August 27, 2014—Drug manufacturers are free to challenge the new 340B orphan drug exclusion “interpretative” rule, but they cannot do so as part of their successful lawsuit against the orphan drug “legislative” rule that came before, a federal district judge ruled this morning. [ms-protect-content id=”2799″]
Judge Rudolph Contreras’ order and final judgment in the case today may mean that Pharmaceutical Research and Manufacturers of America will have to go back to square one and file an entirely new case challenging the Health Resources and Services Administration’s July 21 interpretive rule.
In July 2013, HRSA published a final legislative rule to implement the Affordable Care Act’s 340B orphan drug exclusion, which applies only to critical access hospitals, sole community hospitals, rural referral centers, and free-standing cancer hospitals. The rule prohibited the hospitals from buying an orphan drug at a 340B-discounted price only when the drug is used to treat the rare disease or condition for which the drug received its orphan designation. When the same drug is used for different conditions or diseases, it is eligible for 340B pricing, HRSA said.
PhRMA filed suit, arguing that Congress never authorized HRSA to issue a legislative regulation to implement the orphan drug exclusion, and Judge Contreras agreed in a May decision. HRSA responded in July by issuing an interpretive rule that echoed the invalidated final rule’s interpretation of the statute. In issuing and defending the interpretive rule, HRSA took the position that, although the judge vacated the original legislative rule, he did not invalidate HRSA’s underlying interpretation of the orphan drug exclusion.
PhRMA asked Judge Contreras to invalidate the interpretative rule on the grounds that it is materially identical to the legislative rule.
In his ruling today, Judge Contreras drew a line between HRSA’s July 2013 legislative rule and its July 2014 interpretative rule. He called the interpretative rule “a new agency action” and said it “was not the subject of this lawsuit.”
“The plaintiff is free to challenge that interpretive rule, but such a challenge is beyond the scope of the instant action,” he said before entering an order and final judgment in PhRMA’s favor. Judge Contreras said that his order was appealable, but he did not specify by which side. As the prevailing party, it is not immediately clear if PhRMA has an avenue for an appeal to the U.S. Court of Appeals for the District of Columbia Circuit.
PhRMA did not respond to a request for comment, and HRSA said it was unable to comment on ongoing litigation.
Attention now turns to how individual drug companies and HRSA will respond to the judge’s decision. Apexus, the 340B prime vendor, recently reported that only five drugmakers were extending 340B pricing on orphan drugs to rural and freestanding cancer hospitals. It remains to be seen if others will follow suit or if HRSA will act against those that continue not to sell orphan drugs to the affected hospitals.
In a July 24 filing in the just-closed lawsuit, HRSA said that while its interpretive rule is not binding, “a manufacturer’s … failure to abide by HRSA’s interpretation of the [340B] statute could subject a manufacturer … to an enforcement action by HRSA consistent with statutory requirements.” [/ms-protect-content]