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America’s Essential Hospitals Supports 340B Orphan Drug Rule

January 7, 2014

WASHINGTON—In a recent court filing, America’s Essential Hospitals and two other national organizations supported a federal rule that gives certain hospitals access to discounts on orphan drugs under a drug pricing program for providers that serve vulnerable patients.

The Affordable Care Act (ACA) expanded eligibility for 340B Drug Pricing Program discounts to critical access hospitals, rural referral centers, sole community hospitals, and free-standing cancer hospitals. However, an amendment to the law excluded the newly eligible entities from 340B discounts on orphan drugs, which are used to treat rare diseases or conditions.

But drugs with an orphan designation for one purpose often are approved and used for common conditions. Recognizing this fact, the Health Resources and Services Administration (HRSA) has interpreted the law to exclude orphan drugs from discounts only when used for the condition for which the drugs received the designation. The decision preserves access to critical discounts for 340B providers while protecting incentives for manufacturers to develop orphan drugs.

The Pharmaceutical Research and Manufacturers of America (PhRMA) opposes this policy, arguing that discounts should not be available on orphan drugs for any purpose, and has sued the U.S. Department of Health and Human Services (HHS) to stop it.

In their Dec. 20, 2013 amicus curiae brief to the U.S. District Court for the District of Columbia, America’s Essential Hospitals, Safety Net Hospitals for Pharmaceutical Access, and the National Rural Health Association rejected the manufacturers’ arguments, saying HRSA’s interpretation is consistent with the language of the ACA. Further, they said, even if the law was ambiguous, HRSA’s interpretation is reasonable because it is consistent with the 340B statute’s intent to maintain access to discounts for providers that treat vulnerable patients.

The groups said making 340B discounts available when hospitals use orphan drugs for common indications reduces the cost of a relatively small number of expensive drugs. These and other 340B savings allow hospitals to provide primary care, cancer and other specialized care, and other essential services to vulnerable patients. To deny the discount, as PhRMA seeks, would significantly undermine the 340B program’s benefits, possibly force hospitals to withdraw from the program, and result in reduced services and higher costs for vulnerable patients.

“The 340B program helps hospitals meet the many needs of low-income and other disadvantaged patients,” America’s Essential Hospitals President and CEO Bruce Siegel, MD, MPH, said. “This program is vital to caring for society’s most vulnerable and we oppose any action that would erode access to 340B drugs.”

The 20-year-old 340B program requires pharmaceutical makers to provide discounts to hospitals and other entities that care for large volumes of low-income and vulnerable patients. Congress established the program as a way for hospitals to stretch scarce resources, serve more patients, and provide more comprehensive services.

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About America’s Essential Hospitals
America’s Essential Hospitals, formerly the National Association of Public Hospitals and Health Systems, is the leading association and champion for hospitals and health systems dedicated to high-quality care for all, including the most vulnerable. Since 1981, America’s Essential Hospitals has initiated, advanced, and preserved programs and policies that help these hospitals ensure access to care. It supports members with advocacy, policy development, research, and education.

Our more than 200 members are vital to their communities, providing primary care through trauma care, disaster response, health professionals training, research, public health programs, and other services. They innovate and adapt to lead the broader health care community toward more effective and efficient care. Visit to learn more.

Carl Graziano


About the Author

Graziano is senior director of communications for America's Essential Hospitals.

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