340B Drug Pricing Program Interpretative Rule Survives (for Now)

02 September 2014 Health Care Law Today Blog

A federal court entered a new order, on August 27, 2014, in an ongoing dispute between the Health Resources and Services Administration (HRSA) and the Pharmaceutical Manufacturers of America (PhRMA) regarding HRSA’s issuance of regulations for the 340B Drug Pricing Program (the 340B Program). The dispute relates narrowly to the 340B Program’s treatment of orphan drugs purchased by certain hospital covered entities, but is of much broader interest because of its potential impact on the scope of HRSA’s ability to issue regulations that are binding on participating 340B Program covered entities and manufacturers.

The Court Declined to Address HRSA’s New Interpretive Orphan Drug Rule

As previously reported, PhRMA challenged HRSA’s orphan drug rule, resulting in a court order vacating the rule in May 2014. In July 2014, HRSA responded by issuing a new rule, this time described as an “interpretive rule,” that expresses the same interpretation of the statute as was included in the invalidated regulation. PhRMA objected to this subsequent rulemaking, and petitioned the court to vacate the interpretive rule as well.

On August 27, 2014, the court ruled on PhRMA’s motion, declaring that, while HRSA is prohibited from defending the original, vacated rule, the July 2014 interpretive rule is a new agency action outside the scope of the lawsuit. This new ruling appears to send PhRMA back to square one, as the court indicated that PhRMA would need to bring a new action to challenge the July 2014  interpretive rule.

Potential Impact of Court Decision on Future 340B Program Regulations

The decision may also pave the way for HRSA to proceed with regard to the promulgation of previously announced rules – which have been delayed indefinitely – addressing key areas of the 340B Program. HRSA may choose to issue some or all of the delayed regulations as interpretive rules, as it did with the orphan drug rule. Regulations that have been drafted but not yet issued include the so-called “Mega Reg” that is expected to address topics including the definition of an eligible patient, compliance requirements for contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site hospital facilities. HRSA will likely evaluate its options in issuing these rules, including an evaluation of their ability to survive legal challenge. If issued, the rules would be of great interest to both manufacturers and 340B Program covered entities.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services