stockroom2 - The orphan drug exclusion: where do things stand?

The orphan drug exclusion: where do things stand?

If you’re confused over the status of the 340B orphan drug exclusion, and how it affects participating free-standing cancer hospitals (CAN), critical access hospitals (CAH), rural referral centers (RRC) and sole community hospitals (SCH), you’re not alone. The last several months have been filled with continued controversy and back-and-forth legal action between the Health Resources and Services Administration (HRSA), which oversees the 340B Program, and the Pharmaceutical Research and Manufacturers of America (PhRMA).

Back in 2013, HRSA published a final legislative rule to implement the Affordable Care Act’s (ACA’s) 340B orphan drug exclusion. The rule stated that, while affected CAN, CAH, RRC and SCH hospitals were excluded from buying orphan drugs under 340B to treat the rare disease or condition for which the drug received its orphan designation, they were allowed to purchase orphan drugs at 340B pricing when used to treat other conditions or diseases. PhRMA filed suit, claiming that HRSA lacked the Congressional authority to issue this type of legislative rule.

Throughout the ensuing legal challenges, affected hospitals have been left wondering how to handle orphan drugs in their 340B Program, and some drug wholesalers have already removed orphan drugs from 340B pricing—despite not yet having a final resolution on the matter.

Most recently, HRSA notified more than 50 drug manufacturers that they must “notify HRSA of plans to repay affected covered entities” and to extend the discounted prices in the future in accordance with HRSA’s interpretive rule on orphan drugs, according to a news item posted at AHA News Now.

What does this mean to you?

For starters, unless you’re a CAN, CAH, RRC, or SCH entity type, you are not affected by the orphan drug exclusion. But for those of you who are, here’s what we recommend.

1. Make sure you’re following HRSA’s guidance on handling orphan drugs. Adherence to HRSA’s guidelines was required as of October 1, 2013.

2. Use HRSA’s published list of orphan drugs for the current quarter, and update your list when the new list is published by HRSA on their website.

3. Make sure you have clearly communicated to HRSA your chosen “opt-in” or “opt-out” status for orphan drugs. If you’ve opted out, it means that you will purchase all orphan drugs outside of the 340B Program—on a GPO or other account if you are a CAN entity type. If you’ve opted in, it means that you are maintaining auditable records to demonstrate compliance with the orphan drug exclusion. We interpret this to mean that your records may include a diagnosis code to show that you’re only purchasing orphan drugs on 340B when they’re being used for a non-orphan indication. If you decide to change your opt-in/opt-out status, you can do so at any time by submitting a change form. However, the change will not take effect until the beginning of the following quarter.

4. If you’ve chosen to opt in, you must maintain auditable records to track the use (and subsequent purchases on 340B) of orphan drugs by orphan indication. (If you cannot meet this requirement, you should opt out and purchase all orphan drugs outside of the 340B Program, according to HRSA’s FAQs on orphan drugs.)

5. If you want to manage purchasing preferences for orphan drugs, you can do this in your Sentry solution using the Blacklisting Tool. For help setting up blacklisting,contact the SentryOne Help Team at 800.221.4338.

Still have questions?

I’ll do my best to address some of the questions we’re hearing most frequently!

My wholesaler or manufacturer is refusing to sell me orphan drugs at 340B pricing. What can I do?

If a wholesaler or manufacturer does not offer 340B pricing as required, you should talk with either party to work towards resolution. Consider notifying HRSA and the drug manufacturer, where you feel it is necessary. Until the latest legal action is resolved, per HRSA, the interpretive rule remains in place, and drugmakers must continue to honor the statutory text of the orphan drug policy as stated in the ACA. However, both hospitals and Apexus, the 340B Prime Vendor, have reported that some wholesalers and manufacturers are not honoring 340B pricing for orphan drugs, even when used for a non-orphan indication. These reports have driven HRSA’s recent notification to drug manufacturers in an attempt to solve the problem. From HRSA’s viewpoint, the manufacturers are violating the 340B statute and jeopardizing their 340B Pharmaceutical Pricing Agreements with the federal government. These agreements are required in order to be paid for Medicaid and Medicare Part B drug usage. Drug Discount Monitor reports that this action is “HRSA’s most significant enforcement action affecting drug manufacturers in the 340B program’s 22-year history.”

PhRMA is saying that HRSA doesn’t have the power to enforce the orphan drug exclusion, and it seems like at least one judge agreed. Do they or don’t they have the authority?

Due to the ongoing legal battles, this does get a little tricky. But here’s where things currently stand:

Initially, HRSA issued a “final legislative rule” in July 2013 to implement the Affordable Care Act’s (ACA’s) 340B orphan drug exclusion. PhRMA filed suit, claiming that HRSA lacked the Congressional authority to issue this type of legislative rule. In May 2014, US District Judge Rudolph Contreras agreed with PhRMA and ruled that Health and Human Services (HHS), HRSA’s parent agency, lacked the legislative rulemaking power to implement new regulations regarding the ACA’s orphan drug exclusion. However, the judge did not disagree with HRSA’s interpretation of the intent of the ACA’s orphan drug exclusion, and he left open the option of upholding HRSA’s interpretation as an “interpretative rule.” So, in July, HRSA issued an interpretive rule with the same intent as the original legislative rule, stating that it was essential to provide clarity in the marketplace. In September, Judge Contreras rejected requests from PhRMA to invalidate the interpretive rule, ending the ongoing dispute with a final judgment. This left PhRMA with no other option but to file a new lawsuit, which they did on October 9. However, until that legal action is resolved, it is HRSA’s stance that the interpretive rule stands—and anyone who does not abide by it is out of compliance and subject to penalties.

Aside from the Blacklisting Tool, is Sentry working on any other ways to automate the handling of orphan drug purchases on 340B?

Yes! We’ve been working on a more robust solution to handle orphan drug purchases and indication tracking, but have held off on releasing this solution pending resolution of the initial legal disputes. This solution will track the indications for the orphan drug through diagnosis codes and allow the purchase of orphan drugs on 340B when used for the non-orphan indication. This orphan drug solution is planned for release in the coming months. Look for status updates in the New & Noteworthy newsletter sent every three weeks to registered Sentry users.