphan drugs are used for any indication other than treating the rare disease or condition for which the drug received an orphan designation.”

Interestingly, while HHS acknowledged the court’s decision, HHS stated that if manufacturers do not abide by the agency’s interpretation, manufacturers face possible termination of the manufacturer’s pharmaceutical pricing agreements and potential lack of Medicaid reimbursement for their products. Additionally, HHS also stated that “340B hospitals subject to the orphan drug exclusion (critical access hospitals, free-standing cancer hospitals, sole community hospitals and rural referral centers) are responsible for ensuring that any orphan drugs purchased through the 340B Program are not transferred, prescribed, sold, or otherwise used for the rare condition or disease for which the orphan drugs are designated under section 526 of the Federal Food, Drug, and Cosmetic Act.”

While HHS’s actions and the previous court decision will undoubtedly lead to further legal action, it is extremely important that both manufacturers of 340B products and covered entities be aware of these new compliance-related risks associated with their 340B programs. In addition, both manufacturers and covered entities need to weigh the pros and cons associated with these new compliance requirements.

As previously reported, the 340B Program and its application will continue to require the clarification that HHS and the court is attempting to provide, and its implications for safety net providers will remain essential for allowing these providers to serve those individuals who need access to the drugs that the 340B Program was intended to cover.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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