Health Reform WK-EDGE CMS wants more feedback on 340B ceiling calculations, manufacturer intent
Friday, April 22, 2016

CMS wants more feedback on 340B ceiling calculations, manufacturer intent

By Sarah E. Baumann, J.D.

CMS reopened the comment period for a Proposed rule titled, “340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation.” The comment period for the rule, which proposed changes that seemed to reflect a retreat from HHS’ position limiting the special pricing of orphan drugs in the 340B program to the indications for which they are designated as orphan drugs, ended August 17, 2015. Based on comments received, however, it is being reopened through May 19, 2016. The agency is particularly interested in comments related to the ceiling price for covered outpatient drug exception, a new drug price estimation, and the definition of “knowing and intentional” (Notice, 81 FR 22960, April 19, 2016).

The 340B Drug Pricing Program, governed by section 340B of the Public Health Service Act (PHSA), requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices. The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) amended the PHSA to extend discounts to more facilities that serve the poor, including children’s hospitals, rural referral centers, and sole community hospitals. Section 2302 of the Health Care and Education Reconciliation Act (HCERA) (P.L. 111-152), however, also amended the PHSA to provide that the term “covered outpatient drug” does not include orphan drugs—drugs designated for rare diseases or conditions pursuant to section 526 of the federal Food, Drug and Cosmetic Act (FDC Act )—sold to the newly added facilities. Orphan drug sponsors are entitled to certain benefits, including extended patent protection, that allow them to charge higher prices for a longer time periods in order to recoup the cost of research. After a federal court ruled that HHS’ regulations providing that the exclusion for orphan drugs from the 340B discount program applied only to drugs used for their designated indication, the agency issued a proposed rule on June 17, 2015, backing away from that position (see HHS backs down on orphan drug pricing under 340B program, June 24, 2015). Based on comments it received in response to that proposal, CMS is asking for feedback in three specific areas.

Ceiling price for covered outpatient drugs. The agency proposed that when the 340B ceiling price calculation resulted in an amount less than $0.01, the ceiling price would be $0.01 per unit of measure (penny pricing), since the price could not be set at $0.00 per unit of measure. Although some commenters supported the measure, others suggested using the federal ceiling price, the most recent positive ceiling price from previous quarters, or the nominal sales price. CMS would like feedback on these alternatives.

New drug price estimation. HHS proposed that manufacturers estimate the ceiling price for a new covered outpatient drug as of the date the drug is first available for sale, provide HRSA an estimated ceiling price for each of the first three quarters the drug is available for sale, and calculate the ceiling price as described in proposed 42 C.F.R. 10.10(a) beginning with the fourth quarter. The actual ceiling price for the first three quarters must also be calculated and manufacturers would be required to provide refunds or credits to any covered entity that purchased the covered outpatient drug at a price greater than the calculated ceiling price, no later than the end of the fourth quarter. Commenters suggested setting the price of the new covered outpatient drug as wholesale acquisition cost (WAC) minus the applicable rebate percentage. HHS is requesting feedback on the methodology and the timing of refunds or credits.

“Knowing and intentional.” The Secretary issues civil monetary penalties (CMPs) for manufacturers who have ‘‘knowingly and intentionally’’ charged a covered entity a price that exceeding the 340B ceiling price. HHS is seeking on comments as to whether “knowing and intentional” should be further defined. The agency has suggested four possible definitions, involving actual knowledge, willful or purposeful acts, acting with conscious awareness, and acting with a conscious desire or purpose. It would also like feedback on the concept that manufacturers would not have the requisite intent in three proposed circumstances: (1) the manufacturer made inadvertent, unintentional, or unrecognized error in calculating the ceiling price; (2) a manufacturer acted on a reasonable interpretation of agency guidance; or (3) when a manufacturer has established alternative allocation procedures where there is an inadequate supply of product to meet market demand, as long as covered entities are able to purchase on the same terms as all other similarly-situated providers.

FederalRegisterIssuances: Notices NewsFeed 340BNews AgencyNews DrugNews MedicaidNews

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