On June 17, 2015, the Health Resources and Services Administration (HRSA) published a Proposed Rule that would codify standards for the calculation of ceiling prices by manufacturers for covered outpatient drugs under the 340B Program and provide for imposition of civil monetary penalties (CMPs) on manufacturers who knowingly and intentionally charge a covered entity more than the ceiling price. Comments on the Proposed Rule are due by August 17, 2015.
Calculation of Ceiling Prices
First, HRSA reaffirms in the Proposed Rule the basic methodology for calculation of the ceiling price—Medicaid Average Manufacturer Price (AMP) less the Medicaid Unit Rebate Amount (URA) for the smallest unit of measure, calculated to six decimal places—and reiterates the “penny pricing” exception.
HRSA then proposes “to codify the longstanding policy from the 1995 final guidelines” for new drug price estimation that would require manufacturers to estimate a ceiling price for the first three quarters and apply a calculated ceiling price for the fourth quarter. Manufacturers would have to then calculate the “actual” ceiling prices for the first three quarters and retroactively refund “overcharged” covered entities for that period. HRSA solicits comments on all aspects of the proposed methodology.
Civil Monetary Penalties
Under the Proposed Rule, “[a]ny manufacturer with a pharmaceutical pricing agreement that knowingly and intentionally charges a covered entity more than the ceiling price . . . 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.” Any CMP would be in addition to repayment for an instance of overcharging.
An “instance of overcharging” would include “any order for a certain covered outpatient drug, by NDC [National Drug Code], which results in a covered entity paying more than the ceiling price.” Thus, each order for an NDC would constitute a single instance, regardless of the number of units, and would include any order placed directly with a manufacturer or through a wholesaler, distributor or agent. An instance of overcharging could occur either at the time of initial purchase or in the event of subsequent ceiling price recalculations where the manufacturer does not refund or credit a covered entity.
HRSA emphasizes in the Proposed Rule that the proposed CMPs apply to manufacturers, and, thus, that manufacturers are obligated to ensure that a covered entity receives a 340B drug at or below the ceiling price, regardless of whether the covered entity acquires the drug through a wholesaler. HRSA states that manufacturers should consider the role of wholesalers and work out issues in normal business arrangements, as a manufacturer’s failure to ensure that covered entities receive the appropriate 340B discount through its distribution arrangements could be grounds for assessment of CMPs.
The HHS Office of Inspector General would have the authority to bring 340B CMP actions.
Reporter, Kerrie S. Howze, Atlanta, +1 404 572 3594, khowze@kslaw.com.
