Hospitals get victory on orphan drug buys through 340B program

Hospitals will continue to use the 340B program to purchase so-called "orphan drugs" at a deep discount when they are not being used for their specific purpose, AHA News Now reports.

The U.S. Department of Health and Human Services, in tandem with the Health Resources and Services Administration (HRSA), has issued an interpretive rule regarding the 340B program and orphan drugs. Such drugs are available through the 340B program to free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals.

In short, this interpretive rule clarifies that "HHS interprets section 340B(e) of the Public Health Service Act as excluding drugs with an orphan designation only when those drugs are transferred, prescribed, sold, or used for the rare condition or disease other than for which the drug was designated," according to the rule.

The HHS and HRSA said the interpretative rule was issued to provide clarity in the marketplace and to protect the financial incentives available to manufacture orphan drugs, which can be be hugely expensive given the narrow band of patients for which they're intended.

The rule appears to be a victory for hospitals. Earlier this year, a U.S. District Court upheld a Pharmaceutical Research and Manufacturers of America policy that would have excluded orphan drugs from the 340B program if not purchased for their specific use, although it did not prevent HHS and HRSA from issuing its own interpretations of the existing regulations.

"The AHA supports HHS and HRSA's interpretive rule and believes it reflects the intent of Congress to improve access to 340B discounted drugs for rural and cancer hospitals and the patients and communities they serve," Jeffrey Goldman, AHA's vice president for coverage policy, told AHA News Now.

The 340B program, which is intended to provide low-cost drugs for poor patients, has been under fire both from Congress and the press over the past 18 months. At issue has been the practice of some hospitals to use their 340B discount to purchase drugs in bulk, resell them to insured patients and pocket the difference. In one example, Duke University Medical Center made a nearly $70 million profit in one year from its participation in 340B.

To learn more:
- read the AHA News Now article
- here's the interpretative rule (.pdf)

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