Federal Judge Strikes Down Drug Discount Program

A new rule included in the Affordable Care Act would have required drug companies to offer certain drugs at discounted prices. However, the rule was struck down by a federal judge who said that the President’s administration does not have the authority to include the rule in the legislation. Judge Contreras said that the Obama administration was “acting beyond the bounds of its statutory authority.” The decision was issued by Judge Rudolph Contreras of the Federal District Court, and the Obama administration has stated that it is currently reviewing the ruling, without noting if it will appeal.

The rule in question began with the establishment of a federal program in 1992 which restricted the prices that drug companies could charge for medications sold to certain hospitals and clinics that serve low-income patients. The discounts are significant—ranging anywhere from 20 to 50 percent. The passage of the Affordable Care Act in 2010 made many of those discounts available to both rural and cancer hospitals. In an attempt to provide a financial incentive for the production of pharmaceutical products, drugs with orphan designation were made exempt from the discount program by Congress. However, some orphan drugs are used to treat common diseases as well, and the legislation was ambiguous as to how orphan drugs would be treated under the rule. Even the Obama administration argued in court that the rule did not explicitly cover all uses of orphan drugs. “The statute is silent or ambiguous as to whether it covers all uses of drugs that have received an orphan-drug designation or only those uses related to the designated orphan disease or condition,” said administration lawyers.

There are organizations speaking out against the rule’s blockage. Ted Slafsky, the president of Safety Net Hospitals for Pharmaceutical Access, said, “The court decision will have a devastating impact on rural hospitals and free-standing cancer hospitals, which will pay a lot more for expensive drugs.” Slafsky’s organization represents a number of hospitals that would have benefited from the drug discount program.