340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation

340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation

The latest rule coming out from HHS on the 340B Program was published in the Federal Register on January 5, 2017 (Vol. 82, No. 3) and will have the effect of adding workload and compliance risk to your participation in the 340B program.  On January 30, the Trump Administration withdrew this regulation as part of their overall guidance that for every new regulation there should be two regulations removed.  My opinion that this new 340B regulation will ultimately be implemented since one of the outcomes will be to decrease drug costs to 340B entities due to the repayment provisions.  It would be in the manufacturers best interests to begin planning for this inevitability as it is unknown if the effective dates would be changed.

While HHS indicates that the impact from a resource perspective would range from 0.5 to 1 full time compliance person,  I don’t believe that is reflective of the impact that you will experience given the probable number of 340B covered entities that purchase your products.

Other provisions that will have a direct impact on your teams with my interpretation in italics.

  1. Manufacturers are required to calculate actual 340B ceiling price based on AMP for the time under which the 340B price was estimated and offer a repayment to the covered entity the difference between the estimated and actual within 120 days of the determination by the manufacturer that any overcharging occurred (I believe the requirement to may repayments applies to any adjustment to prior period 340B ceiling prices. Since 340B pricing is a function of Medicaid AMP and BP calculations, any prior period Medicaid adjustment could implicate this provision)
    1. HHS believes that 120 days allows the manufacturer and the covered entity an opportunity to 1st determine whether the overcharge is significant, and if not, whether to make repayment options such as crediting or netting (There is no guidance on how you can define significant and is 120 days sufficient time to do the analysis to determine the impact?)
    2. HHS does not believe a materiality threshold be set and believes it is best approached by the marketplace arrangements and in good faith negotiations between the parties. If a manufacturer and covered entity agree that a de Minimis threshold for refunds should be established such a threshold can be established  through mutual agreement between the manufacturer and covered entity (in reality, HHS punted on this one by not setting a standard for de Minimis and leaves it up to discussions between manufacturer and covered entity to determine if the amounts are immaterial.  How do you staff for those “discussions” and what documentation is needed to confirm that no payment/credit or offsetting of amounts owes was made due to mutual agreement.)
  2. HHS does not authorize covered entities to reclassify a purchase as 340B eligible after the fact, HOWEVER, they then go on to say that 340B entities are responsible for requesting 340B pricing at the time of the original purchase; if a covered entity wants to reclassify a purchase, the covered entity must 1st notify the manufacturer and ensure all processes are fully transparent with a clear audit trail that reflects the actual timing and facts underlying a transaction. (There is no definition of what “notify” means – is it a letter to the manufacturer that the covered entity has reclassified a transaction and then the covered entity can do the reclassification, or is it some other method of communication that requires a manufacturer consent?  There is no clear guidance what happens if a manufacturer does not agree with the reclassification other than the formal dispute resolution process.)

Clearly this adds additional operational and compliance workload to your teams.

If you need any assistance establishing policies, processes, and the mechanics to be compliant with these new requirements, please contact NavAxxess Health Solutions at wevans@navaxxess.com.

William A. Evans, Partner

William Evans