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Big Pharma Renews Price Controls Fight with HHS

(CN) - A pharmaceutical trade group asked a federal judge to declare invalid a July rule imposing price controls on so-called "orphan" drugs used to treat conditions other than those for which they were created.

An orphan drug is a pharmaceutical developed to treat a rare medical condition that affects fewer than 200,000 people, and often comes with a steep price tag. The federal government gives pharmaceutical companies incentives to develop these drugs, because otherwise the profit-margin for them might be too small to warrant the research.

In July, the U.S. Department of Health and Human Services (HHS) issued a rule in July imposing price controls through the 340B program on "orphan drugs," when they are prescribed for "off-label" uses.

The 340B program gives hospitals that serve low-income patients discounts on drugs. The HHS previously issued a final rule that imposed use-based price controls on orphan drugs.

But the Pharmaceutical Research and Manufacturers of America (PhRMA) found the new rule onerous. The trade group sued HHS, Secretary Sylvia Burwell, and HHS Administrator Mary Wakefield in D.C. federal court in an effort to have it voided.

In May, U.S. District Judge Rudolph Contreras vacated the first iteration of the rule, holding that the agency had "acted beyond the bounds of its statutory authority."

HHS issued an interpretive rule two months later that if allowed to stand would require manufacturers to reimburse 340B hospitals when the orphan drug is prescribed for an "off-label" use, the complaint says.

PhRMA contends the interpretive rule is substantively the same as the version the court vacated.

"The new rule reiterates verbatim the Vacated Final Rule's use-based limit on the scope of § 256b(e) and imposes the same tracking requirements on covered entities," the trade group claims.

Congress excluded orphan drugs from the 340B program, without any mention of how the drug is used, according to the complaint.

"If the Secretary designates 'a drug' as an orphan drug, the drug falls within the exclusion when sold to a newly covered entity; how the drug is used is irrelevant," PhRMA says. (Emphasis in original.)

It also claims the rule would graft a use-based limit onto the statutory language, contrary to congressional intention.

"PhRMA's members must either: (a) accept the consequences of the July 2014 Rule, which are inconsistent with the statute; or (b) reject HHS's interpretation, risk incurring significant penalties, and then challenge HHS's decision in an action under the Administrative Procedure Act only after the agency imposes those penalties," the group claims.

PhRMA seeks a court order declaring invalid the HHS's July 2014 rule rewriting the orphan drug exclusion in the 340B statute.

It is represented by Jeffrey Handwerker with Arnold & Porter LLP in Washington, D.C.

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