HRSA Delays Implementation of Manufacturer Penalty Enforcement…Again

By , Published On: June 5, 2017

HRSA has announced that its regulations authorizing the imposition of civil monetary penalties (CMPs) on manufacturers that overcharge 340B program covered entities will not take effect until October 1, 2017, at the earliest.  The rule, which Congress directed HRSA to develop within six months of passage of the Affordable Care Act back in 2010, was finalized on January 5, 2017.[1]  At that time, the rule was set to take effect on March 6, 2017.[2]  The Trump Administration imposed a regulatory freeze upon taking office, which delayed enforcement of the rule to March 21, 2017.[3]

On the eve of the March effective date, HHS and HRSA again delayed enforcement of the rule until May 22.  Now, the agency stated that “after further consideration and to provide affected parties sufficient time to make needed changes to facilitate compliance, and because there are substantive questions raised, we intend to engage in longer rulemaking” to ensure that “implementation of [the] rule…is coordinated with and takes into consideration overall 340B Program implementation.”[4]  Meanwhile, the agency sought comments on whether the rule should be further delayed to October 1.

Last week, HRSA announced that it would delay the rule yet again, to October 1, to allow “regulated entities sufficient time to implement the requirements of the rule.”[5]  HRSA did not elaborate on the nature of the implementation concerns.

The latest delay means that covered entities must continue to wait for a solution to a problem identified over a decade without any tools to investigate suspicions or enforce claims that they are being overcharged for 340B drugs by manufacturers. In 2003, the HHS Office of the Inspector General (OIG) found that such statutory violations are common.[6]  In a 2005 hearing, the HHS OIG testified before the House Committee on Energy and Commerce that “340B entities pay the prices they are billed by the manufacturer or wholesaler with no way to verify that they are being charged at or below the 340B ceiling prices to which they are entitled.”[7]  Additionally, in 2011, the Supreme Court held that covered entities cannot enforce the Pharmaceutical Pricing Agreements (PPAs) that manufacturers enter into with HHS and through which they promise to provide statutory 340B discounts to covered entities.[8]

For more information about 340B issues, contact Jason Reddish or Michael Glomb.  Follow us on Twitter and Facebook for more updates.

[1] See Karan, Elizabeth J. and Glomb, Michael B., HHS Releases the Final 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation (Jan. 6, 2017), at https://www.feldesmantucker.com/hhs-releases-final-340b-drug-pricing-program-ceiling-price-manufacturer-civil-monetary-penalties-regulation/; see also 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 82 Fed. Reg. 1,210 (Jan. 5, 2017).

[2] 82 Fed. Reg. at 1,210

[3] 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 82 Fed. Reg. 12,508 (Mar. 6, 2017).

[4] 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 82 Fed. Reg. 14,332 (Mar. 20, 2017).

[5] 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 82 Fed. Reg. 22,893 (May 19, 2017).

[6] HHS OIG, Pharmaceutical Manufacturers Overcharged 340B-Covered Entities [sic], A-06-01-00060 (Mar. 10, 2003).

[7] HHS OIG, Testimony of Stuart Wright, p. 2 (Dec. 15, 2005), at https://oig.hhs.gov/testimony/docs/2005/340bHouseE&C12-05.pdf.

[8] Astra USA v. Santa Clara County, 563 U.S. 110 (2011).