By Rachel Sachs
For all those who have been following the ongoing fight between pharmaceutical companies and HHS over the 340B Program’s coverage of orphan drugs (I know you’re out there), last week PhRMA filed a new complaint challenging HRSA’s interpretive rule on the subject under the APA. For all those who are not (but should be) paying attention to this battle, here’s what’s happening.
The 340B Program allows certain health care organizations (such as disproportionate share hospitals) to purchase drugs for their patients at significant discounts. The Affordable Care Act expanded the number and kind of organizations that can participate in the 340B Program, but it also added an exception stating that most of the covered organizations could not obtain 340B discounts for orphan drugs — or, as the statute puts it, for “a drug designated … for a rare disease or condition.” 42 U.S.C. § 256b(e).
The battle between PhRMA and HHS is over is whether this statutory exclusion applies to orphan drugs or orphan indications. There are many drugs which have received an orphan designation for certain indications but are also FDA-approved and prescribed more generally for non-orphan indications. In such a case, can a 340B facility purchase the drug at a discount if it is being prescribed for a non-orphan indication?
In July 2013, HRSA issued a final rule (after public notice and comment) stating that 340B hospitals could obtain discounts on non-orphan uses of drugs which also had orphan indications, limiting the statute to orphan indications. PhRMA sued, and the United States District Court for the District of Columbia held that HHS lacked the statutory authority to promulgate this rule, finding that HHS’ authority to make rules regarding the 340B program is limited largely to nonsubstantive areas. But the judge explicitly declined to say whether HHS could accomplish the same substantive goal through an interpretive rule, and HRSA responded by doing just that. PhRMA has now sued again, and I am interested to see how this develops.
This debate hasn’t received very much attention in the press, which is disappointing. Because this issue should be of interest to all, not only to health or administrative law scholars. As the FDA Law Blog has pointed out, the district court’s decision calls into question HRSA’s ability to issue a set of broader 340B rules (the “mega-rule”) currently under review by OMB. And as I’ve focused on in my own work, this debate implicates key policy questions about the tradeoffs we make between innovation and access. The 340B program is designed to provide access to medicines for indigent patients, and the orphan drug exclusion is intended at least in part to maintain incentives for investment in orphan designations, creating a balance between the two. Whether an exclusion limited to orphan indications or to orphan drugs is a better way to maintain that balance is an ongoing (and difficult) policy debate.