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July 02, 2020

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Judge Requires PhRMA To Initiate New 340B Orphan Drug Lawsuit to Challenge Interpretive Rule

A Washington, D.C., federal judge has declined requests from Pharmaceutical Research and Manufacturers of America(“PhRMA”) to invalidate a new interpretive rule applicable to orphan drugs in the 340B drug discount program, saying the trade group must file a new complaint in order to proceed.

Last week, the D.C. District Court ruled that PhRMA must bring a new lawsuit to challenge the recent interpretive rule regarding orphan drugs set forth by Health Resources and Services Administration (“HRSA”). Earlier this year, PhRMA successfully invalidated the regulation promulgated by HRSA, and the court ruled that HRSA lacked the substantive rulemaking authority to implement the rule in the first instance.

HRSA responded by deciding to implement the same policy presented in a new document as an interpretive rule rather than a regulation. In turn, PhRMA argued before the court that this interpretive rule is “materially identical to the vacated and unauthorized Final Rule,” because it “adopts the same interpretation of ‘covered outpatient drug’ and imposes the same compliance obligations as the vacated Final Rule.”

The district court rejected PhRMA’s argument and held that PhRMA’s complaint originally only challenged the final rule promulgated by HRSA. Accordingly, PhRMA’s challenge to the new interpretive rule was found to be beyond the scope of the present law suit.

The court’s ruling means that for the time being, HRSA’s current interpretive rule will stand. As we have previously reported, under this rule only some sales of orphan drugs will be excluded from the 340B program — sales of orphan drugs for orphan indications are to be excluded from the program (and thus not subject to the required discount), and sales of orphan drugs for non-orphan indications may be included and purchased at the statutory discounted price. It is the responsibility of covered entities (and contract pharmacies) to ensure that orphan drugs purchased through the 340B program are not to be transferred, prescribed, sold, or otherwise used for the orphan indication, and to maintain auditable records to demonstrate compliance.

© 2020 Covington & Burling LLPNational Law Review, Volume IV, Number 256


About this Author

Jennifer Plitsch, Litigation attorney, Covington

Jennifer Plitsch is co-chair of the firm’s Government Contracts practice group where her practice includes a wide range of contracting issues for large and small businesses in both defense and civilian contracting. Her practice involves advising clients on contract proposal, performance, and compliance questions as well as litigation, transactional and legislative issues. She has particular expertise in advising clients on intellectual property and data rights issues under the Federal Acquisition Regulations and Bayh-Dole Act, and has significant experience in...