UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

PHARMACEUTICAL RESEARCH AND :

MANUFACTURERS OF AMERICA, :

:

Plaintiff, : Civil Action No.: 14-1685 (RC)

:

v. : Re Documents No.: 14, 21

:

UNITED STATES DEPARTMENT OF :

HEALTH AND HUMAN SERVICES, et al., :

:

Defendants. :

MEMORANDUM OPINION

DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND GRANTING PLAINTIFF’S

MOTION FOR SUMMARY JUDGMENT.

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, 
2

in any event, its reading of the statute is at least entitled to deference under Skidmore v. Swift & 

Co., 323 U.S. 134 (1944) because it “reasonably balances Congress’s concerns with maintaining 

incentives for the 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, ECF 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 

 1 A rare disease or condition is defined by statute as:

. . . [A]ny disease or condition which (A) affects less than 200,000 persons in the 

United States, or (B) affects more than 200,000 in the United States and for which 

there is no reasonable expectation that the cost of developing and making 
3

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 rare 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, Pub. L. 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)(1)(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)(1). 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 licensure of that drug “would be for use for such a disease or condition,” the 

Secretary “shall designate the drug as a drug for such disease or condition.” Id. The Food and 

 

available in the United States a drug for such disease or condition will be 

recovered from sales in the United States of such drug . . . .

21 U.S.C. § 360bb(a)(2).
4

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., 131 S. Ct. 1342, 1345 (2011); see 

generally 42 U.S.C. § 256b. The program was first enacted as part of the Veterans Health Care 
5

Act of 1992, see PhRMA, 43 F. Supp. 3d at 31, and is managed by the Health Resources Services 

Administration (“HRSA”), an agency within HHS, see Astra, 131 S. Ct. at 1345. In order for a 

pharmaceutical manufacturer’s products to be covered under the 340B Program, and therefore 

eligible for reimbursement from Medicaid, manufacturers are required to enter into a 

Pharmaceutical Pricing Agreement with the Secretary calculating a specified ceiling price that 

covered entities must pay for the manufacturer’s drugs. See 42 U.S.C. § 256b(a). A 

manufacturer must offer drugs “for purchase at or below the applicable ceiling price” to any 

entity covered by the 340B Program “if such drug is made available to any other purchaser at 

any price.” Id.

In setting ceiling prices for covered drugs, section 340B is designed to “stretch scarce 

Federal resources as far as possible, reaching more eligible patients and providing more 

comprehensive services.” H.R. Rep. No. 102-384, pt. 2, at 12 (1992). Many of the eligible

health care facilities are “providers of safety net services to the poor.” Astra, 131 S. Ct. at 1345. 

As initially enacted in 1992, the covered entities included health care facilities receiving certain 

federally-funded grants, state-operated AIDS drug purchasing assistance programs, black lung 

clinics, Native Hawaiian health centers, and urban Indian organizations, among other entities. 

See 42 U.S.C. § 256b(a)(4)(A)–(L); see also Veterans Health Care Act of 1991, Pub. L. No. 102-

585, Title VI, § 602(a), 106 Stat. 4943, 4967–68. Disproportionate share hospitals (those 

hospitals that serve indigent populations) are also included as covered entities. See 42 U.S.C. § 

256b(a)(4)(L).

As part of the Patient Protection and Affordable Care Act (“ACA”) Congress added a 

significant number of new categories to the list of covered entities. Those entities are 

enumerated in what became subsections (M), (N), and (O) of section 340B(a)(4). Specifically, in 
6

section 7101 of the ACA Congress added to the 340B Program children’s hospitals that are 

excluded from the Medicare prospective payment system, free-standing cancer hospitals that are 

excluded from the Medicare prospective payment system, critical access hospitals, rural referral 

centers, and sole community hospitals. See Patient Protection and Affordable Care Act, Pub. L. 

No. 111-148, § 7101(a), 124 Stat. 119, 821–22 (codified as amended at 42 U.S.C. § 

256b(a)(4)(M)–(O)).

As part of the ACA, Congress also directed HHS to create an administrative dispute 

resolution process for the 340B Program. The ACA directed the Secretary to “promulgate 

regulations to establish and implement an administrative process for the resolution of claims by 

covered entities that they have been overcharged” for drugs or of “claims by manufacturers” 

following a statutorily-permitted audit of a covered entity. Id. at § 7102 (codified at 42 U.S.C. § 

256b(d)(3)). Congress further instructed that the dispute resolution process should “includ[e]

appropriate procedures for the provision of remedies and enforcement of determinations made 

pursuant” to that process—which could include sanctions of civil monetary penalties of up to 

$5,000 “for each instance of overcharging a covered entity that may have occurred.” Id.

(codified at 42 U.S.C. §§ 256b(d)(3), (d)(1)(B)(vi)(I)). Although the ACA directed the Secretary

to promulgate those regulations within 180 days of the ACA’s passage (March 23, 2010), and the 

Secretary did issue a notice of proposed rulemaking to establish that administrative dispute 

resolution process, HHS has not yet issued a final rule implementing the process. See 340B 

Drug Pricing Program Administrative Dispute Resolution Process, 75 Fed. Reg. 57,233 (Sept. 

20, 2010). In omnibus guidance issued last month, HHS indicated only that “[f]uture rulemaking 

will address the administrative dispute resolution process.” 340B Drug Pricing Omnibus

Guidance, 80 Fed. Reg. 52,300, 52,301 (Aug. 28, 2015).
7

C. The Orphan Drug Exclusion and HHS’s Interpretive Rule

At the same time that Congress added those new entities to the 340B Program, Congress 

also narrowed the categories of drugs to which the newly added entities would have access at 

reduced prices. In the Health Care and Education Reconciliation Act (“HCERA”)—which 

amended the ACA—Congress added an additional subsection to the Act entitled “Exclusion of 

Orphan Drugs for Certain Covered Entities.” That subsection (“section 340B(e)”) provides that: 

“[f]or covered entities described in subparagraph (M), (N), or (O) of subsection (a)(4), the term 

‘covered outpatient drug’ shall not include a drug designated by the Secretary under section 526 

of the Federal Food, Drug, and Cosmetic Act for a rare disease or condition.”2

 Health Care and 

Education Reconciliation Act, Pub. L. No. 111-152, § 2303, 124 Stat. 1029, 1083 (codified as 

amended at 42 U.S.C. § 256b(e)). As a result of section 340B(e), newly covered entities do not 

have access to “a drug designated . . . for a rare disease or condition” at a discounted price.

The parties contest the reach of the term “a drug designated . . . for a rare disease or 

condition.” In addition, in the immediate aftermath of the ACA’s passage covered entities 

expressed concern and confusion about the phrase’s meaning, while pharmaceutical 

manufacturers contended that all orphan-designated drugs, whatever their particular use, were 

intended to be excluded from the 340B Program for the newly added covered entities. See, e.g.,

A.R. 38–39, 65–68, 70, 85–87, 91–96. In part to eliminate that confusion and to provide “clarity 

 2 Free-standing children’s hospitals had previously been afforded access to the 340B 

Program in 2005. See Deficit Reduction Act of 2005, Pub. L. No. 109-171, § 6004, 120 Stat. 4, 

61. As a result, and because those entities had previously enjoyed access to orphan drugs at 

section 340B prices, an amendment was passed in 2010 to clarify section 340B(e)’s application 

to children’s hospitals. See Medicare and Medicaid Extenders Act of 2010, Pub. L. No. 111-309, 

§ 204, 124 Stat. 3285, 3289–90. As codified, section 340B(e) now specifies that it applies to 

“covered entities described in subparagraph (M) (other than a children’s hospital described in 

subparagraph (M)).” 42 U.S.C. § 256b(e) (emphasis added).
8

in the marketplace,” the Secretary issued a notice of proposed rulemaking. See Notice of 

Proposed Rulemaking, Exclusion of Orphan Drugs for Certain Covered Entities Under 340B 

Program, 76 Fed. Reg. 29,183, 29,184 (May 20, 2011).

HHS published its Final Rule on July 23, 2013. That Final Rule interpreted section 

340B(e) to provide that, with respect to the newly covered entities, “a covered outpatient drug 

does not include orphan drugs that are transferred, prescribed, sold, or otherwise used for the rare 

condition or disease for which that orphan drug was designated under section 526 of the [Federal 

Food, Drug, and Cosmetics Act].” 42 C.F.R. § 10.21(a). The “practical effect” of that rule is 

that, while “the discounted 340B price is not available to newly-added covered entities when 

purchasing orphan drugs for their intended orphan use,” when a covered entity instead purchases

a drug for a non-orphan use, it “does receive the 340B discount price.” PhRMA, 43 F. Supp. 2d 

at 32.

