The US government has pledged to challenge an industry court victory which has struck down its plan to allow more hospitals to receive large discounts on the costs of orphan drugs.

A rule issued by the Department of Health and Human Services (HHS) earlier this year under President Barack Obama’s Affordable Care Act (ACA) sought to widen the 340B Drug Discount Programme  – which allows facilities which care for people on low incomes to buy outpatient drugs with discounts of up to 50% – to an extended range of “safety net” hospitals.

These newly-eligible facilities include free-standing cancer centres, clinical-access hospitals, some rural referral centres, children’s hospitals and sole community hospitals. The ACA also authorised HHS’ Health Resources and Services Administration (HRSA) to issue regulations, including one relating to the provision that manufacturers would not be compelled to provide discounts on orphan drugs – defined as those used in the treatment of diseases and conditions affecting fewer than 200,000 Americans - to some safety-net providers.

HRSA proposed that these providers should be able to purchase orphan drugs at 340B  prices provided they were not then used to treat the condition for which they received their orphan designation. This plan brought a lawsuit from the Pharmaceutical Research and Manufacturers of America (PhRMA), which argued that the agency had misinterpreted the law and that by issuing the rule it had overstepped its authority.

In a ruling given in Washington, US District Court Judge Rudolph Contreras said that while he felt the HHS rule was the “most reasonable” way of implementing the statute, he agreed with PhRMA that HHS did not have the authority to make the rule and he issued a permanent injunction to prevent it being implemented.

HHS says it is “currently evaluating its options as to how to respond to the court’s decision, including whether to appeal and/or whether to propound an interpretive rule or other type of interpretive guidance that would set forth HHS’ interpretation,” and many legal observers believe its best option would be to issue a rule which sets out HHS’ interpretation of the 340B programme.

The group Safety Net Hospitals for Pharmaceutical Access (SNHPA) points out that many orphan drugs can cost up to $300,00 per patient per year or more and says it is “deeply disappointed” by Judge Contreras’ ruling. “SNHPA anticipates that drug manufacturers will stop offering 340B pricing on orphan drugs to affected hospitals, which will impose a very heavy financial burden on these institutions and their patients,” it says.

- Judge Contreras gave his decision on May 23; on June 5 Genentech announced that it would no longer be providing discounts on orphan drugs for the newly-covered safety-net facilities