Rural, Safety Net Hospital Advocates Join Drug Pricing Fray

The fracas between advocates for rural hospitals and the drug industry over orphan drug pricing affects a small number of rural and freestanding cancer hospitals. It centers on whether Congress intended to exclude safety nets from discounted pricing.

Advocates for rural and safety net hospitals have stepped into the latest fray over the 340B drug pricing program.

Safety Net Hospitals for Pharmaceutical Access, America's Essential Hospitals, and the National Rural Health Association, have filed a joint amicus brief with the U.S. District Court in Washington, D.C., asking the court to toss a lawsuit brought forward by the drug industry that would block some rural hospitals and cancer hospitals from discounted prices on "orphan drugs" that are used to treat common conditions beyond their orphan designation.

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Pharmaceutical Research and Manufacturers of America brought the suit against the Department of Health and Human Services, claiming that HHS incorrectly interpreted "the clear direction of Congress."

"At issue is the Health Resources and Services Administration's interpretation of the 340B orphan drug exemption, enacted as part of the Affordable Care Act," PhRMA General Counsel, Mit Spears said when the suit was filed.

"The ACA significantly expanded the type of entities that can access 340B discounts for prescription drugs," Speaks said. "To preserve incentives to invest in research and development of new treatments for rare diseases, the ACA expressly exempts manufacturers from having to provide these discounts on orphan drugs to newly eligible providers."

HHS has asked the court to dismiss the suit. PhRMA's response to the call for dismissal is due by the end of this month.

The rural and safety net advocates have challenged PhRMA's argument and claim that HRSA's guidance "must be upheld because the plain language of the statute limits the orphan drug exclusion only to orphan uses and does not sweep in the many non-orphan uses for which medications may be administered."

The case isn't getting much attention beyond the immediate players, in part because the legislation affects a small number of rural and freestanding cancer hospitals that were added to the 340B program in 2010.

For those hospitals, however, the stakes are high. Advocates say the court's ruling could determine if many of those hospitals remain open. They cite a recent survey that found that 63% of the affected hospitals reported using Herceptin at least half the time to treat the non-orphan conditions of breast and stomach cancer.

There is a history here. In 2013 the district court sided with PhRMA and vacated HRSA's legislative regulation of 340B after the court determined that Congress didn't grant that explicit authority. Undeterred, HRSA in July 2014 issued the same ruling but labeled it "interpretive" rather than legislative.

PhRMA cried foul and went back to the court.

"While we value the hard work and efforts of all agencies, it is important [that] federal agencies recognize and work within the bounds set by Congress," Spears said.

Safety net and rural advocates argue in their amicus brief that HHS is acting properly by issuing an "'interpretive rule' that is required by the statutory language that it interprets and, even if it were not compelled by the language of the statute, is a persuasive interpretation of that statute."

"HHS's interpretation promotes the two central goals embodied in this statutory scheme—lowering costs for hospitals while incentivizing the production of drugs to treat rare diseases or conditions," the amicus states.

"PhRMA would have this Court eliminate much of the program's benefit to these hospitals, turning a program intended to lower drug costs for hospitals into one that freezes the high cost of many of the most expensive, commonly used medications."

SNHPA Chief Counsel Maureen Testoni believes the federal government will prevail when the district court issues its ruling, which should occur sometime in the first half of this year.

"HHS is saying you don't get 340B if you are using an orphan drug for orphan purposes and the only reason Congress put that in there was to ensure that there isn't any hit on the orphan drug industry," she says. "You still protect when it is used for an orphan purpose, but not for a non-orphan purpose. It is completely consistent to read it the way HRSA has interpreted it."

From the perspective of this unaccredited bus bench attorney, HHS and the advocates have a strong argument with respect to the validity of the interpretive rule. If we are to agree with PhRMA, then we would have to ask what Congress intended if it specifically excluded this tiny subset of rural and cancer hospitals from the narrowly drawn parameters of the 340B program.

The answer, in my opinion, is that Congress did not intent to exclude them.