80 FR 34583 - 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation
DEPARTMENT OF HEALTH AND HUMAN SERVICES Federal Register Volume 80, Issue 116 (June 17, 2015)
Federal Register Volume 80, Issue 116 (June 17, 2015)
| Page Range | 34583-34588 | |
| FR Document | 2015-14648 |
[Federal Register Volume 80, Number 116 (Wednesday, June 17, 2015)] [Proposed Rules] [Pages 34583-34588] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-14648] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES 42 CFR Part 10 RIN 0906-AA89 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation AGENCY: Health Resources and Services Administration, HHS. ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: The Health Resources and Services Administration (HRSA) administers section 340B of the Public Health Service Act (PHSA), which is referred to as the ``340B Drug Pricing Program'' or the ``340B Program.'' This proposed rule will apply to all drug manufacturers that are required to make their drugs available to covered entities under the 340B Program. The proposed rule sets forth the calculation of the ceiling price and application of civil monetary penalties. DATES: Submit comments on or before August 17, 2015. ADDRESSES: You may submit comments, identified by the Regulatory Information Number (RIN) 0906-AA89, by any of the following methods. Please submit your comments in only one of these ways to [[Page 34584]] minimize the receipt of duplicate submissions. The first is the preferred method.Federal eRulemaking Portal: http://www.regulations.gov. Follow instructions for submitting comments. This is the preferred method for the submission of comments. Email: 340BCMPNPRM@hrsa.gov. Include 0906-AA89 in the subject line of the message. Mail: Office of Pharmacy Affairs (OPA), Healthcare Systems Bureau (HSB), Health Resources and Services Administration (HRSA), 5600 Fishers Lane, Mail Stop 08W05A, Rockville, MD 20857. All submitted comments will be available to the public in their entirety. FOR FURTHER INFORMATION CONTACT: CDR Krista Pedley, Director, OPA, HSB, HRSA, 5600 Fishers Lane, Mail Stop 08W05A, Rockville, MD 20857, or by telephone at 301-594-4353. SUPPLEMENTARY INFORMATION: The President encourages Federal agencies through Executive Order 13563 to develop balanced regulations by encouraging broad public participation in the regulatory process and an open exchange of ideas. The Department of Health and Human Services (HHS) accordingly urges all interested parties to examine this regulatory proposal carefully and to share your views with us, including any data to support your positions. If you have questions before submitting comments, please see the ``For Further Information'' box above for the names and contact information of subject-matter experts involved in this proposal's development. We must consider all written comments received during the comment period before issuing a final rule. If you are a person with a disability and/or a user of assistive technology who has difficulty accessing this document, please contact HRSA's Regulations Officer at: Room 14-101, 5600 Fishers Lane, Rockville, MD 20857; or by telephone at 301-443-1785, to obtain this information in an accessible format. This is not a toll free telephone number. Please visit http://www.HHS.gov/regulations for more information on HHS rulemaking and opportunities to comment on proposed and existing rules. I. Background Section 602 of Public Law 102-585, the ``Veterans Health Care Act of 1992,'' enacted section 340B of the Public Health Service Act (PHSA) ``Limitation on Prices of Drugs Purchased by Covered Entities,'' codified at 42 U.S.C. 256b. The 340B Program permits covered entities ``to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.'' H.R. REP. No. 102-384(II), at 12 (1992). Eligible covered entity types are defined in section 340B(a)(4) of the PHSA, as amended. Section 340B of the PHSA instructs HHS to enter into a pharmaceutical pricing agreement (PPA) with certain drug manufacturers. If a drug manufacturer signs a PPA, it agrees that the prices charged for covered outpatient drugs to covered entities will not exceed defined 340B ceiling prices, which are based on quarterly pricing data reported to the Centers for Medicare & Medicaid Services (CMS). Section 7102 of the Patient Protection and Affordable Care Act (Pub. L. 111-148) as amended by section 2302 of the Health Care and Education Reconciliation Act (Pub. L. 111-152) (HCERA) (hereinafter referred to as the ``Affordable Care Act''), added section 340B(d)(1)(B)(vi) of the PHSA, which provides for: The imposition of sanctions in the form of civil monetary penalties, which-- (I) shall be assessed according to standards established in regulations to be promulgated by the Secretary not later than 180 days after the date of enactment of the Patient Protection and Affordable Care Act; (II) shall not exceed $5,000 for each instance of overcharging a covered entity that may have occurred; and (III) shall apply to any manufacturer with an agreement under this section that knowingly and intentionally charges a covered entity a price for purchase of a drug that exceeds the maximum applicable price under subsection (a)(1). The Affordable Care Act also added section 340B(d)(1)(B)(i)(I) of the PHSA, which requires the ``[d]evelopment and publishing through an appropriate policy or regulatory issuance, precisely defined standards and methodology for the calculation of ceiling prices. . . .'' Since 1992, HHS has administratively established the terms and certain elements of the 340B Program through guidelines published in the Federal Register, typically after notice and opportunity for comment. In September 2010, HHS published two advanced notices of proposed rulemaking (ANPRM) in the Federal Register, 340B Drug Pricing Program Administrative Dispute Resolution Process (75 FR 57233 (September 20, 2010)) and 340B Drug Pricing Program Manufacturer Civil Monetary Penalties (75 FR 57230 (September 20, 2010)). The administrative dispute resolution process remains under development and is not included in this notice of proposed rulemaking. HHS intends to address dispute resolution in future rulemaking. In the manufacturer civil monetary penalties ANPRM, HHS sought comments relevant to this provision and requested comment on nine identified areas: (1) Existing Models; (2) Threshold Determination; (3) Administrative Process Elements; (4) Hearing; (5) Appeals Process; (6) Definitions; (7) Penalty Computation; (8) Payment of Penalty; and (9) Integration of Civil Monetary Penalties with Other Provisions in the Affordable Care Act. The request for comments on existing models requested comments on the appropriateness on the use and adaptation of the procedures codified at 42 CFR part 1003, which includes procedures for the imposition of civil monetary penalties by the HHS Office of the Inspector General. HRSA received 15 comments on the ANPRM. The comments received have been considered in the development of this notice. HHS is also proposing this rule to provide increased clarity in the marketplace for all 340B Program stakeholders as to the calculation of the 340B ceiling price. HHS encourages all