Pharmaceutical Research and Manufacturers of America v. United States Department of Health and Human Services
43 F. Supp. 3d 28
D.D.C.2014Background
- The ACA/HCERA amended the 340B program to exclude orphan drugs from discounted 340B pricing for newly added covered entities (42 U.S.C. §256b(e)).
- Orphan drugs are designated under the FFDCA (21 U.S.C. §360bb) to treat rare diseases but may also be used for non-orphan indications.
- HHS (HRSA) promulgated a Final Rule (42 C.F.R. §10.21) denying 340B discounts to the newly covered entities when orphan drugs are used for their orphan-designated indication, but allowing discounts when used for non-orphan indications; the rule also imposed recordkeeping and compliance duties on covered entities.
- PhRMA sued, arguing HHS lacked statutory authority to promulgate the orphan-drug exclusion regulation and that the rule conflicts with the statute; PhRMA moved for injunctive and summary relief.
- The Court reviewed whether HHS had statutory rulemaking authority under the PHSA/340B provisions (and related statutes) and whether Chevron deference applied; it evaluated HHS’s reliance on several statutory grants and alternative arguments that the rule is interpretive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HHS had statutory authority under 340B/PHSA to promulgate the orphan-drug exclusion regulation | HHS lacks a congressional delegation to make prophylactic rulemaking defining when orphan drugs are excluded; statute limits HHS rulemaking to narrow, specified matters | HHS relied on multiple statutory provisions (within §340B and other statutes) and argued rulemaking was necessary to clarify program administration and implement dispute-resolution and compliance provisions | Court: HHS exceeded statutory authority; statute confines HHS rulemaking to specific dispute-resolution, ceiling-price methodology, and sanction rules and does not authorize the broad regulation at issue; vacate rule |
| Whether HHS could rely on non-340B statutory grants (FFDCA, SSA) to support the rule | PhRMA: Grants in other statutes don’t authorize rulemaking under 340B; authority must be found in the relevant statute | HHS: Cross-referenced rulemaking powers in FFDCA and other Acts as supporting authority | Court: Those other statutory provisions do not authorize the challenged 340B rule; they pertain to different statutory schemes and limited subject matter |
| Whether Chevron deference applies to HHS’s interpretation of its statutory authority | PhRMA: No applicable delegation authorizing the agency to decide the precise question; Chevron not available | HHS: Agency interpretation of statute merits deference where Congress has not spoken clearly | Court: Even under Chevron step 1, Congress spoke clearly by limiting HHS rulemaking; HHS did not receive authority to adopt this rule |
| Whether the Final Rule could be upheld as an interpretive rule (Skidmore) | PhRMA: The rule has legal effect and imposes obligations; it is legislative, not merely interpretive | HHS: Alternatively, the rule is interpretive and entitled only to persuasive weight | Court: The rule appears legislative (notice-and-comment, legal effects); the court suggests more briefing would be required to test any Skidmore claim but decides on lack of statutory authority and vacates the rule |
Key Cases Cited
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) (two-step framework for reviewing agency statutory interpretations)
- United States v. Mead Corp., 533 U.S. 218 (2001) (limits on Chevron deference; guidance on when agency actions have the force of law)
- Gonzales v. Oregon, 546 U.S. 243 (2006) (agency exceeded statutory rulemaking authority where statute did not delegate broad interpretive power)
- City of Arlington v. FCC, 569 U.S. 290 (2013) (Chevron applies to agency interpretations about the scope of their regulatory authority unless Congress unambiguously forbids)
- Astra USA, Inc. v. Santa Clara County, 563 U.S. 110 (2011) (explaining ceiling-price and rebate framework relevant to 340B pricing calculations)
- Amalgamated Transit Union v. Skinner, 894 F.2d 1362 (D.C. Cir. 1990) (agency cannot expand authority beyond statutory form prescribed by Congress)