Penalty Rule for Drugmaker Overcharges Delayed Again by HHS

By Bronwyn Mixter

Drugmakers are getting another delay in a final rule imposing penalties on them for overcharging safety-net hospitals and other providers.

The Department of Health and Human Services is delaying the rule’s effective date until Oct. 1, the agency said in a notice to be published May 19 in the Federal Register. This follows an earlier postponement until May 22, and an even earlier postponement until March 21.

The rule (RIN:0906-AA89) on ceiling prices and civil monetary penalties for the 340B program originally was published near the end of the Obama administration after a heated public debate over drug costs. Under the 340B 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.

Delay Isn’t Surprising

Stephanie Trunk, a health-care attorney with Arent Fox LLP in Washington, told Bloomberg BNA in a May 18 email she’s not surprised by the delay.

Trunk said drug manufacturers have argued that the Health Resources and Services Administration, the part of the HHS that administers the 340B program, couldn’t enforce these civil monetary penalties until it developed a mechanism for manufacturers to issue refunds of overpayments to qualifying 340B covered entities, and provided access to a password-protected website through which manufacturers report 340B ceiling prices and where qualifying covered entities and state Medicaid agencies could view the ceiling prices.

Attorney Donna Lee Yesner told Bloomberg BNA in an email she’s “relieved that the new rule’s effective date has been extended to October and that HRSA has acknowledged in extending the date that it imposes significant compliance burdens.” Yesner, with Morgan, Lewis & Bockius in Washington, counsels companies on government program reimbursement, drug price reporting and compliance requirements.

Yesner said it’s “unclear whether HRSA intends to re-evaluate the rule’s provisions per the president’s order and possibly amend it. It’s also unclear whether the absence of a new director of HRSA is affecting the rulemaking process.”

“The agency could still amend the rule and industry should continue explaining why the rule needs to be revised in order to be fairer, clearer, and less costly to implement,” Yesner said.

Yesner and Trunk are both Bloomberg BNA advisory board members.

Hospitals Disappointed by Delay

The group 340B Health, an association of hospitals and health systems that participate in the 340B program, said in a May 18 statement that it is disappointed the rule was delayed. However, the group said it takes comfort that, in announcing the delay, the HHS declined to withdraw the rule and issue a new proposal, as urged by the drug industry. The group also said it is pleased that the HHS didn’t suggest that another delay might be necessary.

“We continue to be concerned that further delay of the rule will harm safety-net providers and their patients, especially in this time of skyrocketing drug costs,” Ted Slafsky, president and chief executive officer of 340B Health, said. “However, we are pleased that HHS decided not to change a rule that the Health Resources and Services Administration carefully considered and crafted to balance the interests of different program stakeholders.”

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

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

For More Information

The Federal Register notice on the delay is at

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