HRSA Assessing Impact of Court Decision On Proposed 340B ‘Mega-Rule,’ Official Says

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By Bronwyn Mixter  

June 10 — The Health Resources and Services Administration is assessing the impact of a recent court decision vacating the orphan drug rule on its proposed 340B “mega-rule” before it determines the next steps for the proposal, Krista M. Pedley, director of HRSA's Office of Pharmacy Affairs, said June 10 at a summit sponsored by the Alliance for Integrity and Reform of 340B (AIR 340B).

The proposed 340B mega-regulation (RIN 0906-AB04) is expected to cover the definition of an eligible patient, among other things; the White House Office of Management and Budget began its review of the proposed mega-rule in April. The 340B program requires pharmaceutical manufacturers whose products are covered by Medicaid to provide discounts on outpatient covered drugs purchased by eligible covered entities, which include disproportionate share hospitals, critical access hospitals and children's hospitals.

Court Vacates HHS Rule

On May 23, the U.S. District Court for the District of Columbia said the Department of Health and Human Services lacked the authority for the rule that allows safety-net providers in the 340B program to purchase discounted orphan drugs when the drugs aren't used to treat a rare disease or condition and vacated the rule (Pharm. Research & Mfrs. of Am. v. HHS, D.D.C., No. 1:13-cv-01501-RC, 5/23/14). The court said that, although the rule was the “most reasonable way of administering the statute,” the statutory authorities the HHS had “strung together” were specific grants of authority by Congress for other purposes that didn't authorize the HHS orphan drug rule.

The HHS had published its final rule July 23, 2013, interpreting the effect of the Health Care and Education Reconciliation Act (HCERA) on the Section 340B Drug Pricing Program, which imposes ceilings on prices drug manufacturers may charge for medications sold to such facilities as hospitals that serve indigent populations. Orphan drugs, which receive such a designation by the Food and Drug Administration, are developed to treat rare diseases and conditions and can also be used to treat nonrare diseases or conditions.

Path Forward

Pedley said HRSA is assessing the proposed mega-rule based on the court's ruling, and “we don't know what the next steps are yet.”

“We'll convey information as soon as we know our path forward,” she said.

Alice Valder Curran of Hogan Lovells, Washington, said May 27 in a statement on the court ruling that if the HHS doesn't have authority to issue regulations to implement the 340B program as a general matter, as the decision implies, and the HCERA/Affordable Care Act's grant of rulemaking authority as to specific topics is limited to those topics alone, that then “begs the question of whether HHS has authority to issue regulations on the topics expected to be included in the mega-rule,” such as the definition of an eligible patient, the compliance requirements for contract pharmacy arrangements, hospital eligibility criteria and eligibility of hospital off-site facilities.

Other 340B Efforts

Pedley also said HRSA received $6 million in additional funding for the 340B program in fiscal year 2014 and, with that money, has created a new branch devoted to 340B program performance and quality.

The new branch is developing covered entity audit reports and is responsible for recertifying entities, Pedley said. The branch also reviews self-disclosures by covered entities.

Pedley said HRSA also is developing an online system for 340B covered entities to verify ceiling prices for drugs, which was required by the ACA. “Once this system is running, we'll be able to do more spot checks on pricing,” she said.

Additionally, HRSA is working on finalizing a notice of proposed rulemaking on civil monetary penalties levied when drug manufacturers charge more than the ceiling price, Pedley said.

To contact the reporter on this story: Bronwyn Mixter in Washington at

To contact the editor responsible for this story: Brian Broderick at

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