January 14, 2014—If the federal government’s legal defense of the 340B orphan drug regulation is successful, it might have to send Sherlock Holmes a thank-you note. [ms-protect-content id=”2799″]
In a Jan. 10 court filing, the government said the drug industry’s argument that the Health Resources and Services Administration (HRSA) lacked authority to issue the regulation and interpret the law as it did is based not on “what Congress has done and words it has used,” but instead “on speculative attribution of meaning to things Congress has not done.”
Pharmaceutical Research and Manufacturers of America’s (PhRMA) “attempt to rely on these dog-in-the-night-time theories should be rejected,” it said in a nod to Holmes’ famous observation about the dog that didn’t bark.
In its filing, the government makes its case why a federal district judge in Washington should deny PhRMA’s motion for an order nullifying the regulation, which implements Affordable Care Act language limiting rural and free-standing cancer hospitals’ access to 340B pricing on orphan drugs. In its June 2013 regulation, HRSA interpreted the law to mean that rural and cancer hospitals cannot get 340B pricing on an orphan drug when used for the disease or condition for which the drug received its orphan designation, but they may access 340B discounts on such drugs when used for non-orphan purposes.
Drugs commonly used for non-orphan conditions include Avastin for colorectal and lung cancer (originally designated to treat stomach cancer, melanoma, and malignant glioma, among other diseases), and Remicade for rheumatoid arthritis (originally designated to treat Crohn’s Disease and juvenile rheumatoid arthritis).
HRSA’s interpretation “flows naturally from the plain language of the statute itself and is entitled to deference … as a reasonable interpretation promulgated pursuant to [HRSA’s] rulemaking authority,” the Justice Department said in its brief. Elsewhere, it argued that the regulation should be allowed to stand because “because it reasonably balances the interest in providing significant cost savings to the newly eligible health care facilities with that of retaining sufficient incentives for the development of new drugs for rare diseases.”
The government said the regulation provides rural and cancer hospitals with “critical cost savings” for orphan drugs that are widely prescribed for other common uses. “These drugs, when prescribed for these common uses, often generate enormous profits for manufacturers, while representing a significant portion of a covered entity’s drug budget,” it said. It was reasonable for HRSA to conclude that Congress did not intend “to gut the benefits of the 340B program” for hospitals covered by the exclusion, it said.
PhRMA “does not even attempt to explain how excluding the common usages or orphan-designated drugs from discounted pricing is necessary to adequately incentivize the development of drugs for orphan diseases,” the government said. “Indeed, plaintiff’s interpretation would actually create perverse incentives.”
If PhRMA prevails, it explained, manufacturers of drugs approved for the treatment of common diseases would have “an additional and perhaps excessive incentive … to seek out orphan designation for their best-selling drugs that are already on the market.”
PhRMA is expected to submit a reply to the government’s brief by Jan. 17, the last day for filings in the case.
In other recent activity in the case, three hospital groups filed a memorandum last week opposing PhRMA’s attempt to quash survey findings that the groups’ included in a joint friend-of-the-court brief.
The survey of rural 340B hospitals by Safety Net Hospitals for Pharmaceutical Access found that, on average, the hospitals anticipate savings over the next year of $20,000 to $2 million on discount pricing of orphan drugs when used for common indications. [/ms-protect-content]