This Court previously found the Final Rule invalid because “HHS has not been granted 

broad rulemaking authority to carry out all the provisions of the 340B program” and the statutory 

provisions HHS relied on as authority to promulgate the rule were “specific grants of authority 

that do not authorize the orphan drug rule.” Id. at 42, 39. Instead, the Court noted that Congress 

granted HHS only “a specific delegation of rulemaking authority to establish an adjudication 

procedure to resolve disputes between covered entities and manufacturers.” Id. at 45. In an 

alternative, “half-hearted” argument HHS contended that the Final Rule could be upheld as an 

interpretive rule. Id. at 45–46. But the Court expressed some skepticism that the rule as 

expressed in the specific regulation before the court—which was promulgated by notice and 

comment and purported to have a binding legal effect—could properly be classified as an 

interpretive rule. Id. at 46. The Court invited HHS to offer further briefing on the issue, 
9

including to address the question of whether “HHS must first promulgate the rule as interpretive 

for it to then be challenged under Skidmore.” Id. at 46–47 & n.19 (citing Kelley v. EPA, 15 F.3d 

1100 (D.C. Cir. 1994)). HHS declined the Court’s invitation. See Defs.’ Resp. to Court’s May 

23, 2014, Order, PhRMA, No. 1:13-cv-1501-RC (D.D.C. June 12, 2014), ECF No. 45.

Nevertheless, HHS has since issued the Interpretive Rule explaining “how HHS interprets 

section 340B(e).” See Availability of Interpretive Rule: Implementation of the Exclusion of 

Orphan Drugs for Certain Covered Entities Under the 340B Program, 79 Fed. Reg. 42,801, 

42,801 (July 23, 2014). That interpretation—effective as of July 21, 2014—restates, in

substantively identical terms, the interpretation that HHS had reached in its prior Final Rule.3

 

A.R. 680–86. According to HHS, “interpreting the statutory language to exclude all indications 

for a drug that has an orphan drug designation would be contrary to the Congressional intent of 

section 340B(e) to balance the interests of orphan drug development and the expansion of the 

340B Program to new entities.” A.R. 684. Thus, HHS again interpreted section 340B(e) as 

“excluding drugs with an orphan designation only when those drugs are transferred, prescribed, 

sold, or otherwise used for the rare condition or disease for which the drug was designated.” 

A.R. 685 (emphasis added). For the same reason, HHS construed section 340B(e) to “not 

exclude drugs that are transferred, prescribed, sold, or otherwise used for conditions or diseases 

other than for which the drug was designated.” A.R. 685–86.

In its notice, HHS acknowledged that its interpretation would require covered entities and 

manufacturers to identify those drugs that have an orphan designation and are used to treat that 

 3 The Interpretive Rule is also available on HRSA’s website. See Interpretive Rule: 

Implementation of the Exclusion of Orphan Drugs for Certain Covered Entities Under the 340B 

Program, Health Resources & Services Administration, 

http://www.hrsa.gov/opa/programrequirements/interpretiverule/interpretiverule.pdf (last visited 

Oct. 13, 2015).
10

designation. To facilitate that process, HHS proposed to “publish a listing of orphan drug 

designations, providing the name of the drug and the designated indication” on “the first day of 

the month prior to the end of the calendar quarter.” A.R. 685. Furthermore, HHS cautioned that 

“[i]f a covered entity lacks the ability to track drug use by indication, such entity would be 

unable to purchase drugs with orphan designations through the 340B Program.” A.R. 685.

In line with its Interpretive Rule, HHS, through HRSA, has also sent letters to 

pharmaceutical manufacturers advising them that HRSA had been informed by one or more 

covered entities that “the 340B price is not available for at least one of [the manufacturers’]

products with an orphan designation.” See First Am. Compl. Ex. E, ECF No. 11–5. In those 

letters, HRSA set forth its interpretation of the statute and stated that the recipient manufacturer 

“is out of compliance with statutory requirements as described in HRSA’s interpretive rule.” Id.

(emphasis added). HRSA further cautioned that “[m]anufacturers that do not offer the 340B 

price for drugs with an orphan designation when those drugs are used for an indication other than 

the rare condition or disease for which the drug was designated . . . are violating section 

340B(a)(1) of the PHSA and the terms of their Pharmaceutical Pricing Agreement.” Id.

(emphasis added). Finally, HRSA noted that section 340B(d) requires manufacturers to “refund 

covered entities charged more than the statutory ceiling price for covered outpatient drugs” and 

requested the recipients to “respond within 30 days to notify HRSA of your plan to repay 

affected covered entities and to institute the offer of the discounted price in the future.” Id. On 

its website, HRSA has also stated that “[a] manufacturer or covered entity’s failure to comply 

with the statutory requirements could subject a manufacturer or covered entity to an enforcement 

action by HRSA, which could include refunds to covered entities in the case of overcharges, as 
11

well as termination of a manufacturer’s Pharmaceutical Pricing Agreement (PPA).” See First 

Am. Compl. Ex. D, ECF No. 11–4.4

PhRMA filed a complaint on October 9, 2014, challenging the Interpretive Rule under 

the Administrative Procedure Act (“APA”) as “arbitrary, capricious, an abuse of discretion, or 

otherwise not in accordance with law.” See 5 U.S.C. § 706(2)(A); see also Compl., ECF No. 1; 

First Am. Compl., ECF No. 11. Pending before the Court are HHS’s motion for summary 

judgment, See ECF No. 14, and PhRMA’s cross-motion for summary judgment, see ECF No. 21.

III. LEGAL STANDARD

A court may grant summary judgment when “the movant shows that there is no genuine 

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. 

R. Civ. P. 56(a). When assessing a motion for summary judgment in an APA case, however, 

“the district judge sits as an appellate tribunal.” Am. Bioscience, Inc. v. Thompson, 269 F.3d 

1077, 1083 (D.C. Cir. 2001). In such cases the complaint “actually presents no factual 

allegations, but rather only arguments about the legal conclusion to be drawn about the agency 

action.” Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993). 

Therefore, “[t]he entire case on review is a question of law, and only a question of law.” Id. The 

Court’s review “is based on the agency record and limited to determining whether the agency 

acted arbitrarily or capriciously,” Rempfer v. Sharfstein, 583 F.3d 860, 865 (D.C. Cir. 2009), or 

in violation of another standard set out in section 10(e) of the APA, see 5 U.S.C. § 706.

 4 See also FAQs, Health Resources & Services Administration, 

http://www.hrsa.gov/opa/faqs/index.html (last visited Oct. 13, 2015).
12

IV. ANALYSIS

In support of its motion for summary judgment, HHS makes two principal arguments. 

First, HHS claims that the Interpretive Rule does not constitute a final agency action and, 

therefore, is not subject to judicial review. Second, HHS argues in the alternative that, even if 

the rule constitutes a final agency action, its interpretation is entitled to Skidmore deference. In 

opposition to the motion—and in support of its own motion for summary judgment—PhRMA

contends that the Interpretive Rule is a final agency action and, further, that the rule conflicts 

with the plain language of section 340B(e).

At the outset, it is important to note what PhRMA has not challenged. Although the 

Court expressed some skepticism that the Final Rule could be sustained as an interpretive rule, it 

noted that more briefing was needed to determine whether, among other things, the rule could be 

challenged immediately, “or whether HHS must first promulgate the rule as interpretive for it to 

be challenged under Skidmore.” PhRMA, 43 F. Supp. 3d at 46. Rather than continue to defend 

the original Final Rule, HHS did just that, and the Court entered final judgment because the new 

Interpretive Rule was “beyond the scope of the [original] action.” See Order Entering Final 

Judgment, PhRMA, No. 1:13-cv-1501-RC (D.D.C. Aug. 27, 2014), ECF No. 55.

In this case, although PhRMA challenges the merits of the Interpretive Rule, the 

organization does not appear to challenge HHS’s authority to issue an Interpretive Rule 

prospectively setting forth the agency’s reading of the statute. In any event, it is clear that HHS 

has the authority to advise the public of its interpretation of the statute. Cf. United States v. 

Mead Corp., 533 U.S. 218, 228 (2001) (“[W]hether or not they enjoy any express delegation of 

authority on a particular question, agencies charged with applying a statute necessarily make all 

sorts of interpretive choices.”). In order to administer the dispute resolution process that 
13

Congress has instructed HHS to establish, the agency necessarily will be obliged to set forth its 

understanding of a pharmaceutical manufacturer’s obligations under the 340B Program. 42 

U.S.C. § 256b(d)(3)(A). Moreover, Congress has instructed the Secretary to “designate or 

establish a decision-making official or decision-making body within the Department of Health 

and Human Services to be responsible for reviewing and finally resolving claims by covered 

entities . . . and claims by manufacturers.” Id. § 256b(d)(3)(B)(i) (emphasis added). Quite 

obviously, then, to finally resolve those claims, HHS will be required to interpret the reach of 

section 340B(e). See Gonzales v. Oregon, 546 U.S. 243, 268 (2006) (after holding that the 

Attorney General lacked statutory authority to issue an “Interpretive Rule as a statement with the 

force of law,” noting that “[i]f, in the course of exercising his authority, the Attorney General 

uses his analysis in the Interpretive Rule only for guidance in deciding whether to prosecute or 

deregister [a physician for violating the Controlled Substances Act], then the question remains 

whether his substantive interpretation is correct”). Accordingly, even though this Court

concluded that HHS lacks the authority to promulgate the rule as a binding statement of law, 

HHS is not forbidden altogether from proffering its interpretation of the statute.