stakeholders to provide comments on this notice of proposed rulemaking. II. Summary of the Proposed Regulations The proposed revisions to 42 CFR part 10 of the regulations are described according to the applicable section of the regulations. The United States District Court for the District of Columbia recently vacated the 340B Program Regulations at 42 CFR part 10 relating to Orphan Drugs. PhRMA v. HHS, No. 13-01501 (D.D.C. May 23, 2014). This NPRM proposes to replace sections 10.1, 10.2, 10.3, and 10.10 with the provisions of this NPRM, add a new section 10.11, and eliminate sections 10.20 and 10.21. Subpart A--General Provisions Sec. 10.1 Purpose This part implements section 340B of the Public Health Service Act (PHSA) ``Limitation on Prices of Drugs Purchased by Covered Entities.'' Sec. 10.2 Summary of 340B Drug Pricing Program Section 340B of the PHSA instructs the Secretary of Health and Human Services to enter into agreements with manufacturers of covered outpatient drugs under which the amount to be paid to manufacturers by certain [[Page 34585]] statutorily-defined covered entities does not exceed the 340B ceiling price. Manufacturers participating in the 340B Drug Pricing Program (340B Program) are required to provide these discounts on all covered outpatient drugs sold to participating 340B covered entities. Sec. 10.3 Definitions The Department is proposing to revise the following definitions: ``ceiling price,'' ``covered entity,'' ``covered outpatient drug,'' and ``manufacturer.'' The Department is proposing to add the following definitions: ``340B drug,'' ``Average Manufacturer Price (AMP),'' ``CMS,'' ``National Drug Code (NDC),'' ``quarter,'' and ``wholesaler.'' The definitions for ``Pharmaceutical Pricing Agreement (PPA),'' and ``Secretary'' would remain in the section, and the definitions for ``Group purchasing organization (GPO),'' ``orphan drug,'' and ``participating drug manufacturer'' would be removed from the section. Subpart B--340B Ceiling Price Sec. 10.10 Ceiling Price for a Covered Outpatient Drug A manufacturer must calculate the ceiling price for all of its covered outpatient drugs on a quarterly basis. The calculation of the 340B ceiling price for a 340B drug is established by statute. Under section 340B(a) of the PHSA, the 340B ceiling price for covered outpatient drugs is calculated by subtracting the unit rebate amount (URA) from the average manufacturer price (AMP) for the smallest unit of measure and will be calculated using six decimal places. To ensure the final price is operational in the marketplace, HRSA then multiplies this amount by the drug's package size and case package size. HRSA will publish the 340B ceiling price rounded to two decimal places. Under the Medicaid Drug Rebate Program, CMS indexes quarterly AMPs to the rate of inflation (Consumer Price Index adjusted for inflation- urban). Section 1927(c)(2)(A) of the Social Security Act provides that with respect to single source and innovator multiple source drugs, if the AMP increases at a rate faster than inflation, the manufacturer must pay an additional rebate amount which is reflected in a higher URA. Historically, because of the basic rebate and the inflation factor, section 1927(c)(2)(A) could increase the rebate amount a manufacturer must pay to States, resulting in negative 340B prices. As of January 1, 2010, a provision in section 1927(c)(2)(D) of the Social Security Act effectively limited the unit rebate amount to 100 percent of the AMP. Thus, an increase in the basic rebate and inflation factor would not result in a negative 340B price, but could result in a zero 340B price. Exception: Penny Pricing and Distribution HHS recognizes that when the URA equals the AMP in the calculation of the 340B ceiling price, it is not reasonable for a manufacturer to set a 340B ceiling price to $0.00 per unit of measure. HHS proposes that a manufacturer charge a $0.01 per unit of measure for a drug with a ceiling price below $0.01. For those 340B drugs whose calculated price is less than $0.01, the effective ceiling price will be $0.01 per unit of measure. Manufacturers may not use the prior quarter's pricing, wholesale acquisition cost (WAC), or any other non-340B contract price in place of the penny pricing, as 340B ceiling prices must be based on the immediately preceding calendar quarter pricing data. Using the prior quarter pricing or some other price would nullify the pricing formula. New Drug Price Estimation Calculation of the current quarter ceiling price for each covered outpatient drug is based on pricing data from the immediately preceding calendar quarter. For new drugs, there will be no sales data from which to determine the 340B ceiling price. HHS published final guidelines in 1995 describing ceiling price calculations for new drugs (60 FR 51488 (October 2, 1995)). HHS is proposing to codify the longstanding policy from the 1995 final guidelines in these regulations. HHS proposes that a manufacturer will continue to estimate the 340B ceiling price for the first three quarters a new covered outpatient drug is available for sale. The ceiling price calculation described in paragraph (a) of this section will be required beginning with the fourth quarter the drug is available for sale. A manufacturer must calculate the actual 340B ceiling price for the first three quarters the drug was available for sale and refund or credit covered entities that purchased the covered outpatient drug above the calculated 340B ceiling price no later than the end of the fourth quarter after the drug is available for sale. For example, if a manufacturer with a PPA has a new drug approved for sale in February and that drug meets the definition of covered outpatient drug, the price estimation requirements would apply. The manufacturer would estimate the 340B ceiling price for the first three calendar quarters of availability. Beginning with the fourth quarter (October 1- December 31), the manufacturer will have the necessary pricing data to calculate the ceiling price based on section 340B(a)(1) of the PHSA. The manufacturer would then calculate the actual 340B ceiling price for the first three quarters and refund or credit covered entities which paid above the calculated ceiling price during those quarters. The refunds and credits must be completed by the end of the fourth quarter. HRSA solicits comments on all aspects of the 340B ceiling price methodology proposed. Sec. 10.11 Manufacturer Civil Monetary Penalties General Any manufacturer with a pharmaceutical pricing agreement that knowingly and intentionally charges a covered entity more than the ceiling price, as defined in Sec. 10.10, for a covered outpatient drug, may be subject to a civil monetary penalty not to exceed $5,000 for each instance of overcharging a covered entity, as defined in paragraph (b) of this section. Any civil monetary penalty assessed will be in addition to repayment for an instance of overcharging as required by section 340B(d)(1)(B)(ii) of the PHSA. Pursuant to a delegation of authority, the HHS Office of Inspector General (OIG) will have the authority to bring 340B CMP actions utilizing the standards applied to other civil monetary penalties