On May 19, 2011, the Office of the Federal Register put on display a Notice of Proposed Rulemaking (“NPRM”) implementing a provision of the Affordable Care Act (“ACA”) that prohibits certain newly-eligible Covered Entities from receiving discounts on orphan drugs under the 340B Drug Discount Program.

The NPRM clarifies that the prohibition, informally called the “orphan drug exclusion,” only applies to an orphan drug when used for the rare condition or disease for which it received orphan designation under Section 526 of the Federal Food Drug and Cosmetic Act (the “FDCA”). The prohibition does not apply when the drug is used for non-orphan indications or for any other lawful use (e.g. when it is used off-label).