With that understanding in mind, the Court proceeds to address the issues the parties

raise.

A. Whether the Interpretive Rule is a Final Order

The Court first considers whether the Interpretive Rule constitutes a final agency action. 

Under the APA, judicial review is available only of a “final agency action.” 5 U.S.C. § 704. 

Therefore, if the Interpretive Rule does not constitute a final agency action, PhRMA lacks a 
14

cause of action under the APA.5 See Reliable Automatic Sprinkler Co. v. Consumer Prod. Safety 

Comm’n, 324 F.3d 726, 731 (D.C. Cir. 2003). The APA defines an “agency action” to include 

“an agency rule.” 5 U.S.C. § 551(13). A “rule,” in turn, is defined as including “the whole or a 

part of an agency statement of general or particular applicability and future effect designed to 

implement, interpret, or prescribe law or policy.” Id. § 551(4) (emphasis added). Accordingly, 

HHS’s Interpretive Rule falls within the ambit of an “agency action”; the question is whether 

that action is final for purposes of section 704. See Sackett v. EPA, 132 S. Ct. 1367, 1371 (2012) 

(“There is no doubt [the compliance order] is agency action, which the APA defines as including 

even a ‘failure to act.’ But is it final?” (citation omitted)).

In Bennett v. Spear the Supreme Court articulated a two-part test for determining whether 

an agency action is final. See 520 U.S. 154, 177–78 (1997). “First, the action must mark the 

‘consummation’ of the agency’s decision-making process—it must not be of a merely tentative

or interlocutory nature.” Id. (citation omitted). Second, “the action must be one by which rights 

or obligations have been determined or from which legal consequences will flow.” Id. at 178 

(internal quotation marks and citation omitted). Although “Bennett highlights the importance of 

avoiding disruption of the administrative decisionmaking process,” CSI Aviation Servs., Inc. v. 

U.S. Dep’t of Transp., 637 F.3d 408, 411 (D.C. Cir. 2011), “the Supreme Court has instructed” 

that courts must nevertheless “apply the finality requirement in a ‘flexible’ and ‘pragmatic’ 

 5 Although the D.C. Circuit has occasionally characterized the issue as “jurisdictional,” 

see Bark v. U.S. Forest Serv., 37 F. Supp. 3d 41, 50 (D.D.C. 2014) (citing Cobell v. Norton, 240 

F.3d 1081, 1095 (D.C. Cir. 2001)), it is now “firmly established” that “the review provisions of 

the APA are not jurisdictional,” Viet. Veterans of Am. v. Shinseki, 599 F.3d 654, 661 (D.C. Cir. 

2010). Instead, section 704 simply “limits causes of action under the APA.” Ctr. for Auto Safety 

v. Nat’l Highway Traffic Safety Admin., 452 F.3d 798, 806 (D.C. Cir. 2006); see also Reliable 

Automatic Sprinkler, 324 F.3d at 731 (noting that “[i]f there was no final agency action here, 

there is no doubt that [the party] would lack a cause of action under the APA”).
15

way,” Ciba-Geigy Corp. v. EPA, 801 F.2d 430, 435 (D.C. Cir. 1986) (quoting Abbott Labs. v. 

Gardner, 387 U.S. 136, 149–50 (1967)). In this case, HHS concedes that the Interpretive Rule 

“satisfies the first part of the Bennett test” because the rule “is the product of mature 

administrative judgment,” “was issued after extensive deliberation,” and is “not a preliminary or 

tentative agency conclusion on the meaning of subsection 340B(e).” Defs.’ Mem. Supp. Summ. 

J. at 11. Accordingly, for purposes of the finality analysis the only remaining issue before this 

Court is whether the Interpretive Rule is an agency action by which “rights or obligations have 

been determined or from which legal consequences will flow.” Bennett, 520 U.S. at 178 

(internal quotation marks and citation omitted).

In support of its argument that the Interpretive Rule does not constitute a final agency 

action, HHS relies heavily on the fact that the rule is an interpretive one. In its motion for 

summary judgment, and particularly its reply,6 HHS expends considerable energy arguing that 

the rule is not a legislative rule and, for that reason alone, is not yet subject to review under the 

APA. See Defs.’ Mem. Supp. Summ. J. at 13; Defs.’ Reply at 3–6, ECF No. 24. In doing so, 

HHS seems to suggest that the interpretive rule is categorically shielded from judicial review—

and that “there is no final agency action”—“until HHS initiates an enforcement action against a 

drug manufacturer and imposes a penalty for not complying with the statutory provision.” Defs.’

Mem. Supp. Summ. J. at 15; see also Defs.’ Reply at 5 (contending that PhRMA’s argument 

“displays a fundamental misunderstanding of the difference between interpretive and legislative 

rules”).

 6 On the same day, HHS separately filed two memoranda entitled “Memorandum in 

Opposition to Plaintiff’s Motion for Summary Judgment and Reply to Plaintiff’s Opposition to 

Defendants’ Motion for Summary Judgment.” See ECF Nos. 23, 24. The Court has reviewed 

both filings and they appear identical. With that understanding, the Court cites only to ECF No. 

24.
16

If that is HHS’s position, it is contrary to D.C. Circuit and Supreme Court precedent. 

Although HHS’s current rule is undoubtedly an interpretive rule in light of this Court’s prior 

holding, the rule’s particular classification is beside the point. The D.C. Circuit has instructed 

that Bennett “does not foreclose all pre-enforcement challenges.” CSI Aviation, 637 F.3d at 411. 

Indeed, the Circuit has previously noted that an argument that “final agency action . . . requires 

the completion of a full enforcement action” is “mistaken.” Id. at 413. And in a recent case the 

Supreme Court found that a pre-enforcement compliance order issued by the EPA was 

immediately subject to challenge under the APA even though the EPA had taken no steps to 

actually enforce that order. See Sackett, 132 S. Ct. at 1371; see also Bimini Superfast Operations 

LLC v. Winkowski, 994 F. Supp. 2d 106, 114 (D.D.C. 2014) (discussing Sackett). Admittedly, 

interpretive rules, guidance policies, and other general agency statements that lack the force of 

law “generally do not qualify” as a final agency action. Am. Tort Reform Ass’n v. Occupational 

Safety & Health Admin., 738 F.3d 387, 395 (D.C. Cir. 2013). But, “an agency’s other 

pronouncements”—beyond legislative rules—“can, as a practical matter, have a binding effect” 

which contributes to a finding that the action is “final.” Appalachian Power Co. v. EPA, 208 

F.3d 1015, 1021, 1022 (D.C. Cir. 2000); cf. Barrick Goldstrike Mines Inc. v. Browner, 215 F.3d 

45, 48 (D.C. Cir. 2000) (“That the issuance of a guideline or guidance may constitute final 

agency action has been settled in this circuit for many years.”). Indeed, the D.C. Circuit and this 

Court have identified exceptions—and have done so specifically in cases, like the one here, 

where the agency issued a rule, guidance document, or letter setting forth its view of the law and 

threatening enforcement if the regulated entity did not comply. See, e.g., Barrick, 215 F.3d at 

49; CSI Aviation, 637 F.3d at 412; Bimini Superfast, 994 F. Supp. 2d at 114–18; cf. Ctr. for Auto 

Safety v. Nat’l Highway Traffic Safety Admin., 452 F.3d 798, 807 (D.C. Cir. 2006) (noting that 
17

finality can exist “when an agency merely threatens enforcement of a [policy guideline], if the 

guideline is binding on its face or in practice”).

To be sure, in some cases, including those that HHS relies upon, an agency’s preenforcement activity will be deemed non-final. See Defs.’ Mem. Supp. Summ. J. at 15–16 

(citing, e.g., Reliable Automatic Sprinkler, 324 F.3d at 732). These conflicting decisions merely 

confirm that whether an agency’s pre-enforcement action is subject to judicial review “varies 

based on the circumstances.” CSI Aviation, 637 F.3d at 414 n.2. Contrary to the agency’s 

position, however, interpretive rules or other pronouncements setting forth an agency’s reading 

of a statute are not categorically insulated from review before a specific enforcement proceeding 

has commenced. See, e.g., Appalachian Power Co., 208 F.3d at 1023 (“[T]he Guidance, insofar 

as relevant here, is final agency action, reflecting a settled agency position which has legal 

consequences both for State agencies administering their permit programs and for companies.”); 

see also Sackett, 132 S. Ct. at 1371.

