PhRMA renews legal battle over big hospital discounts for orphan drugs

Last October, the Pharmaceutical Research and Manufacturers of America (PhRMA) sued the federal government over a rule that allowed some hospitals to get orphan drugs at a steep discount. At first, it looked like the trade group had prevailed, because in May, a federal court struck down the authority of the U.S. Health Resources and Services Administration (HRSA) to enforce the rule.

Now the contentious issue is back in the courts. Over the summer, HRSA essentially reissued the rule, which pertains to a program called 340B. So PhRMA has sued again, claiming that HRSA is misreading the law and that pharmaceutical companies should not be required to issue any discounts.

First, some background: Under the 340B program, pharmaceutical companies must slash their prices by up to 50% for outpatient drugs supplied to hospitals and clinics that serve poor populations. The rule at the center of the dispute between PhRMA and HRSA allows these so-called safety-net institutions to obtain orphan drugs--for uses in rare diseases--at a discount, but only if those medicines are used to treat non-orphan conditions.

Those discounts can add up, the pharma industry argues. That's because several drugs given orphan status are also approved to treat much larger populations of patients. Roche's ($RHHBY) Rituxan, for example, is approved to treat the orphan conditions, Wegener's granulomatosis and chronic lymphocytic leukemia, and also the non-orphan disease rheumatoid arthritis. Under HRSA's rule, Roche would have to discount Rituxan to safety-net institutions for treating RA, but it could presumably charge full price for the drug when it's used in much smaller orphan populations.

Several drugmakers contend that 340B is robbing the industry in order to provide a financial gain to hospitals. The number of hospitals eligible for 340B has tripled since 2005 and now, an estimated $6.9 billion worth of drugs are vulnerable to the discounting requirement. Last winter, PhRMA and several other trade groups released a report estimating that 340B will grow to $12 billion by 2016 and calling for more oversight over hospital eligibility.

Ted Slafsky

PhRMA's latest lawsuit has drawn a vitriolic response from Safety Net Hospitals for Pharmaceutical Access (SNHPA), a Washington, DC, trade group that represents more than 1,000 hospitals participating in 340B. "Once again, Big Pharma is trying to increase its prices at the expense of rural and cancer hospitals and their patients," said SNHPA CEO Ted Slafsky in a statement. "These providers depend on 340B savings to serve needy patients and, in many cases, to keep their doors open."

SNHPA has asserted that only 5 pharma and biotech companies currently comply with the 340B rule, according to The Wall Street Journal blog Pharmalot. PhRMA declined to confirm that number when asked by the paper, responding, "as a trade association, we are not privy to how individual member companies are responding to the rule."

- access PhRMA's lawsuit here
- here's the WSJ story (sub. req.)
- read SNHPA's statement here

Special Reports: Top 20 orphan drugs by 2018 - Rituxan | Top 10 pharma companies by 2013 revenue - Roche

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