340B Ceiling Prices and Manufacturer Penalties Final Rules Released

February 2017 ~

Early last month, the Health Resources and Services Administration (HRSA) published a final rule(pdf) to implement civil money penalty (CMP) provisions added to section 340B of the Public Health Service Act under the Affordable Care Act (ACA).

Section 340B of the Public Health Services Act requires pharmaceutical manufacturers who participate in the Medicaid Drug Rebate Program (MDRP) to enter into a Pharmaceutical Pricing Agreement (PPA) with The U.S. Department of Health and Human Services (HHS), under which the manufacturer agrees to sell Covered Outpatient Drugs to statutorily designated Covered Entities at a price not exceeding a statutory “ceiling price.”

As written in the Federal Register, the final rule will apply to all drug manufacturers that are required to make their drugs available to covered entities under the 340B Program and will be imposed upon manufacturers that knowingly and intentionally charge 340B covered entities for covered outpatient drugs more than the statutory ceiling price.

The following key provisions have been incorporated within the newly released “340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation” final rule:

  • Definitions
    • HRSA defined “covered outpatient drug” as having the meaning set forth in section 1927(k) of the Social Security Act, which includes the limiting definition in 1927(k)(3) regarding drugs reimbursed separately, as opposed to being reimbursed under bundled payment methodologies. This will have the effect of excluding drugs that are reimbursed as part of a bundled payment from receiving 340B pricing.
  • Quarterly Price Reporting of 340B Ceiling Price
    • Requires drug manufacturers to calculate the 340B ceiling price for each covered outpatient drug, by National Drug Code, on a quarterly basis.
  • Penny Pricing
    • HRSA finalized an exception that would set the ceiling price to $0.01 when the formula would result in a ceiling price of $0.
  • Estimated 340B Ceiling Price
    • For new drugs, manufacturers will need to estimate the 340B ceiling price and then calculate the actual 340B ceiling price once the appropriate data is available. If an overcharge occurs as a result of estimation, drug manufacturers must refund or credit a covered entity the difference between the estimated and actual 340B ceiling price within 120 days.
  • Civil Monetary Penalties (CMP)
    • Under the final rule, drug manufacturers may be subject to CMPs of up to $5,000 for each instance of overcharging. The CMPs would not be calculated and imposed by HRSA’s Office of Pharmacy Affairs, but by the Office of Inspector General.

The Final Rule will become effective on March 6th, 2017, but HRSA has stated that it does not intend to enforce the regulation until the start of the next quarter on April 1st, 2017.

A complete summary of the final rule is available via the HRSA website.


Source(s): AHA News, January 4, 2017; Federal Register, January 5, 2017; Health Care Law Today, January 10, 2017; McDermott Will & Emery, January 12, 2017; Lexology, January 30, 2017;