Today, the Department of Health and Human Services (HHS) announced that they are re-opening the comment period on its June 17, 2015 proposed rule (the Proposed Rule) concerning establishment of the “Ceiling Price” for covered outpatient drugs (340B drugs) and assessment of penalties against manufacturers for violation of 340B pricing rules. Arent Fox LLP previously provided an analysis of the Proposed Rule on our blog, Health Care Counsel, which you can access here.
Upon its initial release, comments on the Proposed Rule were due on August 17, 2015. However, “in light of the comments received, HHS is reopening the comment period for 30 days for the purpose of inviting public comments on several specific areas.” The new comment period ends on May 19, 2016.
Although HHS specifies several areas of particular interest for further public comment, today’s notice clarifies that “comments may be submitted on any aspect of the Proposed Rule, not just those areas specifically addressed” in today’s announcement. The agency is interested to hear more from the industry regarding the following specific topics:
Ceiling Price for a Covered Outpatient Drug Exception. HHS is considering alternatives to so-called “penny pricing,” whereby the 340B Ceiling Price of a covered outpatient drug would be set at one cent if the calculation of a 340B Ceiling Price resulted in an amount less than $0.01. Commenters have already suggested several alternatives to penny pricing, such as use of the federal ceiling price, the most recent positive ceiling price from previous quarters, and nominal sales price. “Given the number of comments on this issue,” HHS wants to know if an alternative to penny pricing should be adopted.
New Drug Price Estimation. In the Proposed Rule, HHS recommended that manufacturers estimate the Ceiling Price for new covered outpatient drugs being introduced to the market for the first three quarters that the new drug is available for sale. After the first three quarters, manufacturers would calculate an “actual” Ceiling Price for use in the fourth quarter of sales, and manufacturers would be required to provide a refund or credit to any covered entity which purchased the covered outpatient drug at a price greater than the “actual” Ceiling Price. Commenters proposed a specific methodology for calculating new drug prices, and HHS is seeking comment on whether the price of the new covered outpatient drug should be set as the wholesale acquisition cost (WAC) minus the applicable rebate percentage (i.e., 23.1 percent for most single-source and innovator drugs, 17.1 percent for clotting factors and drugs approved exclusively for pediatric indications, and 13 percent for generics and OTCs).
Definition of “Knowing and Intentional.” By statute, HHS may impose civil monetary penalties against manufacturers who have “knowingly and intentionally” charged a covered entity a price that exceeds the 340B Ceiling Price. The Proposed Rule, however, did not specifically define the “knowing and intentional” standard. In today’s announcement, HHS indicated that further definition of the standard may be necessary, and that there could be situations in which a manufacturer could be considered “exempt” from the intent requirement. HHS specifically is soliciting comment “on the concept that manufacturers would not be considered to have the requisite intent in the following circumstances:
- the manufacturer made an inadvertent, unintentional, or unrecognized error in calculating the Ceiling Price
- a manufacturer acted on a reasonable interpretation of agency guidance; or
- when a manufacturer has established alternative allocation procedures where there is an inadequate supply of product to meet market demand, as long as covered entities are able to purchase on the same terms as all other similarly-situated providers.”
It is obvious that many stakeholders have already taken advantage of the prior comment opportunity on the Proposed Rule, and today’s announcement indicates that HHS is listening to the industry on these important issues. We encourage stakeholders to reflect on the issues outlined by HHS in today’s announcement, and we are ready to assist our clients with thoughtful and effective ways of communicating their questions, comments and concerns to the agency.