under 42 CFR parts 1003 and 1005. Instance of Overcharging An instance of overcharging is any order for a certain covered outpatient drug, by NDC, which results in a covered entity paying more than the ceiling price, as defined in Sec. 10.10, for a covered outpatient drug. Each order for an NDC will constitute a single instance, regardless of the number of units of each NDC in that order. Likewise, if a covered entity orders a single bottle of a covered outpatient drug four times in a month, it would be considered four instances of overcharging. This includes any order placed directly with a manufacturer or through a wholesaler, authorized distributor, or agent. An instance of overcharging is considered at the 11-digit NDC level and may not be offset by other discounts provided on any other NDC or discounts provided on the same NDC on other transactions, orders, or purchases. An instance of overcharging may occur at the time of initial purchase or when subsequent ceiling price recalculations resulting [[Page 34586]] from pricing data submitted to CMS occur and the manufacturer refuses to refund or issue a credit to a covered entity. A manufacturer's failure to provide the 340B ceiling price is not considered an instance of overcharging when a covered entity did not initially identify the purchase to the manufacturer as 340B-eligible at the time of purchase. Covered entity orders of non-340B priced drugs will not subsequently be considered an instance of overcharging unless the manufacturer's documented refusal to sell or make drugs available at the 340B price resulted in the covered entity purchasing at the non-340B price. When a manufacturer's documented refusal to sell or make drugs available at the 340B price results in the covered entity purchasing at the non-340B price, a manufacturer's sale at the non-340B price could be considered an instance of overcharging. All requirements for offering the 340B ceiling price to covered entities apply regardless of the distribution system. Specialty distribution, regardless of justification, must ensure 340B covered entities purchase covered outpatient drugs at or below the ceiling price. Manufacturers commonly use wholesalers to distribute drugs on their behalf. This regulation and associated penalties applies solely to manufacturers, even though other parties, such as wholesalers, have a role in ultimately ensuring the covered entity receives a 340B drug at or below the ceiling prices. Manufacturers should consider the wholesaler role in this process and work out issues in good faith and in normal business arrangements regarding the assurance that the covered entity receives the appropriate price as outlined in this regulation. A manufacturer's failure to ensure that covered entities receive the appropriate 340B discount through its distribution arrangements may be grounds for the assessment of civil monetary penalties under this regulation. III. Regulatory Impact Analysis HHS has examined the effects of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 8, 2011), the Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354), the Unfunded Mandates Reform Act of 1995 (Pub. L. 104- 4), and Executive Order 13132 on Federalism (August 4, 1999). Executive Orders 12866 and 13563 Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 is supplemental to and reaffirms the principles, structures, and definitions governing regulatory review as established in Executive Order 12866, emphasizing the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. Section 3(f) of Executive Order 12866 defines a ``significant regulatory action'' as an action that is likely to result in a rule: (1) Having an annual effect on the economy of $100 million or more in any 1 year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities (also referred to as ``economically significant''); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year), and a ``significant'' regulatory action is subject to review by the Office of Management and Budget (OMB). This proposed rule is not likely to have economic impacts of $100 million or more in any 1 year, and therefore has not been designated an ``economically significant'' rule under section 3(f)(1) of Executive Order 12866. The 340B Program as a whole creates significant savings for entities purchasing drugs through the program, with total savings estimated to be $3.8 billion in FY 2013.\1\ However, this proposed rule would not significantly affect the impact of the program. This proposed rule incorporates current policies regarding calculation of the ceiling price and introduces manufacturer civil monetary penalties. HHS does not anticipate that the imposition of civil monetary penalties would result in significant economic impacts. --------------------------------------------------------------------------- \1\ In FY 2013, 340B covered entities spent approximately $7.5 billion on the total purchases of 340B drugs under the 340B Program. This data was obtained from the 340B Prime Vendor Program. This amount represents 2 percent of the overall prescription drug market. Assuming covered entities pay 25 to 50 percent less than non-340B prices, HHS calculated the estimated total savings in FY 2013 to be approximately $3.8 billion. --------------------------------------------------------------------------- The 340B Program uses information which already must be reported under Medicaid to calculate the statutorily defined 340B ceiling price as required by this proposed rule. Because the components of the ceiling price are already calculated by the manufacturers under the Medicaid program and reported to CMS, HHS does not believe this portion of the proposed rule would have an impact on manufacturers. The impact on manufacturers would also be limited with respect to calculation of the ceiling price as defined in this proposed rule due to the fact that manufacturers regularly calculate the 340B ceiling price and have been since the program's inception. Separate from calculation of the 340B ceiling price, manufacturers are required to ensure they do not overcharge covered entities, and a civil monetary penalty could result from overcharging if it met the standards in this proposed rule. The use of those penalties would probably be rare. Since the program's inception, issues related to overcharges have been resolved between a manufacturer and a covered entity and any issues have generally been due to technical errors in the calculation. For the penalties to be used as defined in the statute and in this rule, a manufacturer would only be subject to those penalties when the overcharge was a result of a knowing and intentional act. Based on anecdoctal information received from covered entities, HHS anticipates that this would occur very rarely if at all. This rulemaking also proposes that a manufacturer charge a $0.01 per unit of measure for a drug with a ceiling price below $0.01. A small number of manufacturers have informed HRSA over the last several years that they charge more than $0.01 for a drug with a ceiling price below $0.01. However, this is a long-standing HRSA policy and HRSA believes the majority of manufacturers currently follow the practice of