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Jul 24, 2014

HRSA Stands Behind Its Interpretation of the 340B Orphan Drug Exclusion After District Court Vacates the Agency’s Final Rule

Published

Jul 24, 2014

The Health Resources and Services Administration (HRSA) has issued an “interpretive rule” that reflects the same interpretation of the 340B orphan drug exclusion as the agency included in the July 2013 orphan drug final rule, before the rule was vacated by the U.S. District Court for D.C. in May 2014.

In that case, the Court ruled that HRSA lacked substantive (or legislative) rulemaking authority for the orphan drug exclusion. 

HRSA argues that the Court only invalidated the procedure by which the agency sought to clarify the orphan drug exclusion and did not invalidate its actual interpretation. As a result, the agency has reissued the policy as an interpretive rule. In response, PhRMA stated its position that the interpretive rule is “equally invalid” and has asked the Court to either vacate the new interpretive rule or order additional briefings on whether the interpretive rule can stand. HRSA has opposed PhRMA’s motion. 

The fate of HRSA’s 340B orphan drug exclusion policy is in the hands of the District Court, though timing of a final court decision is uncertain. As a result, it remains unclear whether or not newly-eligible covered entity types will continue to access 340B discounts for orphan drugs when used for non-orphan indications. Prior to HRSA’s interpretive rule release, Apexus, the prime vendor for the 340B program, stated that ten manufacturers had stopped providing any 340B discounts for at least some of their orphan products. Upon implementation of the interpretive rule, HRSA has stated that manufacturers are legally bound by the agency’s interpretation of the law. 

Furthermore, HRSA had intended to publish a “comprehensive” 340B proposed rule in June 2014, addressing important topics including patient definition, contract pharmacy arrangements, covered hospital eligibility and eligibility of off-site facilities. Based on the Court’s ruling, it is unlikely that HRSA has the authority to promulgate substantive rules for many of these 340B topics. Based on the outcome of the orphan drug rule litigation, HRSA may instead choose to release a series of interpretive rules. 

The 340B orphan drug exclusion in the ACA restricts the ability of certain newly-eligible 340B-covered entity types to obtain 340B discounts for orphan drugs. In both the new interpretive rule and the vacated final rule, HRSA has interpreted these restrictions to allow newly-eligible facility types to obtain 340B discounts for orphan drugs when those drugs are used for non-orphan indications. 

View HRSA’s interpretive rule.

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