October 16, 2014—The Health Resources and Services Administration has told an undetermined number of orphan drug manufacturers that they are out of compliance with 340B statutory requirements and their pricing agreements with the government and must notify it of their plans to repay affected rural and freestanding cancer hospitals for overcharges. It is HRSA’s most significant enforcement action affecting drug manufacturers in the 340B program’s 22-year history.[ms-protect-content id=”2799″]
HRSA reportedly informed manufacturers by letter that one or more rural or cancer hospitals told it they were unable to access 340B pricing for one or more of the manufacturers’ orphan-designated drugs. HRSA said that, under its July 21 rule interpreting the Affordable Care Act’s 340B orphan drug exclusion, critical access hospitals, sole community hospitals, rural referral centers, and free-standing cancer hospitals may buy an orphan drug at a 340B-discounted price when the drug is used for an indication other than the rare disease or condition for which the drug received its orphan designation.
Pharmaceutical Research and Manufacturers of America recently filed suit in federal district court seeking to invalidate HRSA’s interpretative rule. PhRMA argues the interpretative rule is indistinguishable from HRSA’s July 2013 340B orphan drug exclusion final regulation, which a federal district judge invalidated this past May.
HRSA reportedly told the manufacturers that, by not complying with 340B statutory requirements as described in the interpretative rule, the drugmakers are violating both the 340B statute and their 340B Pharmaceutical Pricing Agreements with the federal government. HRSA reportedly has given the manufacturers 30 days to describe how they plan to repay affected hospitals and offer 340B pricing on affected products in the future.
The exact number of manufacturers deemed to be out of compliance is not known. Hospitals covered by the exclusion have told HRSA they have been unable to obtain 340B pricing on orphan drugs from companies including Eli Lilly & Co., E.R. Squibb & Sons, Genentech, Janssen Biotech, and Novartis.
Apexus, the 340B Prime Vendor, reported in August that the majority of manufacturers of orphan drugs were declining to sell them at 340B prices to rural and cancer hospitals. It said it was aware that at least five manufacturers – Amgen, American Regent, Astellas, Aptella, and Fresenius – had communicated that they will be providing 340B prices on orphan drugs when used for a non-orphan indication.
If manufacturers decline to obey HRSA’s policy, HRSA conceivably could seek to terminate their 340B Pharmaceutical Pricing Agreements with the government. A manufacturer must have such an agreement in place in order for their products to be paid for by Medicaid and Medicare Part B.[/ms-protect-content]