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Court Invalidates 340B Orphan Drug Rule

In a blow to government efforts to regulate the 340B Drug Discount Program, U.S. District Judge Rudolph Contreras has ruled that HRSA lacks regulatory authority to promulgate regulations expanding access to 340B discounts for so-called orphan drugs.

As noted in prior posts, last summer HRSA issued final rules governing 340B access to orphan drugs. The rules that went into effect in October 2013 implemented provisions of the Affordable Care Act that excluded orphan drugs from 340B pricing. In the rules HRSA interpreted the exception as only applying to limited types of 340B covered entities and only applying if the drug at issue is being used for its orphan-approved purpose — meaning that 340B pricing would be available if the drug at issue was being prescribed for another purpose.

The Pharmaceutical Research and Manufacturers of America (PhRMA) filed a lawsuit to enjoin enforcement of the new rule, arguing in part that HRSA was not authorized to issue rules interpreting the legislatively adopted orphan drug exception.  The Court agreed with PhRMA’s position.  In granting PhRMA’s Motions for an Injunction and for Summary Judgment, Judge Contreras relied on precedent in finding that “(w)here Congress prescribes the form in which an agency may exercise its authority…[the court] cannot elevate the goals of an agency’s action, however reasonable, over that prescribed form.”

The timing of the ruling is significant because of HRSA’s intention to publish new regulations governing other aspects of the 340B Program, including the basic issue of how to define a “patient” for 340B purposes. These draft regulations have already been forwarded to the Office of Management and Budget for review.  It will be interesting to see whether the government takes a step back or moves forward with its plan to publish those regulations for comment in June 2014.

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Theresa advises clients on all aspects of the pharmaceutical supply chain, including counseling industry stakeholders on a range of business, legal, transactional, and compliance matters. She provides clients with strategic counseling and creative business modeling that considers legal restrictions and regulatory risk in light of innovation and business goals.