On October 14, 2015, the United States District Court for the District of Columbia struck down an interpretive rule from HHS that limited the prices pharmaceutical manufacturers could charge for orphan drugs sold to certain facilities when such drugs are used for non-orphan indications.

The case involves the intersection between the Orphan Drug Act and the 340B Drug Pricing Program.  Under the Orphan Drug Act, the Secretary of HHS can designate certain drugs used to treat rare diseases or conditions as “orphan drugs.”  A drug may be designated as an orphan drug even if it has other unrelated uses.  The Affordable Care Act expanded the list of health facilities covered by Section 340B, but it also narrowed the categories of drugs covered by the reduced prices.  Drugs designated under the Orphan Drug Act were excluded under Section 340B(e).

By way of background, in July 2013, HHS issued a final rule interpreting Section 340B(e) to exclude orphan drugs from the definition of “covered outpatient drug” that are eligible for 340(B) price discounts only when such orphan drugs are used for the rare disease or condition for which the drug was designated.  Thus, the final rule construed 340B(e) to not exclude orphan drugs from the 340B Program when prescribed for uses other than their orphan indications.  The Pharmaceutical Research and Manufacturers of America (PhRMA) sued HHS, challenging HHS’s statutory authority to issue the final rule, and in May 2014, PhRMA’s challenge was upheld.  HHS responded in July 2014 by issuing an interpretive rule that adopted the same orphan drug policy as the final rule.  (See our previous Health Headlines article discussing these events, available here.)  This Interpretive Rule is the subject of the instant case.

On October 9, 2014, PhRMA sued HHS again, this time challenging the Interpretive Rule as inconsistent with the plain language of Section 340B.  The court rejected HHS’s arguments that (1) the Interpretive Rule was not final agency action, and (2) HHS’s interpretation was entitled to deference.  The court found that the Interpretive Rule was final agency action because it is a purely legal determination that forces pharmaceutical manufactures to make a “painful choice” between complying with HHS’s interpretation or risking enforcement actions for refusing to give 340B discounts on orphan drugs intended to treat non-orphan conditions.  The court also concluded that the interpretation is not entitled to deference because it contradicts the plain language of the statute.  Specifically, Section 340B(e) states that any drug that is designated for a rare disease or condition is excluded from the 340B Program; it makes no mention, according to the court, as to whether the drug is in fact used for that purpose.  Concluding that the Interpretive Rule contradicts the plain language of Section 340B, the court granted PhRMA’s motion for summary judgment.

The case is Pharmaceutical Research and Manufacturers of America v. U.S. Dept. of Health and Human Services, case no. 14-1685 (D.D.C. Oct. 14, 2015).  The district court’s opinion is available here.