by admin | November 22, 2011 8:12 pm
November 22, 2011—The Health Resources and Services Administration’s (HRSA) Office of Pharmacy Affairs (OPA) issued three documents[1] late yesterday clarifying its policies in three areas: manufacturer audits of 340B covered entities, procedures for allocating 340B-priced drugs in short supply, and the office’s “penny pricing” policy when the statutory 340B ceiling price formula yields a zero or negative price.
[ms-protect-content id=”2799″]HRSA had previously disclosed that it would be issuing the three policy releases[2] in its Oct. 21 letter to Sens. Charles Grassley (R-Iowa) and Orrin Hatch (R-Utah) and Rep. Fred Upton (R-Mich.). That letter was in response to the lawmakers’ request for a detailed accounting of HRSA’s oversight[3] of 340B in the wake of the Government Accountability Office’s major report[4]on the drug discount program.
Upon receiving HRSA’s letter, Senator Grassley issued a news release[5] stating that HRSA’s answers confirmed that its oversight of 340B was “poor.” HRSA, he said, “needs to get a handle on potential abuse before program growth gets out of hand, the taxpayers have to pay for it, and program sustainability is in question.”
In its letter, HRSA said it would begin its first-ever audits of 340B covered entities beginning in February 2012 and would publish the results two to three months later. It also said it planned to send a “policy letter” to drug manufacturers encouraging them “to submit audit plans … to investigate claims of diversion and duplicate discounts.”
HRSA had also told the lawmakers that it would issue a fourth policy letter “to all stakeholders … outlining in detail the hospital criteria for 340B eligibility.” In its report on 340B, the GAO recommended that HRSA “issue guidance to further specify the criteria that hospitals that are not publicly owned or operated must meet to be eligible for the 340B program.” It is not known when HRSA will be issuing that fourth notice.
Clarification on Audits
The new policy notice on manufacturer audits states that:
It is unclear how the audit process will interact with the 340B dispute resolution process. The policy release makes no mention of the current voluntary dispute resolution process or themandatory 340B administrative dispute resolution process[6] that Congress directed HRSA to establish when it passed the Affordable Care Act (ACA) last year. For example, HRSA did not address whether 340B stakeholders could challenge audit findings through the dispute resolution process. In September 2010, HRSA invited stakeholders to submit comments in advance of rulemaking to establish the new process but it has yet to publish a proposed rule. OPA officials have said that they will not implement the new process until the office secures more funding from the government.
It also appears that HRSA will continue to rely on the 1996 audit guidelines without making any changes. In its September 2010 request for comments, it invited stakeholders to weigh in on whether it would be appropriate or necessary to modify the guidelines prior to implementing the administrative dispute resolution regulation.
Clarification on Non-Discrimination Policy
HRSA’s policy release on the treatment of 340B covered entities when covered outpatient drugs are in short supply restates that under guidelines issued in 1994, “manufacturers have the ability to develop alternate allocation procedures during situations when the available supply of a covered drug is not adequate to meet market demands.”
HRSA noted, however, that these allocation procedures “must demonstrate that 340B providers are treated the same as non-340B providers.” Under the 1994 guidelines, it said, “manufacturers may not single out covered entities from their other customers for restrictive conditions” nor “place limitations on the transactions (e.g., minimum purchase amounts) which would have the effect of discouraging entities from participating in the discount program.”
To ensure alternate allocation procedures are transparent to all stakeholders, HRSA said manufacturers must provide notification to OPA in writing at least four weeks prior to actual implementation. Their allocation plans must include a description of the product (e.g., drug name, dosage, form and NDC) and details for a non-discriminatory practice for restricted distribution to all purchasers, including 340B covered entities, including:
In the policy release, HRSA chose not to reference the so-called “must sell” language in ACA stating that manufacturers must offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price. Some say the non-discrimination policy might have been stronger if HRSA had cited this congressional authority.
Manufacturers have argued that that ACA’s must-sell provision cannot take effect until HRSA amends the PPAs. Provider groups have countered that the 340B statute, not the PPAs, are the source of manufacturer obligations to covered entities and thus the must-sell provision is now binding.
Manufacturers’ obligations to 340B providers during drug shortages could be altered by a bill that Senator Hatch is expected to introduce shortly. That measure reportedly would exclude “medically necessary” drugs that are in short supply from 340B discounts[7] and Medicaid rebates for possibly up to three years.
Penny Pricing Policy
The third policy release deals with situations in which the 340B ceiling price formula results in a zero price due to the additional Medicaid rebate a manufacturer must pay when a manufacturer increases a drug’s average manufacturer price (AMP) faster than the rate of inflation.
HRSA noted that historically, the 340B ceiling price calculation could result in a negative number when the additional rebate caused the Medicaid unit rebate amount (URA) to be greater than AMP. In these instances, HRSA said that the 340B price should be a penny. However, as amended by ACA, the Medicaid Act now limits the URA to 100 percent of AMP. Thus, it said, “an increase in the basic rebate and inflation factor would not result in a negative 340B price, but could result in a zero 340B price.”
“HRSA recognizes that when the URA equals the AMP in the calculation of the 340B ceiling price, it is not reasonable for a manufacturer to set a zero 340B ceiling price,” the document states. “In these cases, the manufacturer should charge $0.01 per unit of measure for zero priced drugs.”
When a 340B price drops to a penny price, HRSA continued, “a manufacturer may anticipate challenges with equitable market distribution of the drug, and should develop a plan for non-discriminatory, restricted distribution to all purchasers, including 340B covered entities.”
Manufacturers, it said, “must notify OPA of this plan in writing … at least four weeks before the proposed restricted distribution implementation date.” Plans to restrict sales “must be applied to all purchasers of the affected drug and must be applied equitably to 340B and non-340B provider,” it said.[/ms-protect-content]
Source URL: https://340bemployed.org/hrsa-issues-three-340b-policy-clarifications/
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