New Developments in the Ongoing PhRMA v. HHS/HRSA Saga Over the Interpretation of the Exclusion of Orphan Drugs Under the 340B Program

By Michelle L. Butler –

On July 21, 2014, the Department of Health and Human Services (“HHS”)/Health Resources and Services Administration (“HRSA”) announced the availability of an interpretive rule titled “Implementation of the Exclusion of Orphan Drugs for Certain Covered Entities Under the 340B Program,” which is scheduled to be published in the Federal Register on July 23, 2014. 

In its Notice announcing the availability of the interpretive rule, HHS stated that, as the court “decision did not invalidate HHS’s interpretation of the orphan drug exclusion,” “there still is a need for HHS to clarify its interpretation of how the orphan drug exclusion in the 340B Program should be implemented to be consistent with [the statute].”  Consequently, HHS issued an interpretive rule, which states that HHS

interprets section 340B(e) of the Public Health Service Act as excluding 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 under section 526 of the Federal Food, Drug, and Cosmetic Act (FFDCA) Section 340B(e) does not exclude drugs that 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.

Interpretive Rule, at 6.

In articulating the reasons for its interpretation, HHS discussed the purpose and effect of the Orphan Drug Act and the orphan drug exclusion in the Public Health Service Act.  HHS stated that “it is appropriate to construe the orphan drug exclusion consistent with FDA’s longstanding interpretation of the orphan drug provisions of the FFDCA – distinguishing the use of a drug for an orphan indication from its use for other (non-orphan) indications.”  Id. at 4.  Moreover, HHS stated that ‘[i]nterpreting the statutory language to exclude all uses of drugs with an orphan designation, including indications for other (non-orphan) diseases and conditions would nullify the benefits of the expansion of the 340B Program” for newly-eligible entities.  Id. at 5.  Accordingly, HHS “concluded that 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 4340B(e) to balance the interests of orphan drug development and the expansion of the 340B Program to new entities.”  Id. 

According to the Notice, the effective date for the interpretive rule will be the date of publication in the Federal Register.  HRSA’s website contains information pertaining to implementation of the orphan drug exclusion, including orphan drug lists to be used to “assist all stakeholders in complying with HRSA’s policy.” 

HHS/HRSA’s decision to implement its interpretation of the statute as an interpretive rule appears to set the stage for another round of judicial review.  As previously described, in May, in a suit brought by the Pharmaceutical Researchers and Manufacturers of America (“PhRMA”), the United States District Court for the District of Columbia vacated HHS’s substantive rule on the orphan drug exclusion on the ground that HHS did not have the authority to promulgate its rule as a substantive rule.  Having reached its decision on this ground, the court did not come to a final decision on whether the rule could be upheld as interpretive, but seemed skeptical of the argument and invited further briefing on the subject.  PhRMA subsequently filed a motion requesting briefing on the matter of an interpretive rule, which HHS opposed as moot in light of its decision to issue “new, separate interpretive guidance.”  HHS argued in its opposition that any challenge to HHS’s interpretive guidance would be a challenge to “new agency action,” which would require a new suit or amendment of the complaint to include such a new claim.  Last week, PhRMA filed a reply brief to its request for briefing on whether the rule “(however packaged) can survive as an interpretive rule,” particularly in light of HRSA statements that PhRMA argues demonstrate the binding effect HRSA appears to intend for the interpretive rule to have.  We will continue to monitor the developments in this case as HHS/HRSA and PhRMA continue their battle over the orphan drug exclusion.