Genentech May Owe Refunds to Some Safety-Net Providers

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By Bronwyn Mixter

May 9 — Roche's Genentech unit said it has recalculated its ceiling prices for certain drugs under a federal discount program, and some hospitals and other covered entities in the 340B program may be entitled to a refund.

The federal government announced the drugmaker's recalculation May 9. The drugmaker said affected products include certain formulations of the osteoporosis drug Boniva (ibandronate sodium); the organ transplant drug CellCept (mycophenolate mofetil); the HIV drugs Fuzeon (enfuvirtide) and Invirase (saquinavir mesylate); the seizure drug Klonopin (clonazepam); the arthritis drug Naprosyn (naproxen); the human growth hormone Nutropin AQ (somatropin (rDNA origin); the hepatitis C drug Pegasys (peginterferon alfa-2a); the cancer drug Xeloda (capecitabine); and the weight loss drug Xenical (orlistat).

South San Francisco, Calif.-based Genentech said in the notice that it will issue refunds to the affected health-care providers where the company's data indicated a difference between the original and recalculated 340B ceiling prices for these products.

This development comes as drugmakers and hospitals are criticizing each other over the 340B program. Bloomberg Intelligence analyst Brian Rye said in commenting on the notice that “there continues to be a back-and-forth between participating drugmakers and affected safety-net providers under the 340B program.” Pharmaceutical companies “have concerns about loose interpretations of eligibility requirements for entities and patients, while hospitals and other providers are concerned that they aren't always receiving the appropriate discounts from drugmakers,” Rye said.

A hospital group told Bloomberg BNA May 9 that Genentech posted a similar notice about refunds for 340B overcharges in 2013.

Ceiling Price

The ceiling price is the maximum amount a manufacturer can charge for a drug. The 340B program, created in 1992, requires drug manufacturers participating in the Medicaid program to have an agreement with the Department of Health and Human Services under which the manufacturer provides discounts on covered outpatient drugs purchased by safety-net providers. The 340B program is administered by the Health Resources and Services Administration (HRSA), part of the HHS.

Genentech said in a notice posted on HRSA's website recently that it has recalculated the average manufacturer price (AMP) and the best price (BP) values previously submitted to the Centers for Medicare & Medicaid Services for certain products from the first quarter of 2012 through the fourth quarter of 2012. The company also said it has recalculated the 340B ceiling prices for the affected products for the third quarter of 2012 through the second quarter of 2013 based on the corrected AMP and BP values.

The 340B ceiling price is calculated by subtracting the unit rebate amount (URA) from the AMP for the smallest unit of measure, which is then multiplied by the drug package size, according to HRSA's website.

Comments Still Open

Meanwhile, the HHS is still working on a proposal it issued last year (RIN 0906-AA89) on civil monetary penalties for drug manufacturers that charge safety-net providers too much for medications under the 340B program. HRSA issued the proposed rule in June 2015 (116 HCDR, 6/17/15).

The proposed rule, required under the Affordable Care Act, would impose monetary sanctions (not to exceed $5,000 per instance) on manufacturers that have “knowingly and intentionally” charged providers a price above the ceiling price.

A notice announcing the reopening of the comment period on the proposed rule was published in the April 19 Federal Register (81 Fed. Reg. 22,960) (75 HCDR, 4/19/16). Comments are now due May 19. Previously, they were due Aug. 17, 2015.

Hospital Group's Concerns

The group 340B Health, which represents health-care providers receiving discounts in the program, expressed concerns May 9 about the availability of information on overcharges. Randy Barrett, the group's vice president for communications, told Bloomberg BNA that Genentech posted a similar notice about refunds for 340B overcharges in 2013. However, he said all of the manufacturers' notices on the HRSA website, including Genentech's, “are silent about [the] amount of the overcharges.”

Barrett said the 340B hospitals and other providers have never had a way to verify whether the prices they pay for 340B drugs “are, in fact, the prices they should be charged under law.” He pointed to a 2006 report in which the HHS Office of Inspector General found that 14 percent of total purchases made by 340B providers in June 2005 exceeded the 340B ceiling prices, resulting in overpayments. Barrett also said the OIG is working on a follow-up report on another problem: the lack of reported data by companies to set accurate ceiling prices.

To contact the reporter on this story: Bronwyn Mixter in Washington at

To contact the editor responsible for this story: Brian Broderick at