January 29, 2015—Attorneys for the Department of Health and Human Services have asked a federal district judge to dismiss the drug industry’s lawsuit against the 340B orphan drug exclusion interpretive rule. [ms-protect-content id=”2799″]
In a Jan. 27 motion, the Justice Department says that Pharmaceutical Research and Manufacturers of America’s claims that the Health Resources and Services Administration’s interpretative rule reads the orphan drug exclusion incorrectly and violates the Administrative Procedures Act “are without merit.” The department argues that, because the interpretative rule is non-binding, the rule is not a final agency action subject to judicial review. Even if the court decides that a reviewable final action occurred, it says the court should uphold HRSA’s “sensible reading” of the exclusion.
PhRMA’s response to the government motion is due by Feb. 25.
Although the Affordable Care Act made certain rural and cancer hospitals eligible for the 340B program, it excluded them from access to 340B pricing for drugs designated under the Orphan Drug Act for a rare disease or condition. In a 2013 final regulation, HRSA said that the newly eligible hospitals could buy orphan-designated drugs at 340B discounted prices when the drugs were being used for common conditions.
PhRMA sued HRSA to challenge the legality of the regulation and won, with a federal district judge ruling in May 2014 that HRSA lacked authority under the 340B statute to promulgate a “legislative” regulation implementing the exclusion. The court however, left open whether HRSA’s reading of what the 340B statute requires could survive as a lesser “interpretive” rule, and whether HRSA’s reading of the law had merit. HRSA published such a rule in July, saying it interpreted the 340B statute virtually the same as it did in the defunct legislative rule. PhRMA sued HRSA again, saying the interpretive rule was not a valid reading of the orphan drug exclusion.
In its motion for summary judgment, the Justice Department says HRSA issued the interpretative rule because it “did not wish to leave program participants in the dark” about its future interpretation of the law.
It says, first, that PhRMA’s case has no merit because there is no final agency action to review. The interpretative rule “merely reflects [HRSA’s] view of the meaning of the statute,” the government’s brief says, and it is the statute that HRSA would enforce in a future action against a drug manufacturer, not the interpretative rule.
“Nothing in the interpretative rule purports to make [HRSA’s] interpretation” of the exclusion “legally binding, nor does it have any force of law, independent of any binding effect that the statute itself may have,” the government says.
“Until [HRSA] initiates an enforcement action against a drug manufacturer and imposes a penalty for not complying with the statutory provision, there is no final agency action subject to judicial review,” the government says.
Second, the government says that if the court decides that the interpretative rule was a final agency action, it should uphold HRSA’s “sensible reading” of the exclusion. HRSA’s interpretation merits the court’s respect, the brief says, “as a cogent administrative interpretation that is entitled to deference.”
HRSA’s interpretation “is consistent with the plain language of the statute, which highlights the ‘rare disease or condition’ for which an orphan drug has been designated,” the government says. “In the statute, the word ‘drug’ is modified, and limited, by the phrase ‘designated … for a rare disease or condition.’ The domain of ‘rare diseases and conditions’ is therefore the critical focus of [the orphan drug exclusion], and that focus naturally leads to the conclusion that the exclusion applies only to drugs that are actually being used or prescribed for their designated rare disease or condition.”
Also, HRSA’s interpretation “reasonably takes into account that many drugs with orphan designations are not approved or used for their orphan indications but, rather, are prescribed to treat common diseases,” the government says.
“Congress should not lightly be presumed to have intended to force the newly-added covered entities, serving low-income patients, to pay higher prices for their outpatient orphan drugs when these drugs are used to treat common diseases,” the brief continues. “It is one thing (and something Congress evidently did intend) to provide for the higher price and the manufacturer incentive when the drugs are used for the orphan indications. But it would be quite another to have the newly eligible covered entities intended to benefit from participation in the 340B Program to pay higher prices up to 90 percent of the time (particularly when, as it turns out, such a requirement may cause newly eligible entities to forfeit their participation in the 340B Program).”
PhRMA’s interpretation “to exclude all drugs that have received orphan-drug designation even when they are only approved and prescribed to treat common diseases would frustrate” Congress’s intent to enable newly-eligible covered entities to benefit from participation in 340B, the government says.
The Department of Health and Human Services “is responsible for administering the 340B program and the Orphan Drug Act, and is in a perfect position to take the goals of both statutes into account and to make sure they mesh,” the government concludes. Under those circumstances, it says, HHS’s interpretation is entitled to deference. [/ms-protect-content]