January 6, 2017

Obama administration issues final 340B drug discount program rule

Daily Briefing

    HHS on Wednesday finalized a rule for the 340B drug discount program that will penalize drugmakers that deliberately overcharge providers for drugs purchased under the program.

    The federal 340B program requires drug manufacturers to provide outpatient drugs to eligible health care providers at discounts ranging from 20 percent to 50 percent. The program, created by Congress in 1992 and expanded via the Affordable Care Act, focuses on hospitals with disproportionately low-income patient populations. About 40 percent of U.S. hospitals are eligible to participate in the program, which saved providers about $3.8 billion in medication costs in 2013, according to the Health Resources and Services Administration (HRSA).

    However, the program has come under scrutiny, with some questioning the amount of charity care participating hospitals are providing.

    Final rule details

    Under the final rule, drugmakers that "knowingly and intentionally" overcharge providers for drugs purchased through the program will face a fine of up to $5,000. The fine comes in addition to the repayment of the overcharge, Susan Morse reports for Healthcare Finance. Further, the final rule requires drugmakers to offer refunds for overcharges on new drugs, rather than requiring providers to request refunds, as is currently required.

    In addition, the new rule details how drugmakers must determine the ceiling price for covered outpatient drugs each quarter. Under the rule, the ceiling price must be calculated as the average manufacturer price from the previous calendar quarter for the smallest unit of measure, minus the unit rebate amount. If the ceiling price is less than $0.01, the ceiling price will be adjusted to $0.01—the so-called "penny provision." According to HHS, the 340B price occasionally calculates to zero.

    The new rule takes effect Feb. 28 and will be enforced as of April 1. HRSA said the finalized rule will not have an economic impact greater than $100 million in any year (Morse, Healthcare Finance News, 1/4; MacDonald, FierceHealthcare, 1/4; Dickson, Modern Healthcare, 1/4; Health Resources and Services Administration final rule, Federal Register, 1/5).

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