Judge rules: Orphan drugs not subject to 340B discounts

October 16, 2015

Judge Rudolph Contreras ruled against the Department of Health and Human Services by saying that pharma companies do not have to offer rural and cancer hospitals that serve low-income populations 340B discounts on orphan drugs.

Judge Rudolph Contreras ruled against the Department of Health and Human Services (HHS) saying that pharma companies do not have to offer rural and cancer hospitals that serve low-income populations 340B discounts on orphan drugs, Reuters reported.

Last October, the Pharmaceutical Research and Manufacturers of America (PhRMA), sued HHS to block the agency’s interpretation of an orphan drug exclusion found in the Affordable Care Act of 2010.

That language excludes 340B pricing for orphan drugs purchased by rural and cancer hospitals.

Health Resources and Services Administration (HRSA) published a regulation implementing the orphan drug exclusion in July 2013 stating that orphan drugs are excluded from 340B pricing for rural and cancer hospitals only when the drugs are used to treat the rare diseases and conditions for which they received their designations and not when they are used to treat common conditions.

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“HRSA had interpreted the rule to allow discount pricing when an orphan drug was used for a non-orphan indication, which is quite common,” says Randy Barrett, vice president, communications, 340B Health.

According to 340B Health, many of these drugs can cost patients up to $300,000 per year or more, and without access to 340B discounts, these hospitals will struggle to meet the needs of their vulnerable patients.  

“The drug industry is trying to limit the use of the 340B program to preserve profits. A particular target are the larger disproportionate share [DSH] hospitals that buy about 80% of the drugs through the program,” according to Barrett, who noted that this ruling does not affect DSH hospitals. “It's a win for the highly profitable drug industry and a big loss for rural hospitals and their patients.”