On November 13, 2014, the Health Resources and Services Administration (“HRSA”) withdrew a proposed rule (known as the “340B mega-reg”) intended to establish comprehensive 340B Drug Pricing Program requirements for participating covered entities and manufacturers.  The rule was originally expected to publish for notice and comment in June 2014, and was expected to address key issues such as the definition of an eligible patient, contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site facilities.

The decision to withdraw the mega-reg is not surprising, given a district judge’s ruling that Congress had “not given HHS the broad rulemaking authority” to carry out the implementation of the 340B Program.  Importantly, the ruling did not address whether HRSA could permissibly issue an “interpretative” rule to clarify 340B requirements, nor whether HRSA could issue guidance documents attempting to do so.

Thus, in place of a mega-reg, HRSA announced that it plans to issue 340B guidance on “key policy issues” in 2015.  It will publish rules only on the three narrow issues authorized by the statute—rules pertaining to civil monetary penalties for manufacturers, calculations of the 340B ceiling price, and administrative dispute resolution.

As with HRSA’s interpretive rule on the 340B orphan drug exclusion, which it issued shortly after the district court’s ruling, any  guidance documents  issued will not have the force and effect of law, nor impose any binding requirements beyond those already established by relevant statutes.  Although HRSA has recognized these limitations in promulgating its interpretive rule,  it has also taken preliminary action to enforce the interpretive rule and underscored that  failure to comply with relevant statutes may result in “termination of a manufacturer’s Pharmaceutical Pricing Agreement (PPA)”—meaning, exclusion of the manufacturer from participating in federal healthcare programs including Medicaid.

Pharmaceutical Research and Manufacturers of America (“PhRMA”) has filed suit seeking to invalidate HRSA’s interpretative rule on the orphan drug exclusion.  This suit may have important implications on the impact of the envisioned 340B guidance document.  If the district court sides with HRSA, it may be able to impose its interpretation of the statute through the threat of enforcement, raising the risks for affected entities that disagree with HRSA’s interpretation.

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Photo of Jennifer Plitsch Jennifer Plitsch

Jennifer Plitsch is co-chair of the firm’s Government Contracts practice group. Her practice includes a wide range of contracting issues for large and small businesses in both defense and civilian contracting. Her practice involves advising clients on contract proposal, performance, and compliance questions…

Jennifer Plitsch is co-chair of the firm’s Government Contracts practice group. Her practice includes a wide range of contracting issues for large and small businesses in both defense and civilian contracting. Her practice involves advising clients on contract proposal, performance, and compliance questions as well as transactional and legislative issues. Her practice also includes bid protest and contract claims and appeals litigation before GAO, agency boards and the federal courts. Ms. Plitsch has particular expertise in advising clients in the pharmaceutical and biologics industry. She advises a range of pharmaceutical and biologics manufacturers on Federal Supply Schedule contracts, including the complex pricing requirements imposed on products under the Veterans Health Care Act, as well as research and development contracts and grants with various federal agencies. She also has significant experience advising on the requirements of various programs under which vaccine products and biodefense medical countermeasures are procured by the Government.