HRSA Initiates Rulemaking to Implement Health Reform Changes to the 340B Drug Pricing Program

September 22, 2010

By Jennifer B. Davis

On September 20, 2010, the Health Resources and Services Administration (“HRSA”) issued two Advanced Notices of Proposed Rulemaking and Requests for Comment (here and here) announcing its preliminary plans, and requesting stakeholder input, on how best to implement new authorities over the 340B Drug Pricing Program conferred by section 7102(a) of the Patient Protection and Affordable Care Act (“PPACA”).  We previously blogged about this and other drug- and device-related provisions of PPACA.

Among other mandates relating to the 340B Program, PPACA § 7102 requires HHS to adopt regulations establishing the standards and procedures for imposing civil monetary penalties on manufacturers that “knowingly and intentionally” overcharge covered entities for 340B Program drugs, as well as regulations prescribing the procedures for resolution of claims by covered entities that they have been overcharged, and claims by manufacturers that covered entities have violated the prohibition on duplicate discounts or rebates, and resale of 340B Program drugs.  The two recent Notices focus on these mandates. 

In the Notice concerning “Manufacturer Civil Monetary Penalties,” HRSA says it is reviewing the civil monetary (“CMP”) authorities currently used by other federal agencies such as the Office of Inspector General (“OIG”) of the Department of Health and Human Services, the Federal Aviation Administration, Treasury, the Food and Drug Administration and the Centers for Medicare & Medicaid Services to determine which parts of those procedures could be adapted for the 340B Program.  It is also considering the use and adaptation of the OIG’s CMP procedures codified at 42 CFR Part 1003.  HRSA requests comment on which portions of these existing models should be incorporated into the 340B Program CMP regulations, and on anticipated elements of the regulations – for example, the threshold criteria for deciding when to impose CMPs; the type of notice that should be issued to manufacturers and given to third parties and the public regarding proposed CMPs; the hearing and administrative appeals processes; and the method and criteria for computing the penalty.  Worth particular note is HRSA’s request for comment on its view of the “knowing and intentional” requirement.  HRSA contemplates a definition that allows “knowledge and intention” to be inferred from the circumstances and imputed to the manufacturer, even in cases where no single employee may have had knowledge of all the facts or an intention to overcharge.  HRSA also envisions that repeated violations could be considered “knowing and intentional” if, for example, a manufacturer repeatedly miscalculates a ceiling price or creates a system where overcharging is a highly likely consequence.

In the Notice regarding “Administrative Dispute Resolution Process,” HRSA seeks comment on what aspects of existing dispute resolution models – such as the current 340B Program voluntary dispute resolution guidelines – can be adapted to the new 340B dispute resolution regulations.  It also requests input on the standards and threshold requirements for bringing and requesting review of a claim; the role of and appropriate format and scope of a hearing requirement; the appropriate kind of decision-making official or body; the process for discovery of information from participating manufacturers and covered entities; the guidelines for the audit a manufacturer must conduct of a covered entity before bringing a claim; and when third party organizations can bring claims on behalf of member covered entities. 

Comments on both Notices are due by November 19.  HRSA says it will consider the comments in formulating its proposed regulations.  There will be another opportunity to comment on the proposals. 

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