HHS’s Drugmaker Overcharge Penalty Rule Delayed Again

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Bronwyn Mixter

Drugmakers are set to get more relief from a final rule imposing penalties on them for overcharging safety-net hospitals and other providers.

The Department of Health and Human Services is proposing to delay the rule’s effective date until July 1, 2018, the agency said in a notice to be published Aug. 21 in the Federal Register. The effective date has already been delayed several times, and most recently the rule was set to take effect Oct. 1. The HHS is seeking comments on the additional delay for the rule, which was issued under the 340B drug pricing program. Comments are due Sept. 20.

The rule (RIN:0906-AA89) on ceiling prices and civil monetary penalties for the 340B program was published near the end of the Obama administration after a heated public debate over drug costs. Under the program, drug manufacturers provide outpatient drugs to covered entities, such as safety-net hospitals, at significantly reduced prices. The rule requires drug manufacturers to pay a penalty if they intentionally charge above what is known as the ceiling price, and says the penalty can’t exceed $5,000 for each instance of overcharging a covered entity.

Hospitals Object to Delay

340B Health, a group that represents nonprofit hospitals and health systems participating in the 340B program, said in an Aug. 17 statement it “strongly disagrees with the Trump administration’s proposal to again delay—this time to July 1, 2018—a long overdue 340B drug discount program regulation to punish drug manufacturers that illegally overcharge safety-net hospitals and other healthcare providers for lifesaving medicines.”

“We know that drug manufacturers overcharge hospitals that qualify for lower drug prices through the 340B program,” 340B Health said. “In fact, less than an hour before the administration proposed to delay the regulation late this morning, the U.S. Department of Justice and drug manufacturer Mylan announced a $465 million legal settlement of a whistleblower lawsuit claiming that Mylan overcharged 340B hospitals and other healthcare providers for EpiPen epinephrine auto-injectors.” EpiPen is a common allergy treatment.

Ted Slafsky, president and chief executive officer of 340B Health, said “there is no reasonable excuse for delaying this regulation any longer. Nor is there any good reason for reopening the matter for further rulemaking, as the administration proposes.”

Slafsky said 340B Health will submit comments “strongly opposing further delay.”

Ashley Thompson, senior vice president for public policy analysis and development at the American Hospital Association, also said her group is “once again disappointed in the continued delay” of the rule and urged the Health Resources and Services Administration (HRSA), the part of the HHS that administers the program, “to implement this final rule without any further delay.”

“Given the skyrocketing prescription drug price increases that have presented hospitals and their patients with remarkable challenges, the 340B program is as critical as it has ever been in helping eligible hospitals obtain a reduced price for outpatient drugs, allowing them to stretch scarce federal resources to expand and improve access to comprehensive health care services for our nation’s most vulnerable patients,” Thompson said.

Reason for Delay

The HHS said it is proposing the delay because it is still examining “important substance issues” in the rule and it “intends to engage in additional rulemaking on these issues.”

“Requiring manufacturers to make targeted and potentially costly changes to pricing systems and business procedures in order to comply with a rule that is under further consideration and for which substantive questions have been raised would be disruptive,” the HHS said.

Also, the HHS said a Jan. 20 executive order directs the agency and all other executive offices to delay the implementation of certain provisions in the Affordable Care Act. The final rule is based on changes made to the 340B program by the ACA, and the delay will allow the HHS to more fully consider the regulatory burdens of the final rule, the notice said.

Nicole Longo, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, told Bloomberg BNA in an Aug. 17 email, “PhRMA is glad to see that the Health Resources and Services Administration (HRSA) is seeking comment on whether to further delay the final rule’s effective date.”

“We support this delay and are pleased to see HRSA intends to engage in further rulemaking,” Longo said. “We continue to have a number of concerns with the rule as it imposes significant burdens on biopharmaceutical manufacturers.”

Stephanie Trunk, a health-care attorney with Arent Fox LLP in Washington and a Bloomberg BNA advisory board member, told Bloomberg BNA in an email: “The delay seems to indicate that HRSA’s purported web-based portal through which pharmaceutical manufacturers could report 340B ceiling prices to HRSA is not close to operational” and “it also appears in line with the Trump Administration mandate as to less regulation of business so as not to unduly burden legitimate business activity.”

To contact the reporter on this story: Bronwyn Mixter in Washington at bmixter@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

The Federal Register notice is at http://src.bna.com/rKU.

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Health Care on Bloomberg Law