Drugmakers Comment on 340B Pricing and Monetary Penalty Proposed Rule

by admin | September 16, 2015 9:58 am

September 16, 2015—The two major associations of brand-name drugmakers have issues with a proposed 340B program rule setting standards for calculating ceiling prices and implementing civil monetary penalties for drugmakers that knowingly and intentionally overcharge for 340B drugs. [ms-protect-content id=”2799″]

Pharmaceutical Research and Manufacturers of America told the Health Resources and Services Administration in written comments[1] that the draft rule is unclear, unreasonable, and unfair. The Biotechnology Industry Organization said in its comments[2] that its concerns are deep, serious, and grave. BIO “strongly urges” HRSA to start over and issue a new proposed rule. More than a dozen individual pharmaceutical and biotech companies also submitted comments[3] to HRSA, often seconding PhRMA and BIO’s points.

Groups representing healthcare providers reviewed the rule more favorably in their comments[4].

HRSA is addressing 340B ceiling price calculations and fines for manufacturers separately from the proposed program omnibus guidance[5] it released Aug. 27. HRSA has said it will issue another freestanding proposed program regulation, setting up a mandatory and binding dispute resolution system, by the end of this year.

PhRMA’s Comments

In its comments on HRSA’s ceiling price and monetary penalty proposal, PhRMA said the draft rule “lacks the level of clarity and specificity that is critical to implementing this complex program” and “fail[s] to reflect a reasonable and balanced interpretation of the statute that is fair to all 340B stakeholders, including manufacturers.” HRSA apparently “fails to recognize the complexities associated with the calculation” of 340B ceiling prices “or the consequences of a lack of specificity,” it said. Furthermore, PhRMA added, HRSA frequently misinterprets the 340B statute in the rule by taking “extreme positions that cannot be reconciled with the 340B law’s text and purpose.”

PhRMA also made these and other points:

• HRSA’s 340B penny-pricing policy, which the rule would codify, is unreasonable and unsupported by law and should be abandoned. When the 340B ceiling price formula results in a zero or negative price, HRSA should let drugmakers choose from among the prior quarter’s price, the federal ceiling price to “Big Four” purchasers, a “nominal” price, or possibly another alternative of the manufacturer’s choosing.

• HRSA should incorporate the Medicaid drug rebate statute’s “limiting definition” in the rule’s definition of “covered outpatient drug” and tell entities that 340B pricing is unavailable on drugs paid for under a bundled payment rate. HRSA also should clearly define “package size,” “unit,” and other key 340B terms.

• The final rule should clarify that 340B ceiling prices “are (and necessarily must be) calculated with a two-quarter lag” (i.e., pricing data from a year’s first quarter are used to calculate 340B prices for the year’s third quarter).

• For new drugs, HRSA should let manufacturers charge wholesale acquisition cost minus the statutory minimum rebate percentage for the applicable drug for the first three quarters.

• Regarding civil monetary penalties, HRSA should define “knowingly and intentionally” as “a manufacturer denying the covered entity the 340B ceiling price, knowing that the purchaser is a covered entity, that the entity is seeking the 340B price and is entitled to it in that circumstance, and that the price the manufacturer charges to the entity is not the correct 340B ceiling price, and the manufacturer therefore is acting with a conscious intent to violate the 340B law.” This standard would not be met when a manufacturer:
  • made an inadvertent, unintentional, or unrecognized error in calculating the ceiling price
  • acted on a reasonable interpretation of the applicable statutory provision law, regulation, or agency guidance
  • was unaware it was selling to a covered entity
  • believed a covered entity was purchasing for its non-340B inventory
  • established alternative allocation procedures in a situation where there may be an inadequate supply of product to meet market demand
  • or when a distributor failed to give a covered entity a 340B price through no fault of the manufacturer.

• HRSA should define an “instance” of overcharging as “each product ceiling price report by a manufacturer to HRSA that contains a price that the manufacturer knows and intends to be in excess of the price as calculated in accordance with Section 340B.”

• HRSA should not deem a manufacturer’s failure to provide 340B pricing to a covered entity that has violated the prohibition against diversion or duplicate discounts as a “refusal to sell or make drugs available at the 340B price” for purposes of civil monetary penalties. Nor should HRSA likewise penalize a manufacturer regarding “communications between a manufacturer (or a wholesaler) and a covered entity relating to verifying eligibility for 340B prices prior to a sale.”

