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“The Mega Rule is Dead! Long Live the Interpretive Guidance Documents!”

To Be or Not To 340B By Alyce C. Katayama

HRSA/OPA announced the withdrawal of the so-called mega rule last November. This major piece of legislative rule-making had been over four years in the works. The rule had spent the past six months at the Office of Management and Budget, the last step prior to publication. The DC District Court ruling inPharmaceutical Research and Manufacturers of American v. Department of Health and Human Services (May 23, 2014 https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2013cv1501-43), (relating to orphan drugs) raised serious concern about whether HRSA has any substantial rule-making authority with respect to the 340B program. Fearing that its limited authority would not extend to any of the topics which the mega rule was expected to address, HRSA chose to withdraw it.

HRSA is now expected to take the same approach to general 340B program guidance that it is taking on the orphan drug issues.

Specifically, in the absence of authority to issue a legislative regulation, HRSA has instead issued an “interpretative rule” to the same effect.

Interpretive guidance is non-binding (although it is not always clear what “non-binding” really means). For example, although HRSA has issued only interpretive guidance requiring discounts for orphan drugs when they are used in their non-orphan disease applications, HRSA is warning drug makers that if they ignore its policy they may be violating the statute. Interpretive guidance is not given the same deference by a court as a “legislative” rule, but will be accorded some weight if a court finds that the agency’s interpretation of the relevant statute is persuasive.

Commander Krista Pedley, Director of the Office of Pharmacy Affairs, has indicated that interpretive guidance to be issued in 2015 may address many of the same issues which were expected to be covered in the mega rule including:

  • the extent to which patients of covered entities are eligible for 340B drugs
  • hospital eligibility including criteria for hospitals’ off-site facilities, and
  • the use of multiple contract pharmacies.

However, the mega rule would not have addressed how 340B covered entities account for program savings nor will the forthcoming guidance. OPA does not believe it has the statutory authority to dictate how 340B savings are to be used. This is one of the hotly debated aspects of the 340B program as discussed in another post on this Blog.

It is unlikely that any interpretive guidance will redefine covered entity status. This specification of the types of entities entitled to purchase outpatient drugs at 340B prices (“covered entities”) is statutory. Among the entities included are:

  • federally qualified health centers (FQHCs) and FQHC look-alikes
  • certain children’s hospitals
  • critical access hospitals
  • free-standing cancer hospitals
  • sole community hospitals
  • Ryan White HIV/AIDS program grantees
  • Title XIX family planning clinics
  • sexually transmitted disease clinics

The statute can only be amended by congressional action, thus the present group of covered entities is unlikely to expand or contract in the near term.

The interpretive guidance will be issued in notice and comment form, giving 340B stakeholders the opportunity to have some input.

HRSA has also announced that it will be proposing legislative rules pursuant to the authority granted to it in the Affordable Care Act in three areas, namely: civil monetary penalties for drug makers, 340B ceiling prices and administrative dispute resolution.

For 340B program stakeholders, takeaway here is: be watchful as there are important regulatory developments in the offing. We will cover those developments in future posts.

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