One recent D.C. Circuit case concluding that an agency’s pre-enforcement resolution of a 

question of statutory interpretation constituted a final agency action is particularly instructive 

here. In CSI Aviation Services, Inc. v. United States Department of Transportation, the Circuit 

considered whether a Department of Transportation (“DOT”) cease-and-desist letter, issued in 

advance of any enforcement action, was subject to judicial review. See 637 F.3d at 410. The 

petitioner, CSI Aviation Services, Inc., had contracted with the General Services Administration

(“GSA”) to provide air-charter services for federal agencies. Id. Shortly before CSI prevailed in 

a bid to renew its contract with the GSA, the DOT requested information from CSI “to determine 

whether the company was engaging in ‘indirect air transportation’ without the certificate of 

authority required by the Federal Aviation Act.” Id. (citing 49 U.S.C. § 41101(a)). After 
18

considering the information CSI had presented, DOT informed CSI that “CSI has been acting as 

an unauthorized indirect air carrier in violation of section 41101,” that the company faced “civil 

penalties of up to $27,500 per violation,” that “[e]ach day such violation continues is a separate 

violation,” and, finally, that the DOT would “refrain from taking enforcement action” if CSI

“cease[d] and desist[ed] from any further activity that would result in it engaging in indirect air 

transportation.” Id. Although six other companies had received similar letters, only CSI chose 

not to comply with the letter and challenged the agency’s interpretation of the Federal Aviation 

Act. Id. At the time the case was before the D.C. Circuit, DOT had granted CSI a temporary, 

time-limited exemption from the certification requirement and had not yet pursued an 

enforcement action. Id. at 411.

The Circuit began its analysis by noting that the Supreme Court’s decision in Bennett 

“does not foreclose all pre-enforcement challenges.” Id. Instead, and relying on earlier Circuit 

precedent, the Circuit set forth three specific factors that a court should consider when 

determining whether a pre-enforcement action constitutes final agency action.

7 Id. at 412 (citing 

 7 That earlier precedent, Ciba-Geigy Corp. v. EPA, was framed in terms of ripeness. See

801 F.2d at 434. The D.C. Circuit has since held that the question of whether an agency’s action 

is a final one requires an analysis “complementary” to a ripeness inquiry. See, e.g., Reckitt 

Benckiser Inc. v. EPA, 613 F.3d 1131, 1137 (D.C. Cir. 2010); CSI Aviation, 637 F.3d at 411. For 

that reason, and as the Circuit has done, the Court uses the caselaw relative to both issues to 

inform its analysis. See, e.g., Reckitt Benckiser, 613 F.3d at 1137.

At the same time, and although finality and ripeness overlap considerably, the questions 

remain distinct. See, e.g., Barrick, 215 F.3d at 47–49 (analyzing “final agency action” and 

“ripeness” separately). For example, even if an agency action is “‘final’ for purposes of the APA 

. . . issues still may not be fit for review where the agency retains considerable discretion to 

apply the new rule on a case-by-case basis, particularly where there is a complex statutory 

scheme or there are other difficult legal issues that are implicated by the agency action.” Sprint 

Corp. v. FCC, 331 F.3d 952, 956 (D.C. Cir. 2003). In this case, the government has not argued 

that the issues are not ripe for adjudication even if the Court concludes that the Interpretive Rule 

is a final one. To the extent that ripeness is a jurisdictional requirement, however—and the 

Court therefore has a duty to consider it sua sponte, cf. Nat’l Park Hospitality Ass’n v. Dep’t of 

Interior, 538 U.S. 803, 808 (2003) (noting that “the question of ripeness may be considered on a 
19

Ciba-Geigy Corp., 801 F.2d at 435–37). First, a court should ask whether “the agency had taken 

a ‘definitive’ legal position concerning its statutory authority.” Id. (quoting Ciba-Geigy Corp., 

801 F.2d at 436). Second the court should consider whether “the case present[s] ‘a purely legal’ 

question of ‘statutory interpretation.’” Id. (quoting Ciba-Geigy Corp., 801 F.2d at 435). Finally, 

a court should determine whether the agency’s action “impose[s] an immediate and significant 

practical burden on [the regulated entity].” Id. (citing Ciba-Geigy Corp., 801 F.2d at 437); see 

also Bimini Superfast, 994 F. Supp. 2d at 118 (invoking the CSI Aviation test).

The D.C. Circuit concluded that all three factors were present. DOT’s initial warning 

letter had “declared in no uncertain terms” that CSI was not in compliance with the Federal 

Aviation Act, and “gave no indication that it was subject to further agency consideration or 

possible modification.” Id. at 412 (internal quotation marks and citation omitted). The issue also 

presented a “purely legal question of statutory interpretation” without the existence of any 

“disputed facts that would bear on [the] question.” Id. (internal quotation marks and citation 

omitted). Finally, the Circuit held that DOT had “effectively declared the company’s operations 

unlawful” which, “[a]t the very least . . . cast a cloud of uncertainty over the viability of CSI’s 

ongoing business.” Id. DOT’s cease and desist letter “put the company to the painful choice 

between costly compliance and the risk of prosecution at an uncertain point in the future.” Id. 

As the Circuit explained, that “conundrum” is “‘the very dilemma [the Supreme Court has 

 

court’s own motion”)—the Court concludes that HHS’s Interpretive Rule is ripe for review, and

that judicial intervention would not “inappropriately interfere with further administrative action,” 

Ohio Forestry Ass’n, Inc. v. Sierra Club, 523 U.S. 726, 733 (1998). This challenge is ripe both 

because the Interpretive Rule presents a purely legal question of statutory interpretation, and 

would therefore not benefit from a more concrete setting, and, as explained below, because the 

rule also poses a “hardship to the parties of withholding court consideration.” See Nat’l Park 

Hospitality Ass’n, 538 U.S. at 808; see also Reckitt Benckiser, 613 F.3d at 1137; Barrick, 215 

F.3d at 49.
20

found] sufficient to warrant judicial review.’” Id. (alteration in original) (quoting Ciba-Geigy, 

801 F.2d at 439).

In this case, the Court concludes that all three CSI Aviation factors are met and that 

HHS’s Interpretive Rule similarly represents a definitive and purely legal determination that puts 

pharmaceutical manufacturers to the painful choice of complying with HHS’s interpretation or 

risking the possibility of an enforcement action at an uncertain point in the future.

First, given HHS’s concession that the Interpretive Rule represents the consummation of 

the agency’s decisionmaking process, the Court has no trouble concluding that the agency has 

“taken a ‘definitive’ legal position.” Id. at 412. The Interpretive Rule itself admits to “no 

ambiguity” and provides no indication that it is “subject to further agency consideration.” Id.

(quoting Ciba-Geigy, 801 F.2d at 436–37); see also A.R. 680–86. The enforcement letters sent 

to manufacturers also indicate as much. Those letters state that a manufacturer who has not 

offered orphan-designated drugs at the 340B price when those drugs are not used to treat a rare 

condition or disease “is out of compliance with statutory requirements” and “[is] violating 

section 340B(a)(1) of the PHSA.” First Am. Compl. Ex. E (emphasis added). The D.C. Circuit 

has found similar wording in pre-enforcement letters definitive. See, e.g., CSI Aviation, 637 F.3d 

at 412; Reckitt Benckiser Inc. v. EPA, 613 F.3d 1131, 1138 (D.C. Cir. 2010) (holding that EPA’s 

interpretation of statute, as contained in a pre-enforcement letter, was sufficiently final where the 

letter “unequivocally informed” the party that its products “would be considered misbranded”

under the statute (emphasis in original)).

Second, the Interpretive Rule clearly raises a pure question of statutory interpretation. 

The rule supplies HHS’s reading of the statute as applied to all manufacturers that produce drugs 
21

with an orphan designation.8 There is nothing to indicate that the administrative record produced 

during a specific enforcement proceeding would change HHS’s legal interpretation. See Bimini 

Superfast, 994 F. Supp. 2d at 117 (holding that a Customs and Border Protection letter detailing 

the agency’s interpretation of the Immigration and Nationality Act constituted final agency 

action where “[t]here is no indication that any such enforcement process would change CBP’s 

legal position or require that an agency record be developed given the purely legal nature of 

CBP’s position”).

Third—and most vigorously contested by the parties—the Court finds that the 

Interpretive Rule imposes a significant burden on pharmaceutical manufacturers and other 

regulated entities alike. As an initial matter, HHS claims that the Interpretive Rule, itself, “does 

not alter the legal obligations of the program participants” and that the rule has no legal force 

“independent of any binding effect that the statute itself may have.” Defs.’ Mem. Supp. Summ. 

J. at 12–13. HHS repeatedly argues that the statute—and not the Interpretive Rule, itself—is 

binding on the parties. But this purported distinction is a hollow one without any meaningful 

difference. By virtue of the definitive interpretation the agency has settled on, as far as the 

agency is concerned the Interpretive Rule and the statutory requirements are one in the same. 

