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HRSA Proposes Fifth Delay of 340B Drug Pricing, Penalty Rule

A 2017 final rule that would impact 340B drug pricing and drug manufacturer penalties could be delayed until July 2019 as HHS develops new ways to control prescription drug rates.

340B drug pricing

Source: Thinkstock

By Jacqueline LaPointe

- The Health Resources and Service Administration (HRSA) recently proposed a one-year delay of a final rule that would implement 340B drug pricing rules and civil monetary penalties for drug manufacturers that intentionally overcharge hospitals.

If finalized, the implementation date would be July 1, 2019.

This would be the fifth postponement for the implementation of a 2017 final rule on implementing a $5,000 penalty on drug manufacturers that knowingly and intentionally charge hospitals more than the ceiling price for an outpatient drug covered by the 340B Drug Pricing Program.

The final rule also codified the penny pricing methodology for 340B drugs. Under the penny pricing methodology, drug manufacturers must charge $0.01 for each unit of the drug when the ceiling price is zero.

HRSA planned to implement the civil monetary penalties and penny pricing methodology on March 6, 2017.

READ MORE: Prescription Drug Rates Remain Top Healthcare Supply Chain Issue

However, the federal agency delayed the rule’s implementation several times, including a postponement in response to the Trump Administration’s regulatory freeze, which required federal departments to delay implementation of Affordable Care Act requirements.

The HRSA also explained that postponements to rule implementation aimed to give stakeholders more time to prepare for the 340B changes.

The most recent proposed delay would push the implementation date to 2019 to allow HRSA more time to explore “additional or alternative rulemaking on these issues” as HHS tackles 340B Drug Pricing Program reform.

“HHS is in the process of developing new comprehensive policies to address the rising costs of prescription drugs,” the HRSA wrote in the proposed rule. “Those policies will address drug pricing in government programs, such as Medicare Parts B and D, Medicaid, and the 340B discount drug program. Accordingly, we are proposing to delay the effective date of the final rule entitled ‘340B Drug Pricing Ceiling Price and Manufacturer Civil Monetary Penalties Regulation.’”

The proposed delay would also “allow necessary time to consider more fully the substantial questions of fact, law, and policy identified by the Department during its review of the rule pursuant to the aforementioned ‘Regulatory Freeze Pending Review’ memorandum.”

READ MORE: Hospitals Saw 23% Rise in Inpatient Prescription Drug Spending

In addition, HRSA anticipates the proposed postponement to support drug manufacturers as HHS reconsiders its approach to prescription drug rates and the 340B Drug Pricing Program.

“Requiring manufacturers to make targeted and potentially costly changes to pricing systems and business procedures to comply with a rule that is under further consideration would be disruptive,” the federal agency argued.

HRSA does not expect the delay in penny pricing to significantly impact hospitals.

“As discussed in the January 5, 2017 final rule, a small number of manufacturers have informed HHS over the last several years that they charge more than $0.01 for a drug with a ceiling price below $0.01,” the rule stated. “However, this is a long-standing HHS policy, and HHS believes the majority of manufacturers currently follow the practice of charging a $0.01. Therefore, the delay of this portion of the regulation would not result in a significant economic impact.”

The proposed delay may not substantially affect hospitals, but the American Hospital Association (AHA) thought the most recent postponement request shows the HRSA is dragging its feet with the implementation of both civil monetary penalties for overcharging hospitals and updating 340B drug ceiling prices.

READ MORE: Could More Competition Reduce Rising Prescription Drug Costs?

“We are once again very disappointed in this proposed delay of the 340B ceiling price and civil monetary penalties rule, especially considering that HRSA began rulemaking on this issue more than seven years ago. While we appreciate that the Administration has stated a commitment to tackling high drug prices, these multiple delays are unjustified given the exhaustive rule development process that has already occurred,” stated Tom Nickels, AHA Executive Vice President.

“We urge the agency to implement this final rule without any further delay to shine needed light on drug company price increases. The irony is not lost on us that drug companies continue to push for increased reporting for hospitals and others while resisting any transparency on their part.”

Industry group 340B Health also contended the delay in the 340B drug pricing rule would leave safety-net organizations vulnerable to overcharging. The group cited a 2006 HHS Office of the Inspector General (OIG) report that found 14 percent of purchases made by 340B hospitals exceeded the drug’s price ceiling.

“There is a clear history of manufacturers overcharging 340B providers,” said Maureen Testoni, Interim President and CEO of 340B Health. “Delaying enforcement of this rule will have a tremendous adverse impact on hospitals, clinics and health systems caring for low-income and rural patients. It has been eight years since Congress directed HHS to establish these vital consumer protections and they are long overdue.”

The group called on HRSA to abandon the proposed delay.

Healthcare stakeholders are welcome to voice their opinion on the proposed 340B drug pricing rule delay. HRSA is accepting comments through May 22.

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