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Focus on Regulation

340B Program: HRSA Releases Final Rule on Orphan Drug Exclusion

Stethescope on doctorHRSA released its final rule on the orphan drug exclusion this morning. The final rule is set to be published in the Federal Register tomorrow, July 23, 2013. The effective date of the final rule is October 1, 2013 and HRSA expressly states that the final rule applies prospectively only. 

The Affordable Care Act (ACA) added four new categories of covered entities to the 340B Drug Discount Program but provided that the new covered entity types were ineligible for 340B pricing for drugs subject to an orphan designation. Under the 340B statute, only “covered outpatient drugs” are subject to the ceiling price requirement, and the ACA amended the statutory definition of that term to exclude orphan drugs for purposes of the new ACA covered entity types. 

HRSA issued a proposed rule on the orphan drug exception in May 2011. At that time, HRSA proposed to interpret the orphan drug exception to apply only when the orphan drug is used for the orphan indication, thereby assuming that covered entities could actually track and trace the indication for which a particular unit of drug is used. Over two years later, the final rule adopts HRSA’s initial proposal with minimal changes, largely ignoring manufacturer concerns regarding the presumed ability of covered entities to implement an indication-based approach in a compliant manner. 

Under the final rule, ACA covered entities will be entitled to the 340B ceiling price on an orphan drug so long as the entity uses the drug for a non-orphan indication. To that end, if a covered entity requests the ceiling price for an orphan drug, manufacturers are to assume the covered entity will use that unit of product for a non-orphan indication. Manufacturers may not condition availability of the 340B price on a covered entity’s assurance of compliance with 340B provisions, including the compliance requirements of the final rule. Covered entities that cannot or do not wish to maintain the systems and records needed to demonstrate compliance can opt to purchase all orphan drugs outside of the 340B program.

As always, it is very important that you review the final rule carefully yourself to ensure you fully and completely identify all issues relevant to your organization.