Assessing the new 340B interpretive rule

On July 21, 2014, the Health Resources and Services Administration (HRSA) released an “interpretive rule” reiterating that 340B-covered entities affected by the orphan drug exclusion may purchase orphan drugs at 340B prices when those drugs are used for indications other than the rare disease or condition for which the drug received an orphan designation. HRSA’s previous regulations implementing this policy were vacated by a May 23, 2014 U.S. District Court ruling because of a lack of statutory authority to engage in such rulemaking.

Under the interpretive rule, HRSA reiterates that section 340B(e) of the Public Health Service Act (PHSA) excludes 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 as an orphan drug under section 526 of the Federal Food, Drug, and Cosmetic Act (FFDCA). The agency holds that Section 340B(e) does not exclude drugs used for conditions or diseases other than for which the drug was designated under section 526 of the FFDCA.

According to HRSA, “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 340B(e) to balance the interests of orphan drug development and the expansion of the 340B Program to new entities.” To facilitate identification of drugs with an orphan designation for 340B Program purposes, HRSA will publish and update on a quarterly basis a listing of orphan drug designations, providing the name of the drug and the designated indication. If a covered entity lacks the ability to track drug use by indication, it would be unable to purchase drugs with orphan designations through the 340B Program.

The interpretive rule is effective July 21, 2014. Note that the Pharmaceutical Research and Manufacturers of America (PhRMA), which filed the original lawsuit on the 340B orphan drug regulation, has filed a motion asserting that “HHS’s actions are in direct circumvention” of the prior court ruling, and challenging HRSA’s authority to implement this policy through an interpretive rule.