What you need to know about the forces reshaping our industry.


March 22, 2017

Trump admin delays enforcement of 340B drug discount program rule

Daily Briefing

    HHS again has delayed enforcement of a final rule that would penalize drugmakers that deliberately overcharge providers for drugs purchased under the 340B drug discount program.

    The federal 340B program requires drug manufacturers to provide outpatient drugs to eligible health care providers at discounts ranging from 20 to 50 percent. The program, created by Congress in 1992 and expanded under 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.

    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, which HHS issued under former President Barack Obama, drugmakers that "knowingly and intentionally" overcharge providers for drugs purchased through the program will face a fine of up to $5,000 per offense. The drugmakers also have to repay the overcharge. Further, the final rule requires drugmakers to offer refunds for overcharges on new drugs once the overcharges are discovered, rather than requiring providers to request refunds, as currently is 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 rule took effect on Feb. 28 and was scheduled to be enforced beginning April 1.

    HHS again delays enforcement date

    HHS in an interim rule published Monday in the Federal Register again delayed the rule's enforcement date, this time to May 22. The department said it intends to conduct longer rulemaking and is accepting public comments through April 19 on possibly further delaying the rule's enforcement date to Oct. 1.

    OMB withdraws draft 'mega-guidance' for 340B drug program

    Some industry stakeholders expressed frustration over the delay, Healthcare Finance News reports. Ted Slafsky, president and CEO of 340B Health, in a statement said, "This much-needed regulation has been many years in the making." He added, "It was mandated by Congress and is based on HHS Office of Inspector General reports that showed pharmaceutical manufacturers were routinely overcharging providers serving the poor" (Morse, Healthcare Finance News, 3/21; Minemyer, FierceHealthcare, 3/20; HHS final rule, accessed 3/22).

    What providers can learn from the drug pricing debate

    We already knew that patients are becoming more sensitive to health care costs. But public uproar over one drug's 5,000 percent "overnight" price hike proves that patients are more discerning—and vocal—than ever. With more of their money on the line, patients are actively deciding when and where to access care based on cost.

    We saw it coming—and we laid out concrete tactics for dealing with price sensitivity in your market. The first chapter in our study, The Consumer-Oriented Ambulatory Network, focuses on how you can retain market share by making services more affordable. Download the study to learn more.


    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.