Indeed, the agency’s letters to manufacturers indicate that HHS believes entities are “out of 

 8 For this reason the Interpretive Rule and HHS’s follow-on letters here are also distinct 

from those in the cases HHS cites in its reply, in which courts found no final agency action. See

Defs.’ Reply at 10–11. For example, in Center for Auto Safety, the D.C. Circuit noted that the 

agency’s guidelines regarding the legality of regional automobile recalls was “conditional” and 

that the “agency remain[ed] free to exercise discretion in assessing proposed recalls” on a caseby-case basis. 452 F.3d at 809; see also Reliable Automatic Sprinkler, 324 F.3d at 734 (finding 

nonfinal action where “the agency has made it clear that the interpretation of ‘consumer product’ 

with respect to sprinkler heads remains to be determined” (emphasis added)). By contrast here, 

as in CSI Aviation, HHS’s Interpretive Rule concerns only the meaning of section 340B(e), 

“which is antecedent to and distinct from whether [any manufacturer] has violated the law.” 637 

F.3d at 412.
22

compliance with statutory requirements as described in HRSA’s interpretive rule” when they fail 

to offer orphan-designated drugs used to treat other conditions at section 340B prices. First Am. 

Compl. Ex. E (emphasis added). And on its website HRSA further notes that “[a] manufacturer 

or covered entity’s failure to comply with the statutory requirements could subject a 

manufacturer or covered entity to an enforcement action by HRSA, which could include refunds 

to covered entities in the case of overcharges, as well as termination of a manufacturer’s 

Pharmaceutical Pricing Agreement (PPA).” See First Am. Compl. Ex. D (emphasis added).

Accordingly, HHS’s reliance on those cases in which “an agency merely expresses its 

view of what the law requires of a party” is misplaced. See Defs.’ Mem. Supp. Summ. J. at 17 

(quoting Ctr. for Auto Safety, 452 F.3d at 808); see also id. at 13–14. Even those cases

acknowledge that there are “particular circumstances in which an agency’s taking a legal 

position itself inflicts injury or forces a party to change its behavior, such that taking that 

position may be deemed final agency action.” AT&T Co. v. EEOC, 270 F.3d 973, 975–76 (D.C. 

Cir. 2006); see also Ctr. for Auto Safety, 452 F.3d at 808. The Interpretive Rule very clearly 

requires pharmaceutical manufacturers and covered entities alike to change their behavior in a 

not insignificant way.

HHS’s claim that the rule “does not independently impose any obligations on the 

program participants,” Defs.’ Reply at 6, is particularly unpersuasive in light of the new tracking 

and monitoring obligations that the Interpretive Rule explicitly mandates. As the Court 

previously acknowledged, HHS’s rule “imposes duties on the covered entities to maintain 

records of compliance.” PhRMA, 43 F. Supp. 3d at 33. The vacated final rule specifically 

required covered entities to “ensur[e] that any orphan drugs purchased through the 340B 

Program are not transferred, prescribed, sold, or otherwise used for the rare condition or disease 
23

for which the orphan drugs are designated under section 526 of the FFDCA.” 42 C.F.R. § 

10.21(c)(1). Pursuant to its Interpretive Rule, HHS has now imposed identical duties. HHS 

explained that it “will publish a listing of orphan drug designations, providing the name of the 

drug and the designation indication” on “the first day of the month prior to the end of the 

calendar quarter.” A.R. 685. The Rule further cautions that, “[i]f a covered entity lacks the 

ability to track drug use by indication, such entity would be unable to purchase drugs with 

orphan designations through the 350B program.” Id.

Whether to comply with the Interpretive Rule presents pharmaceutical manufacturers, 

too, with a “painful choice between costly compliance and the risk of prosecution at an uncertain 

point in the future” similar to the choice faced by the petitioner in CSI Aviation. 637 F.3d at 412. 

That choice is “costly” in at least three ways. First, and quite obviously, under the agency’s 

interpretation of the statute, pharmaceutical manufacturers will be required to sell orphan drugs 

at reduced prices when covered entities use those drugs to treat ailments other than the rare 

disease or condition for which they have been designated. Those losses themselves impose a 

financial cost.

There is also evidence that implementing the Interpretive Rule will have a “direct effect” 

on pharmaceutical manufacturers’ “day-to-day business.” Reckitt Benckiser, 613 F.3d at 1138

(quoting Abbott Labs, 387 U.S. at 152). Various pharmaceutical company officials have 

submitted sworn declarations representing that, to determine whether covered entities are in fact 

using orphan-designated drugs to treat non-rare conditions, their companies must “make changes 

to [their] own accounting, contracting and government price reporting systems and require the 

wholesaler[s] through whom [they] sell [their] 340B drugs to make changes to their tracking 

system.” See Am. Decl. of Derek L. Asay ¶ 9, PhRMA, No. 1:13-cv-1501-RC (D.D.C. Oct. 22, 
24

2013), ECF No. 15; see also Decl. of Paul Maillet, ¶¶ 8–9, PhRMA, No. 1:13-cv-1501-RC

(D.D.C. Sept. 30, 2013), ECF. No. 3–6; Decl. of Pfizer Inc. ¶ 9, PhRMA, No. 1:13-cv-1501-RC 

(D.D.C. Oct. 1, 2013), ECF. No. 11. Those officials have further alleged that they will be forced 

to increase their auditing and monitoring expenditures to implement those changes.

9

 See, e.g., 

Decl. of Paul Maillet ¶¶ 8–9. The D.C. Circuit has found similar requirements that a regulated 

entity track its business activities sufficient to constitute an immediate and significant burden on 

a regulated entity. See, e.g., Reckitt Benckiser, 613 F.3d at 1138 (finding hardship where “sworn 

declarations by company officials” showed that “the company has been forced to spend hundreds 

of thousands of dollars on research and development of []compliant products” and expected to 

incur “an additional one million dollars to conclude development”); Barrick Goldstrike, 215 F.3d 

at 48 (noting that agency’s guidance extending application of the Emergency Planning and 

Community Right-to-Know Act to the metal mining industry had “legal consequences” because 

the plaintiff was now “bound to keep track of its movements of waste rock and report the 

movements as releases of toxic substances”).

Most tellingly, however, is the fact that HHS contends that failure to comply with the 

statutory requirements—as interpreted by its Interpretive Rule—will expose manufacturers to 

significant penalties in future enforcement proceedings. Sackett, 132 S. Ct. at 1372 (noting that 

pre-enforcement compliance order exposed the petitioners “to double penalties in a future 

enforcement proceeding”). Under section 340B, manufacturers must refund covered entities if 

 9 These declarations refute HHS’s claim that “Plaintiff has not offered any detail of the 

‘significant changes’ they are required to make in their daily ‘business practices.’” Defs.’ Reply 

at 6. Moreover, they refute HHS’s comparison to the Department of Labor’s compliance letters 

in Rhea Lana, Inc. v. U.S. Dep’t of Labor, which another judge on this Court concluded did not 

constitute final agency action because the letters “[did] not affirmatively compel Rhea Lana to do 

anything.” 74 F. Supp. 3d 240, 245 (D.D.C. 2014), appeal docketed, No. 15-5014 (D.C. Cir. Jan. 

21, 2015); see Defs.’ Reply at 10–11.
25

they have charged more than the ceiling price and HHS has instructed manufacturers to “notify 

HRSA of [their] plan[s] to repay affected covered entities.” First Am. Compl. Ex. E. In 

addition, the statute provides for a civil monetary penalty of up to $5,000 “for each instance of 

overcharging a covered entity that may have occurred.” 42 U.S.C. § 256b(d)(1)(B)(vi)(II). A 

manufacturer’s Pharmaceutical Pricing Agreement may also be cancelled altogether, which

PhRMA represents, and HHS has not refuted, would result in a “loss of Medicaid and Medicare 

Part B reimbursement for all of the manufacturer’s products.” Pl.’s Mem. Opp. Summ. J. at 16;

see also Def.’s Mem. Summ. J. at 4 (“The manufacturers must enter into such agreements as a 

condition of receiving reimbursement from Medicaid.”); Astra, 131 S. Ct. at 1345 

(“Manufacturers’ eligibility to participate in state Medicaid programs is conditioned on their 

entry into PPAs for covered drugs purchased by 340B entities.”).

These penalties impose a particularly acute burden in this case because, at present, 

manufacturers have no meaningful recourse to dispute HHS’s reading of section 340B(e) or to 

avoid the continued accumulation of potential liability. HHS is now five years overdue in 

complying with Congress’s mandate that it set up an administrative dispute resolution process 

within 180 days of the ACA’s passage. HHS has maintained only that “[f]uture rulemaking” will 

address the dispute resolution process. 340B Drug Pricing Omnibus Guidance, 80 Fed. Reg. at

52,301. And although that process, as envisioned by Congress, would appear to allow a 

manufacturer to initiate proceedings, see 42 U.S.C. § 256b(d)(3)(A) (instructing HHS to develop 

a process to resolve “claims by manufacturers”), until that system is implemented manufacturers 
26

are left without any remedy. “[E]ach day they wait for the agency to drop the hammer, they 

accrue” significant penalties. Sackett, 132 S. Ct. at 1372.