charging a $0.01. Therefore, this portion of the regulation will not result in a significant impact. This proposed regulation would allow HRSA to enforce the policy in a manner that would require the manufacturer to charge a $0.01, and it is likely that manufacturers would charge $0.01 in order to avoid the imposition of a civil [[Page 34587]] monetary penaly for overcharging a covered entity. Therefore, HRSA believes manufacturers that currently do not comply will come into compliance, which will result in the covered enity paying less for these drugs. This will be a cost transfer from the covered entity to the manufacturer. HHS recognizes that some administrative costs would be incurred for compliance with this proposed rule. HHS does not collect data related to such administrative costs from manufacturers, and compliance costs are expected to vary significantly. HHS believes it is reasonable to assume that manufacturers would use one-half to one full-time compliance officer to ensure compliance with the requirements in this proposed rule. According to the Bureau of Labor Statistics, the mean annual wage for a pharmaceutical compliance officer (NAICS 325400, occupation code 13-1041) is $74,620 in 2014. Inclusion of benefits and overhead (resulting in a total labor cost of 1.5 times mean annual salary) yields a total annual cost of $111,930 for one compliance officer. Thus the estimated annual cost for labor across all 600 manufacturers is between $33,579,000 and $67,158,000. The Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) and the Small Business Regulatory Enforcement and Fairness Act of 1996, which amended the RFA, require HHS to analyze options for regulatory relief of small businesses. If a rule has a significant economic effect on a substantial number of small entities, the Secretary must specifically consider the economic effect of the rule on small entities and analyze regulatory options that could lessen the impact of the rule. HHS will use an RFA threshold of at least a three percent impact on at least five percent of small entities. This proposed rule would affect drug manufacturers (North American Industry Classification System code 325412: Pharmaceutical Preparation Manufacturing). The small business size standard for drug manufacturers is 750 employees. While it is possible to estimate the impact of this proposed rule on the industry as a whole, the data necessary to project changes for specific manufacturers or groups of manufacturers were not available. This proposed rule clarifies statutory requirements for all manufacturers, including small manufacturers, and proposes current ceiling price calculation policies be codified in regulation. HHS is not aware of small manufacturers which currently do not follow the ceiling price policies proposed in this regulatory action. HHS welcomes comments concerning the impact of this proposed rule on small manufacturers. HHS therefore estimates that the economic impact on small entities will be minimal and less than three percent. Unfunded Mandates Reform Act Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing ``any rule that includes any Federal mandate that may result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year.'' In 2013, that threshold level is approximately $141 million. HHS does not expect this proposed rule to exceed the threshold. Executive Order 13132--Federalism HHS has reviewed this proposed rule in accordance with Executive Order 13132 regarding federalism, and has determined that it does not have ``federalism implications.'' This proposed rule would not ``have substantial direct effects on the States, or on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.'' The proposals in this notice of proposed rulemaking, if implemented, would not adversely affect the following family elements: Family safety, family stability, marital commitment; parental rights in the education, nurture, and supervision of their children; family functioning, disposable income or poverty; or the behavior and personal responsibility of youth, as determined under Section 654(c) of the Treasury and General Government Appropriations Act of 1999. HHS invites additional comments on the impact of this proposed rule from affected stakeholders. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that OMB approve all collections of information by a Federal agency from the public before they can be implemented. This proposed rule is projected to have no impact on current reporting and recordkeeping burden for manufacturers under the 340B Program. Changes proposed in this rulemaking would result in no new reporting burdens. Comments are welcome on the accuracy of this statement. Dated: March 6, 2015. Sylvia M. Burwell, Secretary. List of Subjects in 42 CFR Part 10 Biologics, Business and industry, Diseases, Drugs, Health, Health care, Health facilities, Hospitals, 340B Drug Pricing Program. For the reasons set forth in the preamble, the Department of Health and Human Services proposes to amend 42 CFR part 10 as follows: 0 1. Revise part 10 to read as follows: PART 10--340B Drug Pricing Program Subpart A--General Provisions Sec. 10.1 Purpose. 10.2 Summary of 340B Drug Pricing Program. 10.3 Definitions. Subpart B--340B Ceiling Price 10.10 Ceiling price for a covered outpatient drug. 10.11 Manufacturer civil monetary penalties. Authority: Sec. 340B of the Public Health Service Act (42 U.S.C. 256b), as amended. Subpart A--General Provisions Sec. 10.1 Purpose. This part implements section 340B of the Public Health Service Act (PHSA) ``Limitation on Prices of Drugs Purchased by Covered Entities.'' Sec. 10.2 Summary of 340B Drug Pricing Program. Section 340B of the PHSA instructs the Secretary of Health and Human Services to enter into agreements with manufacturers of covered outpatient drugs under which the amount to be paid to manufacturers by certain statutorily-defined covered entities does not exceed the 340B ceiling price. Sec. 10.3 Definitions. For the purposes of this part, the following definitions apply: 340B drug is a covered outpatient drug, as defined in section 1927(k) of the Social Security Act, purchased by a covered entity at or below the ceiling price required pursuant to a pharmaceutical pricing agreement with the Secretary. Average Manufacturer Price (AMP) has the meaning set forth in 1927(k)(1) of the Social Security Act. Ceiling price means the maximum statutory price established under section 340B(a)(1) of the PHSA and these regulations. CMS is the Centers for Medicare & Medicaid Services. [[Page 34588]] Covered entity means an entity that is listed within section 340B(a)(4) of the PHSA, meets the requirements under section 340B(a)(5) of the PHSA, and is registered and listed in the 340B database. Covered outpatient drug has the meaning set forth in section 1927(k) of the Social Security Act. Manufacturer has the meaning set forth in section 1927(k) of the Social Security Act. National Drug Code (NDC) has the meaning set forth in 42 CFR 447.502. Pharmaceutical Pricing Agreement (PPA) means an agreement described in section 340B(a)(1) of the PHSA. Quarter refers to a calendar quarter unless otherwise specified. Secretary means the