Invitation Accepted: PhRMA Sues HHS Over “Interpretive” 340B Orphan Drug Rule

By Jay W. Cormier & Alan M. Kirschenbaum

As we previously reported, in late August, the U.S. District Court for the District of Columbia denied PhRMA’s request that the Court vacate a recent HRSA interpretive rule on the orphan drug exception under the 340B drug discount program, ruling that the interpretive rule was not the subject of PhRMA’s lawsuit. The Court stated that PhRMA “is free to challenge that interpretive rule, but such a challenge is beyond the scope of the instant action.” It should come as no surprise that PhRMA was not deterred by the procedural hiccup.

Briefly, in July 2013, HRSA issued a regulation providing that the orphan drug exclusion added to the 340B statute by the Affordable Care Act – which exempts orphan drugs from 340B pricing in cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals – applies only to orphan drugs that are used for the rare condition or disease for which that orphan drug was designated. (For a more detailed description of the 340B program and the orphan drug rule specifically, please see our previous post.) In October of 2013, PhRMA filed suit alleging that the final rule violated the Administrative Procedures Act (see our previous post here). In May of this year, the Court agreed with PhRMA, finding that HRSA did not have statutory authority to promulgate the rule. (See our previous post here.) In July, HRSA issued what was styled an interpretive rule, which set forth the same use-based limitation contained in the final rule that had been invalidated by the Court. PhRMA then asked the Court to strike down the interpretive rule, and, as mentioned at the opening of this post, the Court dismissed PhRMA’s motion on the ground that PhRMA needed to file a new suit (see our previous post here).

Last week, PhRMA did file a new lawsuit in the D.C. District Court, challenging HRSA’s use-based interpretation of the orphan drug exclusion as arbitrary, capricious, and not in accordance with law. PhRMA’s complaint requests declaratory and injunctive relief, arguing that, although styled an interpretive rule, the rule requires PhRMA members to either change their conduct and comply with HRSA’s interpretation or risk substantial penalties, including a requirement to pay refunds to 340B covered entities.

As if to substantiate PhRMA’s latter point, HRSA has recently sent letters to at least some manufacturers of orphan drugs, warning them that, if they do not offer 340B pricing on orphan drugs when used for non-orphan indications, they will be in violation of the 340B statute and their 340B agreements with HHS. The letters request the manufacturer to submit to HRSA within 30 days a plan for providing refunds to covered entities that have overpaid for orphan drugs and for providing the 340B price in the future.

We will continue to keep our readers updated as events continue to unfold.