February 14, 2012—The Obama administration yesterday proposed giving the Secretary of Health and Human Services (HHS) the ability sometime after Oct. 1, 2013 to collect a fee of up to 0.5 percent, or 5 cents on every $10, on every 340B drug purchase in order to completely end line-item funding for the Office of Pharmacy Affairs’ (OPA).
The proposal was included in the President’s Feb. 13 budget request to Congress for fiscal 2013, which begins Oct. 1, 2012.[ms-protect-content id=”2799″]
President Obama first called for a 340B user fee, also called a cost recovery fee, last year in his 2012 proposed budget. 340B covered entities would pay the fee and it would be collected by manufacturers at the time of sale.
In documents accompanying last year’s spending plan, the administration said the proposed fee would “initially” be set at 0.1 percent, or one penny on every $10 in 340B drugs purchased, generating an estimated $5 million in fee revenue. The administration said Congress would still have to provide OPA with an appropriation during a one-year implementation phase until “regulations are published and funds are collected in sufficient manner to operate the program.” It asked Congress for $5.22 million in appropriated funds in fiscal 2012 for OPA on top of the anticipated $5 million in fee revenue.
In its new fiscal 2013 budget, the administration again asks Congress to let HHS levy a 0.1 percent user fee for one year, but additionally requests that HHS then be allowed to raise the rate up to 0.5 percent, which it says “can fully fund the operations of the program” and “[eliminate] the need for a line-item appropriation.”
The administration is seeking a $4.47 million appropriation for OPA in the coming fiscal year and authority to collect $6 million in user fees, for a total of $10.47 million, roughly $250,000 more than it sought for OPA in fiscal 2012.
The Senate Appropriations Committee included the President’s 340B user fee proposal in its fiscal 2012 spending bill for the departments of Labor, Health and Human Services, and Education that it passed in September. The House Appropriations Committee, however, never passed its own version of the bill. The user fee was not included in omnibus fiscal 2012 spending package that both chambers passed and the President signed in December. That bill provided OPA with a $4.47 million appropriation for the current fiscal year that ends Sept. 30.
For the most part, 340B provider groups have expressed neutrality about user fee concept. Generally speaking, they recognize that OPA needs sufficient funds to carry out its responsibilities and realize that, in the current economic and political climate, all federal domestic discretionary programs are at risk. At the same time, 340B providers are also under budgetary pressure and they do not relish the idea forfeiting any part of their 340B drug discounts. Nonetheless, there appears to be more receptivity to some type of user fee considering the number of projects pending at OPA.
Drug manufacturers have been relatively more receptive to 340B user fees but have concerns about assuming the duty to collect and then submit them to the government.
In recent months, representatives of several drug companies and other industry stakeholders created an informal 340B work group as a forum for discussing shared concerns about 340B operational issues. According to one of the group’s members, Marcus Farbstein of Genentech, Obama administration health care officials reached out to it last year to begin brainstorming about how a 340B user fee would work in the real world.
Farbstein said the group was just getting ready to dig into the subject in earnest late last year when it became clear that Congress was not going to approve the fees for fiscal 2012. “If it’s back on the table, we are willing to get back to work,” he said.
OPA’s parent agency, the Health Resources and Services Administration (HRSA), would get $8.43 billion in fiscal 2013 under the President’s budget, a net increase of $228 million.
State AIDS Drug Assistance Programs (ADAPs) would get $1 billion under the President’s budget, a $66 million increase. Spending through the Affordable Care Act (ACA) to increase the number of community health centers would rise from $1.2 billion to $1.5 billion.
In a budget justification document sent to congressional appropriators, HRSA Administrator Mary Wakefield said OPA spent $1.58 million “to design systems and begin enrolling and supporting” rural and cancer hospitals that gained eligibility for 340B discounts under health care reform in 2010. Continued appropriated funding “is necessary to continue to implement major improvements in the 340B program operations and to resolve identified deficiencies of the current level of operations,” she continued. These include:
- Drug manufacturer non-compliance with 340B pricing requirements.
- Errors and omissions in OPA’s 340B covered entity database, including provider recertification of their 340B eligibility.
- Implementation of 340B program regulations and guidance.
- Investment in information technology.
With respect to the proposed user fee, HRSA said it is needed to pay for “long-term goals of the program that include expanded authority under ACA and recommendations from” the Department of Health and Human Services Office of the Inspector General (OIG).
Specifically, HRSA said it would use user-fee revenues to:
- Develop and publish standards and methods for the calculation of 340B ceiling prices and make them available to covered entities through a secure Web site.
- Improve OPA’s information technology, including establishing “a single, universal and standardized identification system by which each covered entity site can be identified by manufacturers, distributors, and covered entities for purposes of facilitating ordering, purchasing, and delivery of covered drugs, including the processing of charge-backs for such drugs.”
- Monitor manufacturer and covered entity compliance with the 340B law, including validation of OPA’s 340B ceiling price calculations and the prices charged by manufacturers.
- Establish a 340B administrative dispute resolution process.
- Establish civil monetary penalties for manufacturers and covered entities.
- Support publication of policies regarding the computation of 340B ceiling prices, implement a quarterly comparison of 340B ceiling prices with the selling prices offered by manufacturers and wholesalers, and follow up-efforts to resolve problems when they arise.
- Improve the 340B covered entity database.
- Implement regulations and guidance to improve program integrity.
Elsewhere in its 2013 budget proposal, the administration once again asked Congress to create a Medicare Part D drug rebate for all low-income subsidy (LIS) recipients, raising an estimated $155 billion in new federal revenues.
Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO John Castellani issued a statement calling the rebate proposal a “short-sighted proposition that could destabilize the [Part D] program and threaten hundreds of thousands of American jobs.”[/ms-protect-content]