By Brendon Nafziger and Heather Mayer, DOTmed News reporters

Children's hospitals are lobbying Congress to save discounts for orphan drugs that they might lose because of what they consider an "inadvertent" technical error in health care reform legislation.

Discounts for the orphan drugs, used to treat rare diseases, are currently covered by 340B, a program based on a formula under Medicare. Without the program, some free-standing children's hospitals might be forced into the arms of group purchasing organizations, according to the National Association of Children's Hospitals.
"Because we’re so reliant on orphan drugs, which are expensive, and [we] don’t get a discount from the GPO side, it could increase overall costs," Jim Kaufman, vice president for public policy with the NACH, told DOTmed News.

To that end, Sen. Sherrod Brown (D-Ohio) has been going around the Capitol collecting signatures in a letter urging majority leader Harry Reid (D-Nev.) to make a correction to the new law. Kaufman said, at last count, about 12 senators have signed Brown's petition. Already, the House has twice passed legislation that would amend the law.

As it stands, 24 free-standing children's hospitals that pay for the approximately 347 drugs with orphan status risk losing their discounts, the NACH said, but up to 50 children's hospitals would qualify for the program.

It's a "small number," Kaufman acknowledged, but the hospitals, whose patients include sick kids from vulnerable areas, are "important community providers."

The NACH said the problem stems from a seemingly well-intentioned mistake. The Patient Protection and Affordable Care Act, signed in March, added several new classes of hospitals, such as cancer centers, into the 340B plan.

However, at the same time, it also withdrew orphan drugs from the 340B discount program for hospitals being admitted to the plan for the first time, Kaufman said.

The problem is that, along with cancer centers, the health reform law also explicitly included children's hospitals in the 340B plan, even though they were essentially already covered by the plan, Kaufman said.

"The problem for children's hospitals is we were already included in the program," Kaufman said. "This was an inadvertent error."

Enacted by Congress in 1992, the 340B program derives from a section of the Public Health Service Act and helps cover outpatient drug expenses. Originally, independent children's hospitals were excluded from 340B because the discounts went through the Medicare Prospective Payment System, and free-standing children's hospitals generally don't work through Medicare.

But a provision in the Deficit Reduction Act of 2005 extended the plan to children's hospitals, Kaufman said, and they began to get orphan drug discounts in September 2009.

The NACH fears hospitals covered by the program could be badly hit, losing 50 to 100 percent of the savings they'd expect with the 340B plan and perhaps forcing them to join a GPO to help pay for orphan drugs. Currently, children's hospitals enrolled in the 340B plan are forbidden to join GPOs for outpatient services.

A disproportionate number of patients treated by children's hospitals are covered under Medicaid, the NACH said. On average, about half of inpatient services are paid for by Medicaid, Kaufman said. For outpatient hospitals, "we don't have as good numbers, but when you add all services, it's about 40 percent," he said.

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