10

In an effort to brush aside these very real consequences, HHS claims that they represent 

merely practical, not legal, effects and obligations. But the concept of “[f]inality resulting from 

the practical effect of an ostensibly non-binding agency proclamation is a concept” the D.C. 

Circuit “ha[s] recognized.” Nat’l Ass’n of Home Builders v. Norton, 415 F.3d 9, 15 (D.C. Cir. 

2005). Indeed, CSI Aviation spoke only of whether the DOT’s action there “imposed an 

immediate and significant practical burden” on the regulated entity. 637 F.3d at 412 (emphasis 

added). Therefore, regardless of classification, the burdens posed by HHS’s Interpretive Rule 

here are sufficiently significant to rise to the level of a final agency action.11

Ultimately, the Court finds that this case is in line with CSI Aviation and far afield from 

those cases in which an agency’s guidance was “conditional,” had not “commanded, required, 

ordered, or dictated” any specific action, or merely presented entities with the option of 

 10 To state a claim the APA also requires that the party seeking review have “no other 

adequate remedy in a court.” 5 U.S.C. § 704; see also Sackett, 132 S. Ct. at 1372. HHS has not 

argued that PhRMA’s claim is non-actionable on this ground; in fact, neither party addresses the 

point. In any event, because there is currently no other mechanism—following an enforcement 

proceeding or otherwise—for PhRMA to seek review of the Interpretive Rule, the Court 

concludes that PhRMA and the pharmaceutical manufacturers it represents lack an adequate 

alternative remedy. Cf. Sackett, 132 S. Ct. at 1372; accord Bimini Superfast, 994 F. Supp. 2d at 

117 n.4.

11 At least one D.C. Circuit case seems to reject unequivocally, as inconsistent with 

Bennett, the argument that practical consequences suffice to present a final agency action. See 

Ctr. for Auto Safety, 452 F.3d at 811. As an initial matter, the Court has some doubt that the 

civil monetary penalties and the threat of the pricing agreement cancelation that manufacturers 

face here could be properly classified as “practical” and not “legal” burdens. But, regardless, 

more recent D.C. Circuit caselaw speaks of practical burdens, alone. Moreover, as an astute 

decision by another member of this Court recently pointed out, Bennett in fact speaks in the 

alternative and states that final agency actions are those from which “‘rights or obligations have 

been determined’ or from which ‘legal consequences flow.’” Bimini Superfast, 994 F. Supp. 2d 

at 114 n.3 (emphasis in original) (quoting Bennett, 520 U.S. at 177–78). Therefore, this Court 

does not view the consideration of practical burdens as conflicting with Bennett’s holding.
27

voluntary compliance. See Ctr. for Auto Safety, 452 F.3d at 809. Thus, HHS’s attempt to 

distinguish CSI Aviation by arguing that its action “lacks the legal consequences that the order in 

CSI Aviation Services had,” is unpersuasive.12 Defs.’ Reply at 7–8. “‘[A]n agency may not 

avoid judicial review merely by choosing the form of a letter,” or a purportedly non-binding 

Interpretive Rule, “to express its definitive position on a general question of statutory 

interpretation.’” CSI Aviation, 637 F.3d at 412 (quoting Ciba-Geigy, 801 F.2d at 438 n.9). 

Instead, a constellation of factors counsels in favor of finding a final agency action here: HHS’s 

Interpretive Rule presents a pure question of statutory interpretation; the Interpretive Rule 

requires both covered entities and pharmaceutical manufacturers alike to make significant 

changes to their business practices; despite HHS’s urging that manufacturers’ wait until a formal 

enforcement proceeding is initiated to challenge the Interpretive Rule, there currently exists no 

formal dispute resolution mechanism and the timing of future rulemaking remains undetermined; 

and HHS has informed manufacturers that it considers those who do not adopt its Interpretive 

Rule out of compliance with the statute—accruing potential penalties until such time as HHS 

chooses to take action. “Having thus flexed its regulatory muscle, [HHS] cannot now evade 

judicial review.” CSI Aviation, 637 F.3d at 413. Accordingly, the Court concludes that the 

Interpretive Rule constitutes final agency action within the ambit of 5 U.S.C. § 704.

 12 HHS also argues that Ciba-Geigy is distinguishable because it involved a processbased injury (the EPA there had contended that it could cancel the petitioner’s pesticide 

registration without notice and a hearing, see 801 F.2d at 433) and that, unlike the petitioner 

there, pharmaceutical manufacturers here can make their case in a future enforcement 

proceeding. See Defs.’ Reply at 8. As just explained, however, the possibility of an enforcement 

proceeding is currently a hollow one. And, in any event, in CSI Aviation the Circuit did not find 

the substantive, non-procedural-based ground for review raised there any less final at a preenforcement stage. See 637 F.3d at 412.
28

B. The Validity of HHS’s Interpretive Rule

The Court thus proceeds to determine whether HHS’s Interpretive Rule is “arbitrary, 

capricious, an abuse of discretion, or otherwise not in accordance with law.” See 5 U.S.C. § 

706(2)(A). Resolution of this question turns on the interpretation of section 340B(e). The 

interpretation of an administrative agency’s guiding statute typically “follows a two-step 

process.” PhRMA, 43 F. Supp. 3d at 35. “First, always, is the question whether Congress has 

directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end 

of the matter; for the court, as well as the agency, must give effect to the unambiguously 

expressed intent of Congress.” Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 

837, 842–43 (1984). However, if “Congress has not directly addressed the precise question at 

issue, the court does not simply impose its own construction of the statute, as would be necessary 

in the absence of an administrative interpretation.” Id. at 843 (footnote omitted). In this latter 

situation, a court instead proceeds to step two of the Chevron framework: “[I]f the statute is 

silent or ambiguous with respect to the specific issue, the question for the court is whether the 

agency’s answer is based on a permissible construction of the statute.” Id. “[A] court may not 

substitute its own construction of a statutory provision for a reasonable interpretation by the 

administrator of an agency.” Id. at 844.

Yet, deference in the face of a silent or ambiguous statute under Chevron “is warranted 

only ‘when it appears that Congress delegated authority to the agency generally to make rules 

carrying the force of law, and that the agency interpretation claiming deference was promulgated 

in the exercise of that authority.’” Gonzales, 546 U.S. at 255–56 (emphasis in original) (quoting 

Mead Corp., 533 U.S. at 226–27). As this Court previously held, HHS was not delegated 

authority to make binding rules that carry the force of law related to section 340B(e). See 
29

PhRMA, 43 F. Supp. 3d at 45. Thus, if the Court does find an ambiguity, HHS’s interpretation 

“does not receive Chevron deference,” but instead “receives deference only in accordance with 

Skidmore” and the Court will “follow [the] agency’s rule only to the extent it is persuasive.” 

Gonzales, 546 U.S. at 268, 269. In either event, however, “it is elementary that ‘no deference is 

due to agency interpretations at odds with the plain language of the statute itself.’” Smith v. City 

of Jackson, Miss., 544 U.S. 228, 266 (2005) (quoting Pub. Emps. Ret. Sys. of Ohio v. Betts, 492 

U.S. 158, 171 (1989)). As explained below, the Court concludes that HHS’s interpretation here 

is contrary to the plain language of section 340B(e).13

The Court starts, as it must, with the text of section 340B(e) which provides:

(e) Exclusion of orphan drugs for certain covered entities

For covered entities described in subparagraph (M) (other than a 

children’s hospital described in subparagraph (M)), (N), or (O) of 

subsection (a)(4), the term “covered outpatient drug” shall not 

include a drug designated by the Secretary under section 360bb of 

Title 21 for a rare disease or condition.

42 U.S.C. § 256b(e) (emphasis added). By its plain terms, the orphan drug exclusion applies to a 

drug that is “designated . . . for a rare disease or condition.” The section refers only to the 

designation of that drug, and makes no mention of whether the so-designated drug is in fact used

by the covered entity to treat the rare disease or condition for which it was designated. This 

choice of language is informative; as HHS, itself notes, and as FDA regulations make clear, a 

drug can be designated as an orphan drug even if that drug has uses—or has previously been 

 13 HHS argues that if the Interpretive Rule “has enough legal effect to be final agency 

action, then it has enough effect to be entitled to Chevron deference as well.” Defs.’ Mem. Supp. 

Summ. J. at 18 n.1. Not so. As explained above, even non-legislative rules like interpretive 

rules or guidance policies may be classified as a final agency action in circumstances like these. 

But that conclusion does not alter Congress’s delegation of authority. In any event, even were 

Chevron deference appropriate here, because the Court’s conclusion rests on the plain language 

of section 340B(e), HHS’s interpretation would nevertheless fail at Chevron step one. Smith, 

544 U.S. at 266.
30

approved and marketed—to treat conditions that are not rare ones. See Exclusion of Orphan 

Drugs, 78 Fed. Reg. at 44,017 (“FDA will designate a drug for a rare disease or condition as an 

orphan drug in situations where the drug is also approved for a different disease or condition that 

does not qualify for such a designation.”); 21 C.F.R. § 316.23(b) (“A sponsor may request 

orphan-drug designation of an already approved drug for an unapproved use without regard to 

whether the prior marketing approval was for a rare disease or condition”).

