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PhRMA Files Suit Challenging 340B Orphan Drug Final Rule

Alice Valder Curran

Emily Gebbia

04 October 2013
On Friday, September 27th, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed suit against the Department of Health and Human Services challenging the 340B orphan drug final rule.  The complaint seeks both to invalidate the final rule as well as to enjoin (stop) its implementation.

The Affordable Care Act (ACA) expanded the 340B program to add certain new categories of eligible covered entities but excluded drugs subject to an orphan designation from the 340B ceiling price requirement as to those entities.  The final rule, which became effective October 1, 2013, interpreted that ceiling price exception narrowly, to apply only to orphan drugs when used for the indication subject to the orphan designation.  As a result, the final rule allows the new covered entity types to purchase orphan drugs at the 340B ceiling price when those drugs are used for non-orphan indications.

PhRMA makes two arguments in support of its legal challenge.  First, PhRMA alleges that the final rule is inconsistent with the statute.  PhRMA’s position is that the statutory language that creates the ceiling price exception applies to the orphan drug as a whole, and not on an indication basis.  Second, PhRMA alleges that the neither HHS nor HRSA had authority to issue a rule interpreting the orphan drug exception.

Notably, the complaint does not  expressly base its case on the operational concerns expressed by many manufacturers in their comments to the proposed rule, such as the (in)ability of covered entities to implement an indication-based approach, HRSA’s lack of any specific guidance regarding the type of records that covered entities must maintain to demonstrate compliance, or the requirement that manufacturers honor requests for the 340B price for drugs that are approved solely for an orphan indication, which necessarily implies that the covered entity intends  to use the product for an off-label use.

On Monday, September 30th, the day before the final rule’s effective date, PhRMA filed a motion for a preliminary injunction to enjoin implementation of the final rule.  The court granted HHS an extension to file a response to the motion for preliminary injunction.  However, the same day that the extension was granted, HHS filed a motion to stay the proceedings until the government shutdown ends and money is appropriated to the Department of Justice.  PhRMA opposed the motion.  In its brief, PhRMA indicated that it offered to agree to a stay of proceedings for the duration of any government shutdown if HHS would suspend implementation of the final rule for the same period, but that HHS had thus far declined to do so.  If the court does not grant the stay, HHS’s response to the motion for a preliminary injunction would be due October 17th.  The orphan drug final rule remains in effect while the litigation proceeds unless and until either HHS voluntarily agrees to suspend implementation of the final rule or PhRMA prevails on its injunction request.

The complaint and memorandum in support of the motion for the preliminary injunction, both public documents, are attached for your information.  We would be happy to address any questions you may have regarding the orphan drug final rule and/or this litigation.

Alice Valder Curran

Emily Gebbia

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