HRSA’s ‘Piecemeal’ Approach To 340B Integrity Rules Draws Manufacturer Objections
This article was originally published in The Pink Sheet Daily
Executive Summary
Manufacturers say they might be penalized for violating program requirements that are yet to be established, since HRSA is issuing penalties rule first.
Manufacturer civil monetary penalties for violations in the 340B drug discount program should be established only as part of a comprehensive program integrity rule, manufacturers tell the Health Resources and Services Administration (HRSA) in written comments on the proposed CMP rule.
They object to the idea that HRSA is first creating CMPs in a rule not set in context with other program elements.
The Biotechnology Industry Organization captures the tone of many industry comments, saying it “is strongly opposed to HRSA’s proposal to implement the [Affordable Care Act’s (ACA)] program integrity provisions in the piecemeal manner evidenced by the proposed rule.”
BIO's comments strongly urge HRSA to issue a new proposed rule “that both implements the ACA’s 340B program integrity requirements in a coordinated and comprehensive manner (as opposed to the piecemeal manner evidenced by the proposed rule and earlier [information collection requests]) and includes the necessary regulatory impact analysis, taking into account the stakeholder feedback received in response to this [notice of proposed rulemaking (NPRM)].”
Description Of The 340B Program
“The 340B Drug Pricing Program requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices. The 340B Program enables covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. Eligible health care organizations/covered entities are defined in statute and include HRSA-supported health centers and look-alikes, Ryan White clinics and State AIDS Drug Assistance programs, Medicare/Medicaid Disproportionate Share Hospitals, children’s hospitals, and other safety net providers.” – HRSA's website
The comments were submitted to HRSA, the Department of Health and Human Services (HHS) agency that oversees 340B, in response to its proposed rule on the 340B ceiling price and manufacturer CMPs. The rule was published June 17 with a comment deadline of Aug. 17 (Also see "340B Manufacturer Fines Outlined In Rule, But HRSA Expects To Use Them ‘Very Rarely’" - Pink Sheet, 16 Jun, 2015.). Ceiling price is the maximum drug price that can be charged to a 340B-participating health care provider, known in the program as a “covered entity;” the maximum is a drug’s average manufacturer price minus the Medicaid unit rebate amount.
While comments also address many of the details pertaining to ceiling prices and CMPs that are discussed in the proposal, an overarching theme in a number of manufacturers’ comments is the need for a more comprehensive rule that would allow them to provide more meaningful input.
BIO notes that manufacturer CMPs are just one of 11 integrity systems and procedures that HRSA will need to establish to implement statutory changes that ACA made to 340B (see box).
340B Integrity Activities Described In ACA
- Develop a system to verify the accuracy of ceiling prices.
- Establish procedures for manufacturers to issue a refund to covered entities if there is an overcharge.
- Provide covered entities with secure access to HRSA-verified ceiling prices.
- Develop a mechanism by which rebates and other discounts provided by manufacturers to other purchasers subsequent to the sale of drugs to covered entities are reported to HRSA, and appropriate credits and refunds are issued to covered entities if such discounts or rebates lower drugs’ ceiling price for the relevant quarter.
- Conduct selective auditing of manufacturers and wholesalers.
- Impose civil monetary penalties on manufacturers for each instance of knowingly and intentionally overcharging a covered entity.
- Develop procedures to enable and require covered entities to regularly update (at least annually) the information on HRSA’s 340B database.
- Develop a system to verify the accuracy of information regarding covered entities that is listed on such database.
- Develop more detailed guidance describing methodologies and options available to covered entities for billing 340B-discounted drugs to state Medicaid agencies in a manner that avoids duplicate discounts.
- Develop a standardized identification system by which each covered entity site can be identified by manufacturers, distributors, covered entities and HRSA to facilitate the ordering, purchasing and delivery of drugs under 340B.
- Impose sanctions on covered entities, in appropriate cases as determined by HRSA.
Source: Stakeholder comments to HRSA.
“Each of these provisions is not only interrelated, but interdependent,” BIO explains. “Thus, in order for stakeholders to have a meaningful opportunity to comment on HRSA’s proposed approach with respect to each of these program integrity provisions, it is necessary to understand how HRSA proposes to implement many, if not all, of the other provisions.”
So HRSA should implement all of ACA’s integrity improvements “in a coordinated and comprehensive manner” through a new proposal, BIO said.
Citing the same ACA integrity improvements, GlaxoSmithKline Inc. observes in its comments, “Given the many areas implicated by the 11 program improvements, it is unclear how HRSA’s attention to one will effectuate the aims of the whole program. In fact, GSK believes that success of the 340B program depends on a global approach, not the limited focus applied here.”
GlaxoSmithKline also urges CMS to issue a comprehensive integrity rule covering all of the topics, so that stakeholders can provide more meaningful comments.
Novartis Pharmaceuticals Corp. also argues in its comments that the “premature” release of the CMP rule is a “critical” issue, since it sets out how to penalize manufacturers for failing to meet program requirements “that are not yet in place.”
Specifically, Novartis says it opposes codifying CMPs for a manufacturer’s failure to extend a drug’s ceiling price to a covered entity until HRSA has finalized a methodology for verifying and publishing those prices. It also opposes codifying CMPs for failing to issue a refund to a covered entity for an overcharge resulting from a resubmission of Medicaid pricing data, since HRSA has not yet established the mechanism for issuing those refunds.
“HRSA simply cannot seek to codify a regulation that penalizes manufacturers for failing to comply with a process that does not yet exist due to HRSA’s own inaction,” Novartis wrote.
BIO says that, at a minimum, HRSA should not invoke manufacturer CMPs until after it implements all of the ACA’s integrity provisions, in particular those directly related to the CMP authority.
OIG Participation Also Needed
Another part of the proposed rule that manufacturers say is premature is the delegation of authority to bring CMP actions against manufacturers to the HHS Office of the Inspector General (OIG).
BIO argues that HHS, not HRSA, must delegate that authority to OIG, and that HHS has not yet done so. In addition, OIG will need to participate in developing rules for 340B CMP actions, since existing CMP rules for other government health care programs are not directly applicable to 340B.
“We therefore urge HRSA, together with OIG, to issue a new NPRM (ideally a comprehensive NPRM that addresses all of the ACA’s program integrity provisions, as described above) to: (1) identify those provisions of 42 C.F.R. part 1003 [OIG’s CMP regulations] that are not applicable to 340B manufacturer CMPs; (2) identify those provisions that are applicable; and (3) amend certain other provisions such that they can appropriately be applied in this context,” BIO wrote.
Without those details on how OIG would apply CMP provisions, “stakeholders are being denied a meaningful opportunity to comment on the application of 340B manufacturer CMPs per HRSA’s proposal,” BIO added.
Novartis emphasized that “stakeholders cannot comment on processes and inter-agency delegations that are critical to the proposed rule’s function where those processes and relationships do not yet exist.”