February 4, 2013—The Health Resources and Services Administration (HRSA) has sent the White House Office of Management and Budget (OMB) its draft final regulation to clarify the Affordable Care Act’s (ACA) restriction on 340B discounts for orphan drugs purchased by hospitals that became eligible for 340B under health care reform.
OMB’s Office of Information and Regulatory Affairs (OIRA), which reviews all federal agencies’ draft rules at both the proposed and final stages of rulemaking, received the orphan drug exclusion final rule from HRSA on Jan. 31, according to a notice on the OIRA website.[ms-protect-content id=”2799″] Under a 1993 executive order, OIRA is generally required to complete its review of final rules within 90 calendar days. This suggests that if OIRA returns the final rule to HRSA with no changes, it might be posted for public inspection on the Federal Register website by May 1.
The Affordable Care Act added free-standing cancer hospitals, critical access hospitals, sole community hospitals, and rural referral centers to the list of health care providers eligible for 340B drug discounts. A related budget reconciliation bill passed a few days after ACA became law excluded orphan drugs “for a rare disease of condition” from the definition of 340B covered outpatient drug for the newly-eligible hospitals as well as for children’s hospitals, which gained eligibility for 340B discounts under a 2005 law. Congress lifted the restriction for children’s hospitals in December 2010.
HRSA issued a notice of proposed rulemaking on May 20, 2011 stating that rural and freestanding cancer hospitals should be allowed to buy orphan drugs at 340B-discounted prices when they use the medicines to treat non-orphan diseases or conditions.
HRSA explained that the fact that orphan drugs can be—and often are—used for non-orphan purposes led it to conclude that Congress intended the exclusion to apply only when orphan drugs are used “for the rare condition or disease for which the orphan drug was designated.” Congress, it said, wanted newly eligible hospitals to participate in and benefit from the 340B program. Interpreting ACA’s language to exclude uses of orphan drugs “for common diseases or conditions,” it continued, “would place a substantial burden on the affected entities and potentially nullify the benefits of the 340B program for those entities considering enrolling.”
A study last year by researchers at the University of Minnesota found that critical access hospitals in that state are spending significantly more on orphan drugs than they otherwise would if they could buy the medicines at 340B discounted prices.
In comments on the proposed rule, drug manufacturers argued that HRSA’s interpretation of the exclusion conflicts with federal law, would be open to abuse, and would undermine drug development.
Hospitals and health systems, meanwhile, said that letting rural and free-standing cancer hospitals access 340B pricing when they buy orphan drugs to treat non-orphan indications is legally sound, would help hospitals fulfill their safety-net mission, and would not weaken incentives for orphan drug development.
Congressional supporters of the 340B program are expected to re-introduce legislation this term that would lift the exclusion entirely.[/ms-protect-content]