November 23, 2010—Organizations representing a broad spectrum of hospitals have called upon drug companies that are denying 340 discounts on orphan drugs to immediately resume selling the pharmaceuticals at discounted prices.
During the past few months, at least six manufacturers have informed children’s hospitals and rural and cancer hospitals newly enrolled in 340B that they are no longer eligible for these discounts due to language in health care reform that excludes orphan drugs from the program for these types of hospitals.
Safety Net Hospitals for Pharmaceutical Access (SNHPA) and the National Rural Health Association (NRHA) have pointed out, however, that the Health Resources and Services Administration (HRSA) has not issued written guidance on this matter. They say the companies should refrain from implementing the ban on discounts until they hear more from the government.
Companies’ unilateral and premature decisions to deny hospitals 340B pricing on orphan drugs are “driving [hospitals] away from the very program that was intended to support them,”SNHPA and NRHA said in letters this month to executives at Allergan Inc., Astellas Pharma US Inc., Genentech, Genzyme Corp., Shire PLC and Sigma-Tau Pharmaceuticals.
Ambiguous Wording Cited
The wording of the prohibition on such sales in the Affordable Care Act (ACA) is ambiguous, the hospital groups said, and past policy dictates that the ban be placed on hold until HRSA can define its scope. Legislation to lift the prohibition for children’s hospitals is pending in Congress.
Other manufacturers, the hospital groups noted in their letters, “have decided to delay implementation until they receive further guidance from the government and we ask that you follow their lead.”
SNHPA, which represents more than 600 hospitals enrolled in 340B, and NRHA, which represents critical access hospitals, sole community hospitals and rural referral centers that gained 340B eligibility under health reform, say they will send identical letters to other drug companies if they learn that they, too, are denying the discounts to providers.
Agency Working on Guidance
The groups sent copies of the letters to the Office of Pharmacy Affairs (OPA), which oversees the 340B program, and HRSA, its parent agency. The Monitor has learned that HRSA is in the process of drafting guidance.
Congress inserted the orphan drug prohibition into a budget bill passed in tandem with ACA. It is unknown who sought the last-minute change to the health reform law. The drug industry, however, increasingly views orphan drugs as an important revenue source as the number of drugs losing their patent exclusivity keeps growing.
The ban on discounts for children’s hospitals is largely viewed as a mistake on Capitol Hill because many were already enrolled in 340B prior to health reform and the law took away a benefit they already enjoyed. Even some groups with drug industry members have called for an end to the ban. For example, MassBio, an association of Massachusetts biotechnology companies, universities and academic institutions, has expressed support for legislation sponsored by Sen. Scott Brown (R-Mass.) to lift the prohibition for children’s hospitals. Some of the companies that have told these hospitals that they will not provide them with the discounts belong to the organization.
Hospitals groups, meanwhile, argue that the ban on discounts for rural and cancer hospitals denies them much of the benefit of enrolling in 340B and are working with Congress to lift the prohibition for them as well.
Worries About Broad Application
In their letters to the companies, SNHPA and NRHA said they are particularly concerned that some companies might be interpreting the prohibition to apply to all uses of an orphan drug, and not just those for which the drugs received their orphan designation. This “stands to have far-reaching financial implications for all hospitals” affected by the ban, the groups said.
Children’s and cancer hospitals, they noted, cannot buy 340B covered outpatient drugs from a group purchasing organization as a condition of participating in the program. As a result, they “face the prospect of having to purchase expensive orphan drugs at higher wholesale acquisition cost prices as an untenable condition of their participation in the 340B program.”
Rural hospitals, the groups added, “are finding that up to 75 percent of the savings they were expecting for this program are no longer available” due to the companies’ decisions to stop selling the drugs at a discount.