Federal court ruling bars some drugs from 340B hospital program

A federal court invalidated an extension of the 340B program that covers so-called "orphan" drugs--a decision that could hurt some hospitals.

The Washington, D.C. District Court barred the U.S. Department of Health and Human Services (HHS) from implementing a rule that would allow providers to purchase orphan drugs at the steep discounts offered by the 340B if they are explicitly not using the drugs for orphan purposes, according to the National Law Review.

Orphan drugs are usually developed to treat rare medical conditions and are therefore prohibitively expensive. The 340B program is intended to cut costs of pricey drugs to hospitals that provide a large amount of charity care.

HHS said in a final rule issued last year that free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals were eligible to purchase orphan drugs under the 340B program.

But the court ruled that Congress did not give HHS authority to regulate orphan drugs through the 340B program, and granted an injunction against HHS from implementing the rule. The decision was part of a federal lawsuit brought by the Pharmaceutical Research and Manufacturers of America, which had opposed the implementation of the rule.

The ruling means that "the limited resources of those safety net hospitals will be stretched even further and far more patients in the communities served by those hospitals will be adversely affected by reduced patient services and limited access to affordable drugs," American Hospital Association (AHA) Executive Vice President Rick Pollack said in a statement.

Hospitals' use of the 340B program has been criticized in recent years. News reports said that large providers such as Duke University Hospital, Carolinas Medical Center and the UNC Hospitals have been buying discounted drugs and then selling them to insured patients, pocketing the profits. Another report suggested that a large proportion of hospitals that participate in the 340B program provide scant charity care--an assertion that the AHA disputed.

To learn more:
- read the National Law Review article
- check out the AHA statement (.pdf)
- here's the HHS 2013 final rule (.pdf)

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