In an opinion issued Friday, May 23, the U.S. District Court for the District of Columbia vacated the U.S. Department of Health and Human Services’ (HHS’) July 22, 2013, final rule on orphan drug pricing and granted an injunction that prevents HHS from implementing the rule. The provision in question pertains to discounted rates for orphan drugs for certain hospitals under the 340B Drug Pricing Program. Orphan drugs are those that treat rare diseases or conditions, and in many cases these drugs also can be administered to treat other diseases or conditions that are not the subject of the designation.

The Affordable Care Act (ACA) designated additional entities – critical access hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospitals – as eligible to receive 340B discounts, but stated that these entities cannot receive discounted prices for orphan drugs. However, in its final rule, HHS clarified that these hospitals may purchase orphan drugs at discounted prices if the drugs are used for purposes other than the orphan drug designation.

In its ruling, the district court held that the rule was outside the scope of the agency’s rulemaking authority. Because the court vacated the final rule, the newly designated 340B entities will not be able to purchase orphan drugs at discounted prices, regardless of the purpose the drugs are used for. The scope of the ruling, however, applies only to these entities that fall under the ACA’s orphan drug rule and not to other 340B entities such as disproportionate share hospitals. America’s Essential Hospitals, along with two other national organizations, filed an amicus brief while the case was pending that supports HHS’ final rule.

Please contact Xiaoyi Huang, JD, director of policy, at xhuang@essentialhospitals.org or 202.585.0127 with questions.