Secretary of the Department of Health and Human Services and any other officer of employee of the Department of Health and Human Services to whom the authority involved has been delegated. Wholesaler has the meaning set forth in 42 U.S.C. 1396r-8(k)(11). Subpart B--340B Ceiling Price Sec. 10.10 Ceiling price for a covered outpatient drug. A manufacturer is required to calculate 340B ceiling prices for each covered outpatient drug, by National Drug Code (NDC) on a quarterly basis. (a) Calculation of 340B ceiling price. The 340B ceiling price for a covered outpatient drug is equal to the Average Manufacturer Price (AMP) for the smallest unit of measure minus the Unit Rebate Amount (URA) and will be calculated using six decimal places. To ensure the final price is operational in the marketplace, HRSA then multiplies this amount by the drug's package size and case package size. HRSA will publish the 340B ceiling price rounded to two decimal places. (b) Exception.When the ceiling price calculation in paragraph (a) of this section results in an amount less than $0.01 the ceiling price will be $0.01. (c) New drug price estimation.A manufacturer must estimate the ceiling price for a new covered outpatient drug as of the date the drug is first available for sale and must provide HRSA an estimated ceiling price for each of the first three quarters the drug is available for sale. Beginning with the fourth quarter the drug is available for sale, the manufacturer must calculate the ceiling price as described in paragraph (a) of this section. A manufacturer must calculate the actual ceiling prices for the first three quarters and refund or credit any covered entity which purchased the covered outpatient drug at a price greater than the calculated ceiling price. The refunds or credits for the first three quarters must be provided to covered entities by the end of the fourth quarter. Sec. 10.11 Manufacturer civil monetary penalties. (a) General.Any manufacturer with a pharmaceutical pricing agreement that knowingly and intentionally charges a covered entity more than the ceiling price, as defined in Sec. 10.10, for a covered outpatient drug, may be subject to a civil monetary penalty not to exceed $5,000 for each instance of overcharging a covered entity, as defined in paragraph (b) of this section. This penalty will be imposed pursuant to the procedures at 42 CFR part 1003. Any civil monetary penalty assessed will be in addition to repayment for an instance of overcharging as required by section 340B(d)(1)(B)(ii) of the PHSA. (b) Instance of overcharging. An instance of overcharging is any order for a covered outpatient drug, by NDC, which results in a covered entity paying more than the ceiling price, as defined in Sec. 10.10, for that covered outpatient drug. (1) Each order for an NDC will constitute a single instance, regardless of the number of units of each NDC ordered. This includes any order placed directly with a manufacturer or through a wholesaler, authorized distributor, or agent. (2) Manufacturers have an obligation to ensure that the 340B discount is provided through distribution arrangements made by the manufacturer. (3) An instance of overcharging is considered at the NDC level and may not be offset by other discounts provided on any other NDC or discounts provided on the same NDC on other transactions, orders, or purchases. (4) An instance of overcharging may occur at the time of initial purchase or when subsequent ceiling price recalculations due to pricing data submitted to CMS result in a covered entity paying more than the ceiling price due to failure or refusal to refund or credit a covered entity. (5) A manufacturer's failure to provide the 340B ceiling price is not considered an instance of overcharging when a covered entity did not initially identify the purchase to the manufacturer as 340B- eligible at the time of purchase. Covered entity orders of non-340B priced drugs will not subsequently be considered an instance of overcharging unless the manufacturer's refusal to sell or make drugs available at the 340B price resulted in the covered entity purchasing at the non-340B price. Editorial Note: This document was received for publication by the Office of the Federal Register on June 10, 2015. [FR Doc. 2015-14648 Filed 6-16-15; 8:45 am] BILLING CODE 4165-15-P
![Federal Register / Vol. 80, No. 116 / Wednesday, June 17, 2015 / Proposed Rules 34583
and subject to review by the Office of Executive Order 13563 also requires request to the program contact person
Management and Budget (OMB). an agency ‘‘to use the best available listed under FOR FURTHER INFORMATION
Section 3(f) of Executive Order 12866 techniques to quantify anticipated CONTACT.
defines a ‘‘significant regulatory action’’ present and future benefits and costs as Electronic Access to This Document:
as an action likely to result in a rule that accurately as possible.’’ The Office of The official version of this document is
may— Information and Regulatory Affairs of the document published in the Federal
(1) Have an annual effect on the OMB has emphasized that these Register. Free Internet access to the
economy of $100 million or more, or techniques may include ‘‘identifying official edition of the Federal Register
adversely affect a sector of the economy, changing future compliance costs that and the Code of Federal Regulations is
productivity, competition, jobs, the might result from technological available via the Federal Digital System
environment, public health or safety, or innovation or anticipated behavioral at: www.gpo.gov/fdsys. At this site you
State, local, or tribal governments or changes.’’ can view this document, as well as all
communities in a material way (also We are issuing this proposed priority other documents of this Department
referred to as an ‘‘economically only on a reasoned determination that published in the Federal Register, in
significant’’ rule); its benefits would justify its costs. In text or Adobe Portable Document
(2) Create serious inconsistency or choosing among alternative regulatory Format (PDF). To use PDF you must
otherwise interfere with an action taken approaches, we selected those have Adobe Acrobat Reader, which is
or planned by another agency; approaches that would maximize net available free at the site.
(3) Materially alter the budgetary benefits. Based on the analysis that You may also access documents of the
impacts of entitlement grants, user fees, follows, the Department believes that Department published in the Federal
or loan programs or the rights and this regulatory action is consistent with Register by using the article search
obligations of recipients thereof; or the principles in Executive Order 13563. feature at: www.federalregister.gov.
(4) Raise novel legal or policy issues We also have determined that this Specifically, through the advanced
regulatory action would not unduly search feature at this site, you can limit
arising out of legal mandates, the
interfere with State, local, and tribal your search to documents published by
President’s priorities, or the principles
governments in the exercise of their the Department.
stated in the Executive order.
governmental functions.
