HRSA Publishes Final Rule Addressing 340B Ceiling Price Calculations and Manufacturer Penalties for Overcharging

5 Jan 2017

Today HRSA published regulations addressing the 340B ceiling price calculations and implementing civil monetary penalties (CMPs) on manufacturers that overcharge covered entities. 

This is the second regulation that HRSA has issued related to the 340B program but, unlike the first one (the orphan drug rule), it is unlikely to be invalidated by a court because HRSA has clear authority to issue the rule.  The rule generally benefits covered entities by establishing clearer standards for ceiling price calculations and implementing penalties against manufacturers for overcharges.

Below is a summary of the significant provisions of the final rule. This memo contains more detailed analysis.

General

  • HRSA will begin enforcing the rule April 1, 2017.
  • “Covered outpatient drug” is defined by reference to Social Security Act § 1927(k), which is the definition section applicable to the Medicaid rebates statute.  HRSA clarified that the definition includes both the basic definition and its limitations.  Applying the limiting definition for purposes of the 340B program is problematic because it excludes drugs that are reimbursed by a Medicaid program at a bundled rate.
  • Manufacturers must sell 340B drugs to a covered entity regardless of whether the manufacturer believes the covered entity is engaging in diversion or subjecting the manufacturer to duplicate discounts.

Ceiling Price Calculation

  • The final rule adopts the 340B statutory formula for calculating the 340B ceiling price for each 11-digit NDC.
  • HRSA finalized its long-standing “penny-pricing” policy that sets the 340B ceiling price for a drug at $0.01 when it would otherwise be zero.
  • HRSA adopted a discounted WAC formula for estimating the ceiling price for the first three quarters that a new drug is on the market and requires manufacturers to refund covered entities if the actual ceiling price for the new drug turns out to be lower than the estimate.  Under current policy, HRSA gives manufacturers discretion as to how to estimate the ceiling price for a new drug and covered entities have to seek refunds if the actual ceiling price is lower than the estimate.

Manufacturer CMPs

  • Manufacturers are subject to CMPs of up to $5,000 for each instance of knowingly and intentionally charging a price higher than the 340B ceiling price, including when the drug is sold through a third party (g., a wholesaler or limited distribution network).
  • An instance of overcharging is considered at the NDC level and may not be offset by other discounts provided by the manufacturer.
  • The Office of Inspector General will impose the CMPs and will have the authority to determine on a case-by-case basis whether an overcharge was knowing and intentional.
Category: HRSA

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