May 23, 2014—A federal district judge ruled today that the Department of Health and Human Services has no authority under the 340B statute to promulgate regulations implementing the Affordable Care Act’s 340B orphan drug exclusion, which applies to hospitals registered in 340B as critical access hospitals, sole community hospitals, rural referral centers, and free-standing cancer hospitals.[ms-protect-content id=”2799″]
The judge granted Pharmaceutical Research and Manufacturers of America’s motion to permanently enjoin HHS from implementing the final orphan drug exclusion rule. The June 2013 regulation interpreted the law to mean that rural and cancer hospitals could not get 340B pricing on an orphan drug when used for the disease or condition for which the drug received its orphan designation, but they could access 340B discounts on such drugs when used for non-orphan purposes.
In today’s ruling, U.S. District Judge Rudolph Contreras said that while he found HHS’s rule “to be the most reasonable way of administering the statute,” he was bound nevertheless to rule that Congress did not grant HHS the “rulemaking authority to do so.”
The judge’s decision means there is no longer a regulation in place that authorizes rural and cancer hospitals to access 340B discounts on orphan drugs under any circumstances. Drug manufacturers are expected to stop offering 340B pricing on orphan drugs to the affected hospitals.
The judge’s decision could have implications for HRSA’s so-called 340B “mega-reg” currently pending review by the White House Office of Management and Budget. HRSA has said that it hoped to publish the proposed regulation for notice and comment in June. That regulation is expected to cover the definition of an eligible patient, contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site facilities.
Safety Net Hospitals for Pharmaceutical Access, which represents hospitals in the program, issued a statement expressing its disappointment with the ruling, which it said “will significantly raise the cost of orphan drugs for rural and cancer hospitals and their patients.”[/ms-protect-content]