This proposed regulatory action is not In accordance with both Executive Dated: June 12, 2015.
a significant regulatory action subject to orders, the Department has assessed the Michael K. Yudin,
review by OMB under section 3(f) of potential costs and benefits, both Assistant Secretary for Special Education and
Executive Order 12866. quantitative and qualitative, of this Rehabilitative Services.
We have also reviewed this proposed regulatory action. The potential costs [FR Doc. 2015–14940 Filed 6–16–15; 8:45 am]
regulatory action under Executive Order are those resulting from statutory BILLING CODE 4000–01–P
13563, which supplements and requirements and those we have
explicitly reaffirms the principles, determined as necessary for
structures, and definitions governing administering the Department’s DEPARTMENT OF HEALTH AND
regulatory review established in programs and activities. HUMAN SERVICES
Executive Order 12866. To the extent We propose to fund through this
permitted by law, Executive Order priority TA to State VR agencies to 42 CFR Part 10
13563 requires that an agency— improve the quality of VR services and
(1) Propose or adopt regulations only RIN 0906–AA89
of the competitive integrated
on a reasoned determination that their employment outcomes achieved by 340B Drug Pricing Program Ceiling
benefits justify their costs (recognizing individuals with disabilities, and Price and Manufacturer Civil Monetary
that some benefits and costs are difficult ultimately to increase the percentage of Penalties Regulation
to quantify); individuals with disabilities who
(2) Tailor its regulations to impose the receive services through the State VR AGENCY: Health Resources and Services
least burden on society, consistent with agencies who achieve competitive Administration, HHS.
obtaining regulatory objectives and integrated employment outcomes. This ACTION: Notice of proposed rulemaking.
taking into account—among other things proposed priority would promote the
and to the extent practicable—the costs SUMMARY: The Health Resources and
efficient and effective use of Federal
of cumulative regulations; Services Administration (HRSA)
funds.
(3) In choosing among alternative Intergovernmental Review: This administers section 340B of the Public
regulatory approaches, select those program is subject to Executive Order Health Service Act (PHSA), which is
approaches that maximize net benefits 12372 and the regulations in 34 CFR referred to as the ‘‘340B Drug Pricing
(including potential economic, part 79. One of the objectives of the Program’’ or the ‘‘340B Program.’’ This
environmental, public health and safety, Executive order is to foster an proposed rule will apply to all drug
and other advantages; distributive intergovernmental partnership and a manufacturers that are required to make
impacts; and equity); strengthened federalism. The Executive their drugs available to covered entities
(4) To the extent feasible, specify order relies on processes developed by under the 340B Program. The proposed
performance objectives, rather than the State and local governments for rule sets forth the calculation of the
behavior or manner of compliance a coordination and review of proposed ceiling price and application of civil
srobinson on DSK5SPTVN1PROD with PROPOSALS
regulated entity must adopt; and Federal financial assistance. monetary penalties.
(5) Identify and assess available This document provides early DATES: Submit comments on or before
alternatives to direct regulation, notification of our specific plans and August 17, 2015.
including economic incentives—such as actions for this program. ADDRESSES: You may submit comments,
user fees or marketable permits—to Accessible Format: Individuals with identified by the Regulatory Information
encourage the desired behavior, or disabilities can obtain this document in Number (RIN) 0906–AA89, by any of the
provide information that enables the an accessible format (e.g., braille, large following methods. Please submit your
public to make choices. print, audiotape, or compact disc) on comments in only one of these ways to
VerDate Sep<11>2014 16:32 Jun 16, 2015 Jkt 235001 PO 00000 Frm 00044 Fmt 4702 Sfmt 4702 E:\FR\FM\17JNP1.SGM 17JNP1](https://thefederalregister.org/doc/80_FR_34699/page/1.svg)
![34584 Federal Register / Vol. 80, No. 116 / Wednesday, June 17, 2015 / Proposed Rules
minimize the receipt of duplicate 256b. The 340B Program permits process remains under development and
submissions. The first is the preferred covered entities ‘‘to stretch scarce is not included in this notice of
method. Federal resources as far as possible, proposed rulemaking. HHS intends to
• Federal eRulemaking Portal: http:// reaching more eligible patients and address dispute resolution in future
www.regulations.gov. Follow providing more comprehensive rulemaking.
instructions for submitting comments. services.’’ H.R. REP. No. 102–384(II), at In the manufacturer civil monetary
This is the preferred method for the 12 (1992). Eligible covered entity types penalties ANPRM, HHS sought
submission of comments. are defined in section 340B(a)(4) of the comments relevant to this provision and
• Email: 340BCMPNPRM@hrsa.gov. PHSA, as amended. Section 340B of the requested comment on nine identified
Include 0906–AA89 in the subject line PHSA instructs HHS to enter into a areas: (1) Existing Models; (2) Threshold
of the message. pharmaceutical pricing agreement (PPA) Determination; (3) Administrative
• Mail: Office of Pharmacy Affairs with certain drug manufacturers. If a Process Elements; (4) Hearing; (5)
(OPA), Healthcare Systems Bureau drug manufacturer signs a PPA, it agrees Appeals Process; (6) Definitions; (7)
(HSB), Health Resources and Services that the prices charged for covered Penalty Computation; (8) Payment of
Administration (HRSA), 5600 Fishers outpatient drugs to covered entities will Penalty; and (9) Integration of Civil
Lane, Mail Stop 08W05A, Rockville, MD not exceed defined 340B ceiling prices, Monetary Penalties with Other
20857. which are based on quarterly pricing Provisions in the Affordable Care Act.
