By Robert B. Barnett Jr., J.D.
HHS is seeking comments on its proposal to delay to July 18, 2018, the effective date of a Final rule setting the calculation of ceiling prices and civil monetary penalty (CMP) authority for the 340B drug-pricing program, which would be the fifth time the effective date was delayed. The latest cause for delay is the need to evaluate the impact of a January 20, 2017, Executive Order requiring executive branch heads to delay implementation of certain parts of the Patient Protection and Affordable Care Act. HHS’ Final rule on the 340B program resulted from changes made to the program by the ACA (Proposed rule, 82 CFR 39553, August 21, 2017).
History.The Final rule, published on January 5, 2017 (see 340B gets teeth with CMPs, January 5, 2017) originally established an effective date of March 6, 2017. That date was delayed to March 21, 2017, due to a memorandum from the Assistant to the President and Chief of Staff called "Regulatory Freeze Pending Review" and then again to April 21, 2017, amid concerns over using an effective date in the middle of a quarter. To give those effected additional time to comply, the date was moved again, this time to May 22, 2017. After further comments, HHS delayed the effective date for a fourth time, to October 1, 2017.
Reasons for the delay.HHS says that the delay is necessary to "more fully consider the substantial questions of fact, law, and policy raise by the rule, consistent with the aforementioned ‘Regulatory Freeze Pending Review’ memorandum." The delay is necessary, HHS argues, because requiring manufacturers to make potentially costly changes by the earlier date would be disruptive.
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. Under the new regulations, manufacturers are required to calculate the 340B ceiling price for each covered outpatient drug quarterly. 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 established 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 that results in a covered entity paying more than the ceiling price for a covered outpatient drug.
Comments. Those wishing to comment on the proposal to delay the current effective date of October 1, 2017, must do so by September 20, 2017. Comments may be submitted by email, U.S. mail, or at www.regulations.gov.
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