To support its reading of the exclusion as tied to the drug’s use, HHS places controlling 

weight on the phrase “for a rare disease or condition.” According to HHS, that phrase 

“effectively limits the scope of the exclusion,” because it modifies the word “drug” and therefore 

already “convey[s] [a] meaning” cabined to a drug’s particular “uses or indications.” Defs.’

Reply at 12–13; see also Defs.’ Mem. Supp. Summ. J. at 19–20.

While HHS’s reading might appear plausible at first glance, and when confined solely to 

section 340B(e), “[w]hen interpreting a statute, we examine related provisions in other parts of 

the U.S. Code.” Boumediene v. Bush, 553 U.S. 723, 776 (2008). When one reads the statute in 

the context of its related provisions, it becomes clear that HHS’s interpretation runs counter to 

the way Congress has used the phrase “a drug designated . . . for a rare disease or condition” or 

similar wording throughout the U.S. Code. In each case, although Congress refers to a drug “for 

a rare disease or condition” or a drug so “designated,” Congress has added additional language 

to specify that the provision’s applicability is limited to occasions when that designated drug is 

actually used to treat the rare disease or condition.

A typical example is 42 U.S.C. § 1395l(t)(6)(A)(i). That statute, part of the Medicaid 

program, provides for prospective, pass-through payments of certain drugs and medical devices. 

The statute limits the payments for “[c]urrent orphan drugs,” however, to “[a] drug or biological 
31

that is used for a rare disease or condition with respect to which the drug or biological has been 

designated as an orphan drug under section 360bb of Title 21 . . . .” 42 U.S.C. § 

1395l(t)(6)(A)(i). Like section 340B(e), this section specifies that it applies only to a drug that 

has been designated under 21 U.S.C. § 360bb. Compare id. (applying to a “drug or biological 

. . . designated as an orphan drug under section 360bb of Title 21”), with 42 U.S.C. § 256b(e) 

(applying to “a drug designated by the Secretary under section 360bb of Title 21 for a rare 

disease or condition”). Unlike section 340B(e), however, the section further specifies that the 

benefit is only available for those drugs when “used for a rare disease or condition” for which it 

has been designated. 42 U.S.C. § 1395l(t)(6)(A)(i) (emphasis added).

It is a “cardinal principle of statutory construction that we must give effect, if possible, to 

every clause and word of a statute.” Williams v. Taylor, 529 U.S. 362, 404 (2000) (internal 

quotation marks and citation omitted). In section 1395l, the negative implication from 

Congress’s use of further qualifying language is that Congress’s use of the phrase “designated as 

an orphan drug under section 360bb of Title 21,” alone, would have not have cabined the 

provision’s scope to only those pass-through payments for drugs when used to treat the rare 

disease or condition but would have applied, more generally, to all of the “designated” orphan 

drug’s uses—rare or otherwise. Otherwise, the additional language providing that the provision 

applies to a drug “that is used for a rare disease or condition” for which it has been designated is 

unnecessary surplusage.

Other examples abound. Consider 21 U.S.C. § 379h(a)(1)(F), which exempts a “human 

drug application for a prescription drug product that has been designated as a drug for a rare 

disease or condition” from the fees typically assessed for such applications. (Emphasis added). 

According to the subsection, the exception applies “unless the human drug application includes 
32

an indication for other than a rare disease or condition.” 21 U.S.C. § 379h(a)(1)(F) (emphasis 

added). This subsection includes both the language “designated as a drug for a rare disease or 

condition” and the further qualification that the application must pertain solely to indications for 

that rare disease or condition. Again, if a prescription drug product “designated as a drug for a 

rare disease or condition” by definition only described that drug product when used to treat those 

rare diseases or conditions, Congress would not have needed to specify that the provision does 

not apply when that drug product’s alternative indications are included.

Similar in scope is 26 U.S.C. § 45C—entitled “Clinical testing expense for certain drugs 

for rare disease or conditions”—which provides a tax credit for the clinical testing expenses 

incurred during the orphan drug’s development. The statute specifies that the credit applies to 

clinical testing “for a drug being tested for a rare disease or condition” and must occur “after the 

date such drug is designated under section 526 of [the Federal Food, Drug, and Cosmetic Act].” 

26 U.S.C. §§ 45C(b)(2)(A)(i), (ii)(I). But the statute goes on to specify that clinical testing 

should be taken into account “only to the extent such testing is related to the use of a drug for the 

rare disease or condition for which it was designated under section 526 of the Federal Food,

Drug, and Cosmetic Act.” Id. § 45C(b)(2)(B) (emphasis added).

14

 14 Another section of the ACA, in which section 340B(e) was enacted, is also 

informative. Although the Supreme Court has cautioned that the ACA “does not reflect the type 

of care and deliberation that one might expect of such significant legislation,” King v. Burwell, 

135 S. Ct. 2480, 2492 (2015), it is nevertheless telling that Congress did add use- or indicationlimiting language elsewhere in the ACA when referring to certain benefits that apply to orphandesignated drugs. Section 9008(b), which applies an excise tax to branded prescription drugs, 

exempts orphan drugs until “the date on which such drug or biological product is approved . . . 

for marketing for any indication other than the treatment of the rare disease or condition with 

respect to which [the section 45C tax credit] was allowed.” See Patient Protection and 

Affordable Care Act, Pub. L. No. 111-148, § 9008(e)(3), 124 Stat. 119, 860 (Mar. 23, 2010)

(emphasis added). Generally, Congress “acts intentionally when it uses particular language in 

one section of a statute but omits it in another.” Dep’t of Homeland Sec. v. MacLean, 135 S. Ct. 

913, 919 (2015) (citing Russello v. United States, 464 U.S. 16, 23 (1983)).
33

To be sure, each of these statutes varies slightly in its exact wording; some refer to drugs 

“designated . . . for a rare disease or condition” while others refer to drugs “designated as an 

orphan drug.” Yet, together, these provisions indicate that Congress knows how to add an 

additional use- or indication-based limitation when referring to a drug that has received an 

orphan designation. Cf. Dep’t of Homeland Sec. v. MacLean, 135 S. Ct. 913, 921 (2015)

(referencing other federal statutes demonstrating that Congress “knew how to distinguish 

between regulations that had the force and effect of law and those that did not”); Dole Food Co. 

v. Patrickson, 538 U.S. 468, 476 (2003) (finding it instructive that the statute at issue referred 

only to “ownership” while “[v]arious federal statutes refer to ‘direct and indirect ownership’” as 

demonstrating that “[w]here Congress intends to refer to ownership in other than the formal 

sense, it knows how to do so”). Each provision contains use- or indication-limiting language, 

suggesting that Congress must typically intend for the term “designated . . . for a rare disease or 

condition” to have a more general meaning when used alone. That Congress by contrast used 

only the general phrase “designated . . . to treat a rare condition or disease” in section 340B(e), 

implies that it must have meant to refer to that designated drug in all of its uses and indications.

HHS has not pointed the Court to a single provision in the U.S. Code that appears to use

the language “designated . . . for a rare disease or condition,” alone, in the use-limiting way that

it argues section 340B(e) should be read. And HHS’s response that the comparison provisions

just discussed “are too remote in time and location to cast any illuminating light on the 

congressional intent behind the language chosen for” section 340B(e) simply does not withstand 

scrutiny. Defs.’ Reply at 17. These related provisions are some of the very same benefitproviding provisions with which HHS claims its own interpretation is meant to accord. See A.R. 

682–83 (citing 21 U.S.C. § 379h(a)(1)(F); 26 U.S.C. § 45C) Defs.’ Mem. Sup. Summ. J. at 20–
34

21. But, far from evidencing consistency, the differing language of those related provisions 

demonstrates that Congress must have had a different intent in mind when it drafted section 

340B(e).15 These provisions, moreover, refute HHS’s contention that when “drugs are used for 

common diseases, they are not formally categorized or considered ‘orphan-designated drugs’ and 

it would be a mistake to classify them as such.” Defs.’ Reply at 12. Congress’s addition of 

qualifying language indicates that it believes reference to a drug’s orphan designation, alone, 

would refer to the drug, generally, irrespective of the specific use.16 

HHS is correct to note that the general statutory “incentive[s] associated with the orphandesignated drug applies only to the orphan indication, and not to non-orphan indications.” Defs.’

Mem. Support. Summ. J. at 20. But, the language of section 340B(e) does not indicate whether 

the newly added entities’ inability to access orphan-designated drugs at 340B Program prices 

was intended to serve as an additional benefit meant to flow to the manufacturers of those drugs, 

or simply as a compromised-limitation on the reach of the newly expanded program. Indeed, the 

Court takes notes that the orphan-drug exclusion pertains only to the newly added entities. 