All submitted comments will be data reported to the Centers for The request for comments on existing
available to the public in their entirety. Medicare & Medicaid Services (CMS). models requested comments on the
FOR FURTHER INFORMATION CONTACT: CDR Section 7102 of the Patient Protection appropriateness on the use and
Krista Pedley, Director, OPA, HSB, and Affordable Care Act (Pub. L. 111– adaptation of the procedures codified at
HRSA, 5600 Fishers Lane, Mail Stop 148) as amended by section 2302 of the 42 CFR part 1003, which includes
08W05A, Rockville, MD 20857, or by Health Care and Education procedures for the imposition of civil
telephone at 301–594–4353. Reconciliation Act (Pub. L. 111–152) monetary penalties by the HHS Office of
(HCERA) (hereinafter referred to as the the Inspector General. HRSA received
SUPPLEMENTARY INFORMATION: The
‘‘Affordable Care Act’’), added section 15 comments on the ANPRM. The
President encourages Federal agencies 340B(d)(1)(B)(vi) of the PHSA, which
through Executive Order 13563 to comments received have been
provides for: The imposition of considered in the development of this
develop balanced regulations by sanctions in the form of civil monetary
encouraging broad public participation notice. HHS is also proposing this rule
penalties, which— to provide increased clarity in the
in the regulatory process and an open (I) shall be assessed according to
exchange of ideas. The Department of marketplace for all 340B Program
standards established in regulations to stakeholders as to the calculation of the
Health and Human Services (HHS) be promulgated by the Secretary not
accordingly urges all interested parties 340B ceiling price. HHS encourages all
later than 180 days after the date of stakeholders to provide comments on
to examine this regulatory proposal enactment of the Patient Protection and
carefully and to share your views with this notice of proposed rulemaking.
Affordable Care Act;
us, including any data to support your (II) shall not exceed $5,000 for each II. Summary of the Proposed
positions. If you have questions before instance of overcharging a covered Regulations
submitting comments, please see the entity that may have occurred; and
‘‘For Further Information’’ box above for The proposed revisions to 42 CFR part
(III) shall apply to any manufacturer
the names and contact information of 10 of the regulations are described
with an agreement under this section
subject-matter experts involved in this according to the applicable section of
that knowingly and intentionally
proposal’s development. We must the regulations. The United States
charges a covered entity a price for
consider all written comments received District Court for the District of
purchase of a drug that exceeds the
during the comment period before Columbia recently vacated the 340B
maximum applicable price under
issuing a final rule. Program Regulations at 42 CFR part 10
subsection (a)(1).
If you are a person with a disability The Affordable Care Act also added relating to Orphan Drugs. PhRMA v.
and/or a user of assistive technology section 340B(d)(1)(B)(i)(I) of the PHSA, HHS, No. 13–01501 (D.D.C. May 23,
who has difficulty accessing this which requires the ‘‘[d]evelopment and 2014). This NPRM proposes to replace
document, please contact HRSA’s publishing through an appropriate sections 10.1, 10.2, 10.3, and 10.10 with
Regulations Officer at: Room 14–101, policy or regulatory issuance, precisely the provisions of this NPRM, add a new
5600 Fishers Lane, Rockville, MD defined standards and methodology for section 10.11, and eliminate sections
20857; or by telephone at 301–443– the calculation of ceiling prices. . . .’’ 10.20 and 10.21.
1785, to obtain this information in an Since 1992, HHS has administratively Subpart A—General Provisions
accessible format. This is not a toll free established the terms and certain
telephone number. elements of the 340B Program through § 10.1 Purpose
Please visit http://www.HHS.gov/ guidelines published in the Federal This part implements section 340B of
regulations for more information on Register, typically after notice and the Public Health Service Act (PHSA)
HHS rulemaking and opportunities to opportunity for comment. In September ‘‘Limitation on Prices of Drugs
comment on proposed and existing 2010, HHS published two advanced Purchased by Covered Entities.’’
rules. notices of proposed rulemaking
srobinson on DSK5SPTVN1PROD with PROPOSALS
(ANPRM) in the Federal Register, 340B § 10.2 Summary of 340B Drug Pricing
I. Background Drug Pricing Program Administrative Program
Section 602 of Public Law 102–585, Dispute Resolution Process (75 FR Section 340B of the PHSA instructs
the ‘‘Veterans Health Care Act of 1992,’’ 57233 (September 20, 2010)) and 340B the Secretary of Health and Human
enacted section 340B of the Public Drug Pricing Program Manufacturer Services to enter into agreements with
Health Service Act (PHSA) ‘‘Limitation Civil Monetary Penalties (75 FR 57230 manufacturers of covered outpatient
on Prices of Drugs Purchased by (September 20, 2010)). The drugs under which the amount to be
Covered Entities,’’ codified at 42 U.S.C. administrative dispute resolution paid to manufacturers by certain
VerDate Sep<11>2014 16:32 Jun 16, 2015 Jkt 235001 PO 00000 Frm 00045 Fmt 4702 Sfmt 4702 E:\FR\FM\17JNP1.SGM 17JNP1](https://thefederalregister.org/doc/80_FR_34699/page/2.svg)
![34588 Federal Register / Vol. 80, No. 116 / Wednesday, June 17, 2015 / Proposed Rules
Covered entity means an entity that is greater than the calculated ceiling price. resulted in the covered entity
listed within section 340B(a)(4) of the The refunds or credits for the first three purchasing at the non-340B price.
PHSA, meets the requirements under quarters must be provided to covered Editorial Note: This document was
section 340B(a)(5) of the PHSA, and is entities by the end of the fourth quarter. received for publication by the Office of the
registered and listed in the 340B Federal Register on June 10, 2015.
database. § 10.11 Manufacturer civil monetary
penalties. [FR Doc. 2015–14648 Filed 6–16–15; 8:45 am]
Covered outpatient drug has the BILLING CODE 4165–15–P
meaning set forth in section 1927(k) of (a) General.Any manufacturer with a
the Social Security Act. pharmaceutical pricing agreement that
Manufacturer has the meaning set knowingly and intentionally charges a
covered entity more than the ceiling DEPARTMENT OF TRANSPORTATION
forth in section 1927(k) of the Social
Security Act. price, as defined in § 10.10, for a
Federal Motor Carrier Safety
National Drug Code (NDC) has the covered outpatient drug, may be subject
Administration
meaning set forth in 42 CFR 447.502. to a civil monetary penalty not to
Pharmaceutical Pricing Agreement exceed $5,000 for each instance of
49 CFR Part 393
(PPA) means an agreement described in overcharging a covered entity, as
section 340B(a)(1) of the PHSA. defined in paragraph (b) of this section. [Docket No. FMCSA–2014–0428]
Quarter refers to a calendar quarter This penalty will be imposed pursuant RIN 2126–AB67
unless otherwise specified. to the procedures at 42 CFR part 1003.
