On July 23, 2013, the Health Resources and Services Administration (HRSA) issued a final rule clarifying the orphan drug exclusion for certain covered entities created by the Affordable Care Act (ACA) (“Final Rule”). The Final Rule is available here, has an effective date of October 1, 2013, and applies prospectively from that date. The text of the new 340B regulations created by the Final Rule, 42 C.F.R. Part 10, appears at the end of this Client Alert.

In short, the Final Rule permits the new categories of covered entities access to 340B pricing for orphan drugs based on the covered entity’s intended use. In one sense, the Agency rule is surprising given statutory language that would appear to limit these covered entities’ access to the 340B program’s deeply discounted pricing for orphan drugs without regard to the condition the drug will be used to treat. Treatment-specific considerations have never been part of access to 340B discounts: HRSA’s new interpretation of the 340B statute is a watershed moment in the history of the 340B Program. Further, HRSA has crafted a rule that puts determination of eligibility to purchase orphan drugs at 340B prices squarely in the hands of the affected covered entities. Drug manufacturers are not afforded any opportunity at the point-of purchase to gauge the validity of the claim for discounts, and are given little authority after the fact to check the covered entity records that are the sole mechanism of ensuring compliance with the orphan drug exclusion rule, short of audit or referral to HRSA for investigation.