U.S. Federal Court Vacates HHS' Orphan Drug Rule, Favors PhRMA
The U.S. District Court for the District of Columbia vacated the Orphan Drug Rule regarding the 340B Federal Drug Pricing Program (the 340B Program) on grounds that the Department of Health and Human Services (HHS) did not have the authority to implement it.
Orphan drugs are certain medicines designated by the Food and Drug Administration (FDA) which aim to treat rare and serious diseases. Under the 340B Program, certain providers are allowed to purchase ‘covered outpatient drugs’ from drug makers at discounted prices. The Affordable Care Act (ACA) included four types of hospitals as Newly Eligible Providers: critical access hospitals, sole community hospitals, rural referral centers and cancer hospitals. However, the ACA intentionally excluded orphan drugs from the definition of covered outpatient drugs for these hospitals. If the hospitals wanted to purchase orphan drugs, they need to do so at a non-340B or non-discounted price.
The Orphan Drug Rule was an attempt by the HHS to help these hospitals purchase an orphan drug at 340B prices, as long as the drugs are being used to treat a non-orphan designated condition.
The Pharmaceutical Research and Manufacturers of America (PhRMA) filed a lawsuit against HHS challenging its authority to implement the Orphan Drug Rule. In the end, the court determined that the ODR is ‘legislative’ rather than ‘interpretive’ and ruled in the favor of PhRMA in its Memorandum Opinion issued on May 23, 2014 in Pharmaceutical Research and Manufacturers of America v. United States Department of Health and Human Services, et al.
Rick Pollack, Executive Vice President of the American Hospital Association, expressed disappointment in this result, stating that, this decision might be beneficial for drug manufacturers, but it could also negatively impact hospitals. “We are deeply disappointed… Denying rural and cancer hospitals access to 340B discounts on drugs that will not be used for a rare disease will lead to an inevitable result: the limited resources of those safety net hospitals will be stretched even further and far more patients in the communities served by those hospitals will be adversely affected by reduced patient services and limited access to affordable drugs.”
Following the May 23rd decision, the HHS may either choose to provide additional briefing on the interpretive guidance issue regarding the rule, appeal the decision, or issue new, non-regulatory guidance regarding orphan drug purchases. The HHS has not yet revealed what action it will take in the wake of the court decision.