Industry Insights

Court Rules on 340B Orphan Drug Interpretation

October 2015
Author:  Todd Kenney

Todd Kenney

Partner

Audit

Health Care

1201 Walnut Street, Suite 1700
Kansas City, MO 64106-2246

Kansas City
816.221.6300

On October 14, 2015, the U.S. District Court for the District of Columbia issued an important ruling related to the 340B pricing program for orphan drugs.

The court ruled the Health Resources and Services Administration (HRSA) lacks the authority to allow 340B pricing for orphan drugs used for common indications to critical access, sole community, rural referral or cancer center hospitals. These covered entity types must purchase all orphan drugs at non-340B pricing. Other covered entity types were not subject to the orphan drug exclusion.

HRSA had interpreted that the orphan drug exclusion in the Affordable Care Act (ACA) was applicable to orphan drugs only when the drug was used for treatment of the orphan indication. This allowed covered entity types (noted above) subject to the orphan drug exclusion to purchase and dispense orphan drugs at 340B pricing when treating a nonorphan indication. Orphan drug indication is a status granted by the U.S. Food and Drug Administration for drugs that treat a rare disease or condition, but many drugs with orphan indications are often purchased and prescribed or administered to treat nonorphan conditions.

This ruling may affect covered entities participating in the 340B program that previously purchased and dispensed 340B drugs with an orphan indication for treatment of common or nonrare conditions.

For more information on how the ruling could affect your organization, contact your BKD advisor.

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