HRSA's regulation reflects congressional intent and would improve access to needed drugs, they say.
Editors' note: This is the last in a series of articles on 340B stakeholders' reactions to an important proposed regulation to implement health care reform's limit on rural and free-standing cancer hospitals' access to 340B pricing on orphan drugs. In this installment, we focus on the perspectives of two key lawmakers involved in drafting the orphan drug discount exception and the views of hospitals and trade associations that submitted comments. The first installment focused on the viewpoint of Safety Net Hospitals for Pharmaceutical Access, the advocacy organization for 340B hospitals. The second focused on the pharmaceutical industry's views.
August 11, 2011—Letting rural and free-standing cancer hospitals access 340B pricing when they buy orphan drugs to treat non-orphan indications is legally sound, would help hospitals fulfill their safety-net mission and would not weaken incentives for orphan drug development, hospitals and health systems said in recent comments about a key proposed regulation issued by the Health Resources and Services Administration (HRSA).
But, the providers added, if HRSA reverses itself and ultimately rules that rural and cancer hospitals can never obtain 340B pricing on orphan drugs, many will be forced to conclude that enrolling in 340B is not worth the cost—an outcome that they say is clearly not what Congress intended when it expanded the program.
Waxman and Harkin Weigh in
Rep. Henry Waxman (D-Calif.), ranking member of the House Energy and Commerce Committee, and Sen. Tom Harkin (D-Iowa), chairman of the Senate Health, Education, Labor and Pensions Committee, also submitted comments to HRSA on its proposed regulation, which would implement health care reform's limit on 340B discounts for orphan drugs bought by rural and cancer hospitals that gained eligibility for the drug discount program under reform.
HRSA's proposed rule, Waxman and Harkin said, is consistent with Congress's desire that the exclusion be construed narrowly and applied only "when drugs are legitimately used for the rare diseases or conditions" for which they received orphan designations. The two senior lawmakers chaired the House and Senate committees with jurisdiction over 340B when health care reform and its 340B orphan drug provision became law.
An orphan drug designation, they said, "consists of two components: the drug itself and the indication for which it is designated." The same drug, they continued, can be an orphan drug or not "depending on whether it is used for the indication described."
To illustrate their point, Waxman and Harkin cited the drug Albuterol, which has an orphan designation for the prevention of paralysis due to spinal cord injury but is also approved for and is widely used to increase airflow into the lungs. Congress, they said, intended the exclusion to mean that when Albuterol is used to prevent paralysis it would meet the definition of an orphan drug but when it is used to treat asthma or for any other non-orphan indication it would not.
"As chairmen of the committees with jurisdiction over the 340B program at the time the provision became law, we support … HRSA's interpretation," they wrote.
"These Six Words"
Several hospitals and health systems adopted a similar line of reasoning in their comments to HRSA.
"The plain meaning of the statute … supports only one interpretation: the exclusion is limited to orphan drugs only in instances when they are used for the rare disease of condition for which they were designated," wrote the Rural Referral Center/Sole Community Hospital Coalition.
"The exclusion does not simply refer to a 'drug,' it refers to a 'drug designated … for a rare disease or condition,'" the group continued. "These six words define the category of drugs intended to be excluded from the definition of 'covered outpatient drug.'"
If rural hospitals cannot get 340B pricing, many will be forced out of the program, undermining congressional intent in expanding 340B, the coalition said.
Less Incentive to Enroll
Health systems and individual hospitals agreed that the incentive to join 340B would be greatly diminished if the exclusion is interpreted broadly.
Allegan General Hospital, a critical access hospital in rural western Michigan, noted that orphan drugs make up less than 2 percent of its pharmacy inventory but represent 52 percent of its pharmacy inventory costs. It said it routinely uses orphan drugs on an outpatient basis to treat common types of cancer for which the drugs did not receive their orphan designations.
Heartland Regional Medical Center, a sole community hospital in St. Joseph, Mo., pointed out to HRSA that while the drug Ellence has an orphan designation for breast cancer, it is a first-line treatment for esophageal cancer. Its price, the hospital said, "is 27 percent higher from our non-340B account than with the 340B discount."
Using Taxol to treat uninsured or underinsured patients with breast cancer is likewise prohibitively expensive, Heartland added. The drug has an orphan designation for the treatment of AIDS-related Kaposi's sarcoma. "The hospital has to absorb the cost of the drug so that our patients have the greatest chance of survival," it said.
Estimates of Savings
Other hospitals and health systems gave estimates of how much they and their patients stood to gain if they are allowed to buy orphan drugs at 340B prices for common conditions or diseases.
Catholic Health Initiatives, which operates 72 hospitals across 19 states, said its critical access hospitals estimate annual cost savings of between $11,000 and $480,000 if they can buy orphan drugs for non-orphan indications at 340B prices. Providence Health and Services, a 27-hospital system in the Pacific Northwest and Montana, said two of its critical access hospitals and one of its rural referral centers would save a combined $2 million a year if HRSA's proposed rule becomes final. The Avera Health System said one of its critical access hospitals projects nearly $400,000 in annual savings. St. Francis Hospital in Litchfield, Ill., an affiliate of the Hospital Sisters Health System, anticipates an 18 percent savings for drugs.
"In fact, while we have been pursuing the 340B enrollment process" at St. Francis and a second newly eligible hospital, St. Joseph's in Highland, Ill., "we will not move forward with the final process if orphan drugs are excluded because the cost of program implementation and participating would then outweigh the benefits," Hospital Sisters wrote. "This is why the draft HRSA position is so important."
"Allowing these facilities to purchase orphan drugs at 340B pricing will not only allow facilities more fiscal stability, it will help provide needed drugs to vulnerable rural Americans," the National Rural Health Association wrote.
In addition, hospitals and health system said they supported HRSA's decision to require newly eligible providers to maintain separate purchasing accounts and keep auditable records to demonstrate their compliance. While there was general agreement that most hospitals would be able to meet these accountability requirements, the cost of tools such as split-billing software might be prohibitively expensive for some, they said. In such cases, they recommended that hospitals be allowed to use alternative tracking systems if they cannot track discounted drugs on a drug-by-drug basis.
Hospital and health systems that submitted comments also applauded HRSA for giving cancer hospitals the option of using group purchasing organizations (GPOs) instead of 340B to buy orphan drugs without losing their 340B status."Free-standing cancer hospitals are significant purchasers of orphan drugs, and the opt-out provision will allow these hospitals to achieve important savings in drug purchases," the American Hospital Association said.