• HRSA should confirm that manufacturers may limit distribution of drugs through a subset of distributors, so long as 340B and non-340B purchasers are treated equally and any covered entity would have at least one avenue to access covered outpatient drugs at the 340B ceiling price. In a footnote, PhRMA says HRSA should “confirm that a pharmacy (including a specialty pharmacy or radiopharmacy) is not a ‘distributor.'”

• HRSA should drop its proposal that an instance of overcharging can occur when manufacturers recalculate ceiling prices after trueing-up their pricing data.

• HRSA should let manufacturers offset instances of overcharging via discounts on other NDCs or on the same NDC on other transactions, orders, or purchases.

• HRSA should not delegate its civil monetary penalty authority to the Department of Health and Human Services Office of Inspector General. HRSA should develop a new proposal for procedures to impose CMPs; publish and seek comments on the new proposal; and then adopt final regulations after considering the comments on its new proposal.

BIO’s Comments

BIO expressed “deep concern” that HRSA’s proposed rule addresses only some of the Affordable Care Act’s 340B program integrity provisions. It “strongly urges” HRSA to issue a new proposed rule that implements the provisions comprehensively instead of “piecemeal.”

BIO expressed “serious concerns” with HRSA’s penny-pricing policy and urged it let manufacturers choose “reasonable” alternatives including nominal pricing, pricing from prior quarters, the federal ceiling price, or federal supply schedule pricing.

BIO said it was “gravely concerned” that HRSA’s interpretation of “knowing and intentional” overcharges could encompass actions by wholesalers and distributors or ceiling price recalculations flowing from true-ups. It urged HRSA to remove such language from the rule. It also urged HRSA “to clarify that manufacturers may not be subject to CMPs based on a manufacturer’s use of a limited distribution network, where such a network would not violate HRSA’s standards for nondiscrimination, as well as to eliminate the agency’s proposal that an instance of overcharging may not be offset by other discounts.”

HRSA, BIO said, should define an “instance” of overcharging to include only

• each incorrect ceiling price calculation reported to HRSA that actually results in overcharges to one or more registered covered entities
• each incorrect treatment of an organization that
  • meets all parts of HRSA’s proposed “covered entity” definition
  • notified the manufacturer at the time of purchase of both its status and desire to order at the 340B price.

To be considered a covered entity, an organization must “not have committed a duplicate discount or diversion violation,” BIO said. HRSA should rely on audit findings and self-disclosures “to identify those organizations ineligible as a result of uncorrected instances of diversion and duplicate discounts,” it continued. “Such ineligibility should persist until the instance(s) of diversion and/or duplicate discount(s) are resolved.

BIO said it is “imperative that HRSA provide some consequence for either engaging in double dipping, or failing to work with the affected manufacturer(s) to resolve the issue (e.g., prospective ineligibility for the 340B program), in order to provide an incentive for covered entities to promptly address, and work to resolve, any such issues with the affected manufacturer(s).”

“Currently, the lack of any such consequences incentivizes covered entities to delay, or even deny, repayment requested by manufacturers, which, in turn, discourages manufacturers from attempting to address potential duplicate discounts with them,” BIO said.

340B healthcare providers say BIO’s assertions that they suffer no consequences for noncompliance lack merit. Failure to respond to a manufacturer’s inquiries can lead to an audit, they point out, and HRSA expects providers to repay manufacturers if auditors find or the providers self-report that that diversion or duplicate discounts occurred.

BIO submitted its comments about two weeks before HRSA separately published its proposed 340B program omnibus guidance. In the mega-guidance, HRSA says that, once enrolled, covered entities “must comply with all 340B program statutory requirements” as of their 340B start dates and must continue to meet all eligibility requirements for its entity type. HRSA does not, however, take the position that a diversion or duplicate discount audit finding or self-disclosure disqualifies a provider from participating in 340B.

Elsewhere in its comments, BIO urged HRSA to define the term “covered outpatient drug” in a way that incorporates the Medicaid drug rebate statute’s limiting definition. It also called on HRSA to set the 340B ceiling price for new drugs at wholesale acquisition cost minus the relevant Medicaid drug rebate percentage for the first two quarters of sales.

Finally, BIO said HRSA’s should officially delegate authority to bring CMP actions against manufacturers to the OIG and “work with OIG to provide additional standards with respect to the CMP provisions that would be applicable and appropriate in this context.” [/ms-protect-content]

Source URL: https://340bemployed.org/drugmakers-comment-on-340b-pricing-and-monetary-penalty-proposed-rule/

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