On July 21, 2014, the Health Resources and Services Administration of HHS (HRSA) issued an interpretive rule interpreting Section 340B(e) of the Public Health Service Act as excluding from the 340B Drug Pricing Program orphan drugs that are “transferred, prescribed, sold, or otherwise used” only for the rare condition or disease for which the drug received its orphan drug designation. The interpretive rule HRSA now adopts is essentially the same policy that HRSA had previously adopted in a final rule promulgated on July 23, 2013, which was vacated by the United States District Court for the District of Columbia on May 23, 2014.

The D.C. District Court’s May 23, 2014 ruling in Pharmaceutical Research & Manufacturers of America v. United States Department of Health & Human Services, No. 1:13-cv-01501, held that HHS lacked the statutory authority to issue last year’s “legislative” final rule on Section 340B(e), the orphan drug exclusion. Last week’s Health Headlines article discussing that decision is available here. In direct response to the District Court’s decision, HRSA has now adopted essentially the same policy as an “interpretive” rule. HRSA’s interpretive rule is the latest in an ongoing battle between PhRMA and safety net providers.

Under HRSA’s interpretive rule, orphan drugs that are “transferred, prescribed, sold, or otherwise used” for conditions other than those for which the drugs received their orphan designation are not excluded from the 340B Program. This enables certain covered entities participating in the 340B Program, such as free-standing cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals, to purchase orphan drugs at a discount through the 340B Program when they are prescribed for uses other than the indication for which the drug received its orphan drug status.

Explaining its rationale for the policy articulated in the interpretive rule, HRSA highlights Congress’s use of the phrase “for a rare disease or condition” in the statutory language excluding orphan drugs from the 340B Program. Second, HRSA explains that its interpretation is consistent with FDA’s interpretation of provisions in the Food, Drug and Cosmetic Act providing incentives for orphan drug manufacturers. Finally, HRSA cites that its interpretation of the orphan drug exclusion furthers Congress’s intent that 340B covered entities obtain value from the 340B Program and “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”

Click here for a copy of the interpretive rule.

Reporter(s), Kate Stern, Atlanta, + 1 404 572 4661, kstern@kslaw.com.