Secretary means the Secretary of the Any civil monetary penalty assessed Parts and Accessories Necessary for
Department of Health and Human will be in addition to repayment for an Safe Operation: Federal Motor Vehicle
Services and any other officer of instance of overcharging as required by Safety Standards Certification for
employee of the Department of Health section 340B(d)(1)(B)(ii) of the PHSA. Commercial Motor Vehicles Operated
and Human Services to whom the (b) Instance of overcharging. An by United States-Domiciled Motor
authority involved has been delegated. instance of overcharging is any order for Carriers
Wholesaler has the meaning set forth a covered outpatient drug, by NDC,
in 42 U.S.C. 1396r–8(k)(11). which results in a covered entity paying AGENCY: Federal Motor Carrier Safety
more than the ceiling price, as defined Administration (FMCSA), DOT.
Subpart B—340B Ceiling Price in § 10.10, for that covered outpatient ACTION: Notice of Proposed Rulemaking
drug. (NPRM), request for comments.
§ 10.10 Ceiling price for a covered
outpatient drug. (1) Each order for an NDC will SUMMARY: FMCSA proposes to amend
A manufacturer is required to constitute a single instance, regardless the Federal Motor Carrier Safety
calculate 340B ceiling prices for each of the number of units of each NDC Regulations (FMCSRs) by requiring
covered outpatient drug, by National ordered. This includes any order placed United States-domiciled (U.S.-
Drug Code (NDC) on a quarterly basis. directly with a manufacturer or through domiciled) motor carriers engaged in
(a) Calculation of 340B ceiling price. a wholesaler, authorized distributor, or interstate commerce to use only
The 340B ceiling price for a covered agent. commercial motor vehicles (CMV) that
outpatient drug is equal to the Average (2) Manufacturers have an obligation display a certification label affixed by
Manufacturer Price (AMP) for the to ensure that the 340B discount is the vehicle manufacturer or a U.S.
smallest unit of measure minus the Unit provided through distribution Department of Transportation (DOT)
Rebate Amount (URA) and will be arrangements made by the Registered Importer, indicating that the
calculated using six decimal places. To manufacturer. vehicle satisfied all applicable Federal
ensure the final price is operational in (3) An instance of overcharging is Motor Vehicle Safety Standards
the marketplace, HRSA then multiplies considered at the NDC level and may (FMVSS) in effect at the time of
this amount by the drug’s package size not be offset by other discounts manufacture. If the certification label is
and case package size. HRSA will provided on any other NDC or discounts missing, the motor carrier must obtain,
publish the 340B ceiling price rounded provided on the same NDC on other and a driver upon demand present, a
to two decimal places. transactions, orders, or purchases. letter issued by the vehicle
(b) Exception.When the ceiling price (4) An instance of overcharging may manufacturer stating that the vehicle
calculation in paragraph (a) of this occur at the time of initial purchase or met all applicable FMVSS in effect at
section results in an amount less than when subsequent ceiling price the time of manufacture.
$0.01 the ceiling price will be $0.01. recalculations due to pricing data DATES: You may submit comments by
(c) New drug price estimation.A submitted to CMS result in a covered August 3, 2015.
manufacturer must estimate the ceiling entity paying more than the ceiling ADDRESSES: Comments to the
price for a new covered outpatient drug price due to failure or refusal to refund rulemaking docket should refer to
as of the date the drug is first available or credit a covered entity. Docket ID Number FMCSA–2014–0428-
for sale and must provide HRSA an (5) A manufacturer’s failure to or RIN 2126–AB67, and be submitted to
estimated ceiling price for each of the provide the 340B ceiling price is not the Administrator, Federal Motor
first three quarters the drug is available considered an instance of overcharging Carrier Safety Administration using any
for sale. Beginning with the fourth when a covered entity did not initially
srobinson on DSK5SPTVN1PROD with PROPOSALS
of the following methods:
quarter the drug is available for sale, the identify the purchase to the • Federal eRulemaking Portal: http://
manufacturer must calculate the ceiling manufacturer as 340B-eligible at the www.regulations.gov.
price as described in paragraph (a) of time of purchase. Covered entity orders • Fax: 1–202–493–2251.
this section. A manufacturer must of non-340B priced drugs will not • Mail: Docket Management Facility
calculate the actual ceiling prices for the subsequently be considered an instance (M–30), U.S. Department of
first three quarters and refund or credit of overcharging unless the Transportation, Room W12–140, 1200
any covered entity which purchased the manufacturer’s refusal to sell or make New Jersey Avenue SE., Washington,
covered outpatient drug at a price drugs available at the 340B price DC 20590–0001.
VerDate Sep<11>2014 16:32 Jun 16, 2015 Jkt 235001 PO 00000 Frm 00049 Fmt 4702 Sfmt 4702 E:\FR\FM\17JNP1.SGM 17JNP1](https://thefederalregister.org/doc/80_FR_34699/page/6.svg)
Document Created: 2015-12-15 14:23:22
Document Modified: 2015-12-15 14:23:22
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Proposed Rules | |
| Action | Notice of proposed rulemaking. | |
| Dates | Submit comments on or before August 17, 2015. | |
| Contact | CDR Krista Pedley, Director, OPA, HSB, HRSA, 5600 Fishers Lane, Mail Stop 08W05A, Rockville, MD 20857, or by telephone at 301-594-4353. | |
| FR Citation | 80 FR 34583 | |
| RIN Number | 0906-AA89 | |
| CFR Associated | Biologics; Business and Industry; Diseases; Drugs; Health; Health Care; Health Facilities; Hospitals and 340b Drug Pricing Program |
2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR