Pharmaceutical Research & Manufacturers of America v. United States Department of Health & Human Services

138 F. Supp. 3d 31, 2015 U.S. Dist. LEXIS 139617, 2015 WL 5996374
CourtCourt of Appeals for the D.C. Circuit
DecidedOctober 14, 2015
DocketCivil Action No.: 14-1685 (RC)
StatusPublished
Cited by11 cases

This text of 138 F. Supp. 3d 31 (Pharmaceutical Research & Manufacturers of America v. United States Department of Health & Human Services) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Pharmaceutical Research & Manufacturers of America v. United States Department of Health & Human Services, 138 F. Supp. 3d 31, 2015 U.S. Dist. LEXIS 139617, 2015 WL 5996374 (D.C. Cir. 2015).

Opinion

MEMORANDUM OPINION

Denying Dependants’ Motion por Summary Judgment and Granting Plaintiff’s Motion for Summary Judgment.

RUDOLPH CONTRERAS, United States District Judge

I. INTRODUCTION

The Court previously vacated a Final Rule promulgated by the Secretary of the Department of Health and Human Services (“HHS”) that addressed the circumstances in which an orphan drug must be offered at a discounted price pursuant to section 340B of the Public Health Service Act (“PHSA”). The Court concluded that HHS lacked the statutory authority to promulgate that rule. See Pharm Research & Mfrs. of Am. v. U.S. Dep’t of Health & Human Servs., 43 F.Supp.3d 28, 42-45 (D.D.C.2014) (hereinafter “PhRMA ”). HHS has since issued an interpretive rule (the “Interpretive Rule”) identical in substance to the vacated Final Rule that sets forth the “manner in which section 340B(e) of the PHSA will be interpreted and implemented by HHS.” A.R. 680. The plaintiff, Pharmaceutical Research and Manufacturers of America (“PhRMA”) again challenges HHS’s action, contending that the Interpretive Rule contravenes section 340B’s plain language, HHS has moved for summary judgment arguing that the Interpretive Rule does not constitute. a final agency action sufficient to state a claim and that, in any event, its reading of the statute is at least entitled to deference under Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944) because it “reasonably balances Congress’s concerns with maintaining incentives for [33]*33the "development of drugs for orphan diseases with providing the newly covered 340B entities with discounts sufficient to make participation in the program beneficial.” 'Defs.’ Mem. Supp. Summ. J. at 3, EOF No. 14-1. PhRMA has cross-moved for summary judgment and argues that the Interpretive Rule is a final agency action subject to immediate challenge and that the rule, conflicts with the statute’s plain language. Because the Court concludes that the Interpretive Rule is a final agency action and that the Interpretive Rule contravenes the plain language of section 340B(e), the Court will deny HHS’s motion for summary judgment and grant PhRMA’s motion for summary judgment,

II. FACTUAL & STATUTORY BACKGROUND

This case involves the intersection of two intricate statutory schemes: the Orphan Drug Act and the 340B Program. Both are designed, in large part, to ensure greater access to medications for certain populations. In its prior memorandum opinion in this dispute, the Court described the statutory schemes implicated in this case and the Court' assumes familiarity with that discussion. See PhRMA 43 F.Supp.3d at 31-33.

A. The Orphan Drug Act

The Orphan Drug Act involves the designation and marketing of drugs—called orphan drugs—to treat rare diseases or conditions.1 Orphan drugs are so-named because, absent the financial and marketing incentives Congress has provided to pharmaceutical manufacturers for the development of such drugs, efforts to invest, research, and otherwise manufacture those drugs would likely be abandoned. Congress passed the Act after concluding that “because so few individuals are' affected by any one fare disease or condition, a pharmaceutical company which develops an orphan drug may reasonably expect the drug to generate relatively small sales in comparison to the cost of developing the drug and consequently' to incur a financial loss.” Act of Jan. 4, 1983, PubL. No. 97-414, § 1(b)(4), 96 Stat.2049, 2040. For that reason, the Orphan Drug Act provides several incentives to those pharmaceutical manufacturers that develop orphan drugs, including: a seven-year market exclusivity period during which no drugs, other than the designated orphan drug, can be licensed or approved “for such disease or condition,” 21 U.S.C. § 360cc(a); a tax credit for the clinical testing expenses incurred during the orphan drug’s development, , see 26 U.S.C.' § 45C; research grants for that clinical testing, see 21 U.S.C. § 360ee; and an exemption from the fees otherwise applicable to new drug applications, see 21 U.S.C. § 379h(a)(l)(F).

The Orphan Drug Act permits the Secretary of Health and Human Services (the “Secretary”) to designate a- drug as an orphan drug. According to statute, “[t]he manufacturer or the sponsor of a drug may request the Secretary to designate the drug as a drug for a rare disease or condition.” 21 U.S.C. § 360bb(a)(l). The statute further instructs that, if the Secretary finds that the drug' “is being or will be investigated for a rare disease or condition” and the approval, certification or li-censure of that drug “would be for use for [34]*34such a disease or condition,” the Secretary “shall designate the drug-as a drug for such disease or condition.” Id. The Food and Drug Administration, an agency within HHS, oversees the designation and approval of orphan drugs. See PhRMA, 43 F.Supp.3d at 41 n. 11 (citing 21 C.F.R. § 316.1(a) (regulation promulgated by the FDA implementing the orphan-drug related sections of the Federal Food, Drug, and Cosmetic Act and providing “procedures to encourage and facilitate the development of drugs for rare diseases or conditions”)); see also 21 U.S.C. § 393(d)(2).

A drug’s designation as an orphan drug may not overlap entirely with its use. Drugs that carry an orphan, designation “can also be used to treat non-rare diseases or conditions.” PhRMA, 43 F.Supp.3d at 30 (discussing, for example, Prozac, which commonly treats depression but is designated as an orphan drug to treat autism and body dysmorphic disorder). And a drug may be designated as an orphan drug even if that drug is also approved to treat a different disease or condition that does not qualify for orphan-drug designation. See 21 C.F.R. § 316.23(b). Nor does the designation of a drug as an orphan drug in and of itself afford a pharmaceutical manufacturer with the ability to market the drug in the United States. That a drug has been awarded an orphan designation “does not alter the standard regulatory requirements and process for obtaining marketing approval.” Exclusion of Orphan Drugs for Certain Covered Entities Under 340B Program, 78 Fed.Reg. 44,016, 44,017 (July 23, 2013). Indeed, according to HHS “a large majority of drugs with orphan designations do not have approval to be marketed in the United States” at all. Id.

B. The 340B Program and the 2010 Extension

The second statutory scheme, section 340B of the Public Health Services Act, “imposes ceilings on prices drug manufacturers may charge for medications sold to specified health facilities.” Astra U.S.A.,. Inc. v. Santa Clara Cnty., Cal., 563 U.S. 110, 131 S.Ct.

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138 F. Supp. 3d 31, 2015 U.S. Dist. LEXIS 139617, 2015 WL 5996374, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pharmaceutical-research-manufacturers-of-america-v-united-states-cadc-2015.