The Health Resources and Services Administration (HRSA) of the US Department of Health and Human Services (HHS) recently announced the availability of an interpretive rule (the “Interpretive Rule”) regarding section 340B(e) of the Public Health Service Act (PHSA), effective July 21, 2014.

This Interpretive Rule comes on the heels of the US District Court for the District of Columbia’s ruling that HHS does not have the authority to issue substantive rules regarding section 340B(e)’s orphan drug exclusion. PhRMA v. HHS, No. 13-01501 (D.D.C. May 23, 2014). The court’s decision, however, left open the ability of HHS to issue interpretive rules on the provision. Accordingly, HRSA has characterized the former substantive rule as interpretive.

The rule is largely unchanged.  The Interpretive Rule, “Implementation of the Exclusion of Orphan Drugs for Certain Covered Entities Under the 340B Program,” affirms the agency’s previous guidance that pharmaceutical manufacturers must significantly discount orphan drugs for off-label uses. The Interpretive Rule specifically states that HHS interprets 340B(e) of the PHSA as excluding from the drug pricing program “drugs that are transferred, prescribed, sold, or otherwise used for the rare condition or disease for which the drug was designated” under the Federal Food, Drug, and Cosmetic Act (FFDCA). The Interpretive Rule states that the 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 FFDCA.

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 FFDCA.

Update:  On August 27, 2014, the U.S District Court for the District of Columbia issued its final judgment in PhRMA v. HHS.  The court entered its judgment in favor of PhRMA, but rejected PhRMA’s reqeust to consider the legality of the Interpretive Rule.  The upshot of this decision is that if PhRMA wants to challenge the Interpretive Rule, it will have to do so through a separate action.

Robert D. Nauman
Principal
T: +1 614 365 2721
E: robert.nauman@squirepb.com
Stanford L. Moore
Fellow
T:  +1 614 365 2793
E:  stanford.moore@squirepb.com