340B gets teeth with CMPs

January 05, 2017

Ceiling prices and civil monetary penalty (CMP) authority for the 340B drug-pricing program are set out in an HHS Final rule and Notice. The Final rule sets the calculation of 340B ceiling prices and the resulting application of CMPs for violations of the ceiling prices. The Notice delegates to the HHS Office of Inspector General the HHS Secretary’s authority to impose sanctions on manufacturers that knowingly and intentionally charge a 340B covered entity a price in excess of the ceiling price (Final rule, 82 FR 1210, January 5, 2017; Notice, 82 FR 1356, January 5, 2017).

340B. The 340B program, under 42 U.S.C. § 256b, is based upon pharmaceutical pricing agreements (PPAs) entered into between HHS and certain drug manufacturers. When a drug manufacturer enters into a PPA, the manufacturer agrees to charge 340B covered entities for covered outpatient drugs at prices that do not exceed ceiling prices. The ceiling prices are based upon quarterly pricing data from CMS.

ACA. Section 7102 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) provides for the imposition of sanctions, in the form of CMPs, for manufacturers that overcharge covered entities. CMPs may not exceed $5,000 for each instance of overcharging. The ACA also mandated the development of a methodology for calculating ceiling prices.

Ceiling price. Under the new regulations, manufacturers are required to calculate the 340B ceiling price for each covered outpatient drug on a quarterly basis. The 340B ceiling price is equal to the average manufacturer price (AMP) from the preceding calendar quarter for the smallest unit of measure, using the Unit Rebate Amount (URA). Ceiling prices will be calculated using six decimal places. When the ceiling price calculation of a drug results in an amount less than $0.01, the price will be $0.01. Additionally, a manufacturer must estimate the 340B ceiling price for a new covered outpatient drug as of the date the drug is first available for sale.

CMPs. The Final rule also establishes that any manufacturer with a PPA that knowingly and intentionally charges a covered entity more than the ceiling price for a covered outpatient drug may be subject to a CMP of up to $5,000 for each instance of overcharging. An instance of overcharging is an instance which results in a covered entity paying more than the ceiling price for a covered outpatient drug.

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