Section 340B(e) continues to allow pre-existing entities—or those enumerated in subsections (A) 

through (L) plus children’s hospitals—to access orphan-designated drugs at section 340B prices 

 15 PhRMA also points to section 340B(e)’s heading. While “section headings are tools 

available for the resolution of a doubt about the meaning of the statute,” Fla. Dep’t of Revenue v. 

Piccadilly Cafeterias, Inc., 554 U.S. 33, 47 (2008) (internal quotation marks and citation

omitted), the Court does not find section 340B(e)’s heading particularly informative here. The 

section’s heading refers generally to “orphan drugs.” Contrary to PhRMA’s argument, however, 

other subsections in the U.S. Code similarly refer generally to an “orphan drug” without 

specifying usage, even when the actual text of that provision includes a use-based limitation. See

21 U.S.C. § 379h(a)(1)(F) (“Exception for designated orphan drug or indication”).

16 The Court does agree with HHS that the statute’s cross reference to section 360bb 

(regarding the designation process) rather than section 360cc (regarding the marking process) is 

not conclusive. As HHS points out, “use” is not synonymous with “marketing” and drugs may 

be lawfully prescribed to treat conditions for which they have not been approved for marketing. 

Defs.’ Reply. at 13–14.
35

even when used to treat a rare disease or condition. That result is an odd one if Congress 

intended for the orphan drug exclusion to operate as an additional incentive for drug 

manufacturers to develop orphan drugs, and therefore conflicts to some extent with HHS’s 

characterization of section 340B(e) as intended in some way to preserve the Orphan Drug Act’s 

incentives.

Neither party has identified any contemporaneous legislative history that bears on the 

purpose behind, or rationale for, section 340B(e).17 After undertaking its own review, the Court 

has found none, either. HHS cites only to the general stated purpose for the 340B Program: “to 

stretch scarce Federal resources as far as possible, reaching more eligible patients and providing 

more comprehensive services.” See H.R. Rep. No. 102-384, pt. 2, at 12 (1992). But that 

legislative history is drawn from the program’s initial passage in 1992. That far earlier 

proclamation sheds little light on the specific reasoning of Congress in 2010 when it passed

section 340B(e). The Court fails to see how it persuasively supports HHS’s contention that in 

2010 Congress specifically intended for “section 340B(e) to balance the interests of orphan drug 

development and the expansion of the 340B Program to new entities.” A.R. 684. Moreover, 

while it is beyond dispute that the 340B Program is intended to ensure access to drugs at a 

reduced cost for certain entities and in certain circumstances, the acknowledgement that the 

 17 Both of the amicus briefs filed in this case point to a post-enactment letter from 

Congressman Henry Waxman and Congressman Tom Harkin which states that “HRSA’s 

interpretation of [section 340B(e)] is consistent with legislative intent.” See A.R. 335–36; see 

also Brief of the American Hospital Association as Amicus Curiae at 17, ECF No. 19; Amicus 

Curiae Brief of the Safety Net Hospitals for Pharmaceutical Access, et al. at 17–18, ECF No. 20. 

Neither brief identifies any contemporaneous statements made to that effect while Congress was 

considering the ACA, however, and such “post-enactment legislative history” is “inherently 

entitled to little weight.” Cobell v. Norton, 428 F.3d 1070, 1075 (D.C. Cir. 2005). Because that 

letter was written well after the ACA was enacted, the letter is unhelpful here as it “by definition 

could have had no effect on the congressional vote.” Bruesewitz v. Wyeth LLC, 562 U.S. 223, 

242 (2011) (internal quotation marks and citation omitted).
36

program was meant to “stretch scarce Federal resources” at a general level is of little use in 

assessing the parties’ competing interpretations of the exact balance Congress ultimately settled 

upon when extending the 340B Program to new entities.

18 It is worth noting that, 

notwithstanding section 340B(e)’s orphan drug exclusion, by making the newly covered entities 

eligible to purchase all non-orphan designated drugs at a lower cost, Congress has still placed 

those entities in a better position than they were in prior to the addition of section 340B(e).

The Court readily acknowledges that the plain meaning of the broad, unqualified 

language that Congress chose to employ in section 340B(e) is somewhat curious, and might be 

more difficult to reconcile with the generally-stated goal of the 340B Program.

19 The Court 

appreciates the views of amici explaining how many orphan-designated drugs have common 

non-orphan uses and explaining why construing section 340B(e) to apply to all orphandesignated drugs, whatever their uses in a particular case, would make the 340B Program less 

attractive for many newly covered entities. The Court further concedes that, “[c]ertainly, there 

 18 For their part, PhRMA points to Congress’s decision not to amend the language 

“designated . . . for a rare disease or condition” in section 340B(e) when it amended that section 

to remove children’s hospitals from the list of excluded entities. Pl.’s Mem. Opp. Summ. J. at 

28; see also note 2, supra. The Court does not find Congress’s failure to act conclusive in either 

direction. Congress’s refusal to act may indicate that members of Congress definitively read the 

statute as the Court does and simply intended to “le[ave] the matter where it was.” Kucana v. 

Holder, 558 U.S. 223, 250 (2010). But it may also infer that members of Congress, contrary to 

what the text seems to indicate but in line with HHS’s reading, believed “that the existing 

legislation already incorporated the offered change.” Pension Benefit Guar. Corp. v. LTV Corp., 

496 U.S. 633, 650 (1990). Given these differing interpretations of Congress’s inaction, the Court 

gleans little from Congress’s failure to amend the statute.

19 At the same time—and cautioning, again, that the parties have not identified and the 

Court has not found any contemporaneous legislative history directly on point—it is worth 

pointing out that the 2010 ACA amendment was the first addition of new specificallyenumerated covered entities since the 340B Program’s inception in 1992. Congress may have 

chosen to exclude all orphan-designated drugs from the program for those new entities in an 

effort to balance the program’s significant extension to new covered entities with the impact that 

extension would have on the prices that pharmaceutical manufacturers’ could charge to a large 

number of newly eligible entities.
37

may be compelling policy reasons,” Hall v. United States, 132 S. Ct. 1882, 1893 (2012), for 

excluding orphan-designated drugs from the section 340B pricing program only when they are 

used to treat those diseases, particularly in light of Congress’s clear effort to expand the 340B 

Program. “But if Congress intended that result, it did not so provide in the statute.” Id.

Congress’s chosen statutory language evidences that it struck a different balance and it is simply 

“not for [this Court] to rewrite the statute.” Id. Congress remains free to amend section 340B(e) 

if it determines that, in practice, the scheme it has set up is not a workable one or does not 

provide the hoped-for benefits to the extent envisioned. But until Congress does so “this court is 

bound by the language that Congress has so far provided.”20 United States v. Singleton, 182 F.3d 

7, 15 (D.C. Cir. 1999); see also Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 

U.S. 573, 604 (2010) (noting that “[t]o the extent Congress is persuaded that the policy concerns 

identified by the dissent require a recalibration of the [statutory] scheme, it is, of course, free to 

amend the statute accordingly”).

 20 HHS also argues that adopting PhRMA’s reading of the statute would “create perverse 

incentives” and would encourage pharmaceutical manufacturers to seek to designate their bestselling drugs as orphan drugs. Defs.’ Reply at 18–19. The Court finds this fear unfounded. 

FDA regulations already specify that the agency will “refuse to grant a request for orphan-drug 

designation” if “[t]here is insufficient information about the drug, or the disease or condition for 

which it is intended, to establish a medically plausible basis for expecting the drug to be effective 

in the prevention, diagnosis, or treatment of that disease or condition.” 21 C.F.R. § 316.25(a)(2) 

(emphasis added). Nor does the administrative record appear to support some of the negative

consequences that HHS portends. As PhRMA points out, an informal survey undertaken by 

several advocacy organizations representing hospitals that participate in the 340B Program 

showed that only 17.2% of entities responding to the survey were “somewhat” or “very” likely to 

withdraw from the 340B Program if they were unable to access orphan-designated drugs when 

used to treat non-rare conditions, while 72.9% were “unlikely” to withdraw. A.R. 727. 

Similarly, only 7.1% of entities that responded to the survey stated that they would not have 

registered for the program if they had known they were unable to access those drugs at reduced 

prices; 92.9% responded that they would have registered for the program nonetheless. Id.
38

Because the term “a drug designated . . . for a rare disease or condition” in section 

340B(e), as construed with reference to related statutory provisions, unambiguously indicates 

that Congress intended to exclude all drugs carrying an orphan-designation from 340B Program 

eligibility for the newly added entities, the Court concludes that HHS’s Interpretive Rule is

contrary to the plain language of the statute. Accordingly, the Court grants plaintiff’s motion for 

summary judgment and vacates the Interpretive Rule as “arbitrary, capricious, an abuse of 

discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).

V. CONCLUSION

For the foregoing reasons, the defendants’ motion for summary judgment (ECF No. 14) 

is DENIED, and the plaintiff’s motion for summary judgment (ECF No. 21) is GRANTED. An 

order consistent with this Memorandum Opinion is separately and contemporaneously issued.

Dated: October 14, 2015 RUDOLPH CONTRERAS

United States District Judge