On November 13, 2014, the Health Resources and Services Administration (“HRSA”) announced its plans to abandon the much anticipated “mega-reg” amid questions concerning HRSA’s rule-making authority.  The “mega-reg” was expected to provide much needed clarity to the 340B drug discount program (the “340B Program”) by addressing, among other things, the definition of an eligible patient, compliance requirements for contract pharmacy arrangements, hospital eligibility, and criteria for hospital off-site facilities.

HRSA submitted draft regulations to OMB in April 2014, and the proposed “mega-reg” was expected to be released in June 2014.  However, several legal challenges to other 340B Program regulations undermined HRSA’s legal posture to proceed.  A federal district court ruling in May 2014 determined that HRSA did not have the statutory authority to issue regulations concerning the Orphan Drug provision of the 340B Program.[1] This decision called into question HRSA’s authority for promulgating regulations for the 340B Program, except for limited rulemaking authority granted to it under the Affordable Care Act.[2]  In response to the May 2014 decision, on July 23, 2014, HRSA released a nonbinding Interpretive Rule that set forth the same Orphan Drug policies as the challenged regulation.[3]  EBG has previously posted more in-depth detail as to the court’s decision on the PhRMA lawsuit and the Interpretative Rule here.

After release of the Interpretative Rule, PhRMA filed a motion for miscellaneous relief arguing that the challenged regulation was outside of HRSA’s rulemaking authority and incapable of surviving as an Interpretive Rule.[4]  The court decided to limit its initial decision to whether HRSA had the authority to issue the Orphan Drug rule as a legislative rule, and PhRMA filed a second lawsuit on October 9, 2014, challenging HRSA’s Interpretive Rule as violative of the plain language of the statutory Orphan Drug exclusion.[5]  Despite questions concerning its rulemaking authority, HRSA has updated its frequently asked questions asserting that the failure to comply with statutory requirements as interpreted by HRSA could be considered a violation of the Orphan Drug statute and subjects the drug manufacturer to enforcement action.[6]

Despite the withdrawal of the “mega-reg,” HRSA has stated that it will pursue proposed rules where it has clear legislative rulemaking authority.  To this end, the HRSA Office of Pharmacy Affairs website includes a statement that HRSA will issue proposed rules pertaining to civil monetary penalties for manufacturers, calculation of the 340B ceiling price, and administrative dispute resolution in 2015.[7]  In addition, the website states that HRSA will issue proposed guidance to address “key policy issues,” which are surmised to include the areas that would have been addressed by the “mega-reg.”  Historically, HRSA has not issued regulations, but has issued program guidance through a series of Notices issued through the Federal Register, as well as other sub-regulatory guidance, including FAQs on its website.

HRSA’s ability to issue and enforce guidance will likely be impacted by ongoing litigation and challenges brought forth by the drug industry.  In addition, calls from the drug industry, and a new conservative majority in the Senate, may cause the Senate to reopen the original 340B statute to address the policy debates, lack of clarity regarding the permissible interpretation of 340B Program requirements and standards and HRSA’s rulemaking authority.  Thus, even in the absence of the “mega-reg,” significant changes to the 340B Program should be expected by stakeholders in 2015.