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“Finally! HRSA Proposes Manufacturer Civil Monetary Penalties”

To Be or Not To 340B By Alyce C. Katayama and Elizabeth R. Gebarski

On June 17, 2015 the Health Resources and Services Administration (“HRSA”) finally published its much anticipated proposed rule, the 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation. Comments must be submitted via the online portal, email, or US Mail by August 17, 2015. Keep in mind, all submitted comments will be available to the public in their entirety.

The proposed rule begins with a discussion of HRSA’s authority to promulgate rules regarding ceiling prices and civil monetary penalties, and notes that HRSA’s orphan drug restriction was recently vacated by the United States District Court for the District of Columbia. It also touches on the proposed rules before it.

The proposed rule modifies the summary, definitions, and eligible entities sections of 42 C.F.R. Part 10 (the 340B Drug Pricing Program) and deletes the definition of covered outpatient drug and the orphan drug restriction sections. Finally, it creates a section regarding manufacturer civil monetary penalties.

The proposed rule provides greater detail about when and how a manufacturer must calculate ceiling prices. HRSA proposes that when the ceiling price comes to $0.00, or below, that manufacturers should charge $0.01, instead. HRSA states that it is adopting the Department of Health and Human Services published final guidelines from 1995 that discussed ceiling price calculations for new drugs. This means that manufacturers of new drugs will estimate ceiling prices for the first three quarters of sales. By the fourth quarter, manufacturers of new drugs must calculate the actual ceiling price and refund or credit covered entities that were overcharged.

In this rule, HRSA implements the statutory provision contained in the Patient Protection and Affordable Care Act, which imposes a civil monetary penalty on a 340B manufacturer that knowingly and intentionally charges a covered entity more than the ceiling price. The penalty is not to exceed $5,000 for each instance of overcharging. The rule tempers concerns about unduly costly penalties by defining “each instance” as “each order for an NDC . . . regardless of the number of units of each NDC in that order.” For example, “if a covered entity orders a single bottle of a covered outpatient drug four times in a month, it would be considered four instances of overcharging,” rather than an instance for each tablet included in the NDC.

The burden is on covered entities to ensure that the manufacturer is aware that a purchase is 340B-eligible. In fact, if the covered entity receives non-340B priced drugs, the order will not be considered an instance of overcharging unless the covered entity has documented refusal by the 340B manufacturer to make drugs available at the 340B price. It is not clear whether a covered entity is expected to make the manufacturer aware at each time of purchase, or if something less is required.

Finally, HRSA proposes that the manufacturer would always take the civil monetary penalty fall, regardless of whether it was actually a wholesaler that made the error that caused the covered entity to be overcharged.

The To Be or Not to 340B Blog will focus in on each section of this proposed rule in upcoming posts. Stay tuned for more details!

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