Kusserow’s Corner: HRSA Issues Interpretive Rule Clarification for 340B(e) Orphan Drug Exclusion

The Health Resources and Services Administration (HRSA) released an “interpretive rule” reiterating that 340B-covered entities affected by the orphan drug exclusion may purchase orphan drugs at 340B prices when those orphan drugs are used for indications other than the rare disease or condition for which the drug received an orphan designation. HRSA’s previous regulations implementing this policy were vacated by a May 23, 2014, U.S. District Court ruling because of a lack of statutory authority to engage in such rulemaking. The interpretive rule states that the Public Health Service Act (PHSA) does not exclude from the program “drugs that are transferred, prescribed, sold, or otherwise used for conditions or diseases other than for which the drug was designated” under the federal Food, Drug, and Cosmetic Act (FDC Act). Under the interpretive rule, HRSA’s new stated position is that the section 340B(e) drug pricing rule of the PHSA excludes drugs with an orphan designation only when those drugs are transferred, prescribed, sold, or otherwise used for the rare condition or disease for which the drug was designated as an orphan drug under section 526 of the FDC Act.

According to HRSA, “interpreting the statutory language to exclude all indications for a drug that has an orphan drug designation would be contrary to the Congressional intent of section 340B(e) to balance the interests of orphan drug development and the expansion of the 340B Program to new entities.” To facilitate identification of drugs with an orphan designation for 340B Program purposes, HRSA will publish and update on a quarterly basis a listing of orphan drug designations, providing the name of the drug and the designated indication. If a covered entity lacks the ability to track drug use by indication, it would be unable to purchase drugs with orphan designations through the 340B Program.

For pharmaceutical manufacturers, the interpretive rule means that HRSA and HHS will continue to require that orphan drugs be provided to freestanding cancer hospitals and other newly eligible entities at 340B Program rates when the drugs are transferred, prescribed, sold or otherwise used for conditions or diseases other than for which the drug was designated under section 526 of the FDC Act.The interpretive rule is effective July 21, 2014. The Pharmaceutical Research and Manufacturers of America (PhRMA) that had filed the original lawsuit on the 340B orphan drug regulation, has now filed a motion asserting that “HHS’s actions are in direct circumvention” of the prior court ruling, and challenging HRSA’s authority to implement this policy through an interpretive rule.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.