November 30, 2018

HHS finalizes 340B rule

Daily Briefing

    HHS on Thursday announced that it has finalized a long-delayed rule for the 340B drug discount program that is slated to take effect Jan. 1, 2019.

    The 340B drug pricing controversy, explained

    Background

    Medicare's 340B program requires drug manufacturers to provide outpatient drugs to eligible health care providers at discounts ranging from 20% to 50%. The program, created by Congress in 1992 and expanded under the Affordable Care Act, focuses its discounts on hospitals with disproportionately low-income patient populations. However, the program has come under scrutiny, with some questioning the amount of charity care participating hospitals are providing.

    HHS in June delayed for the fifth time the effective date of the final 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation. The rule originally was scheduled to take effect Feb. 28, 2017, and the federal government was scheduled to begin enforcing it on April 1, 2017. However, HHS has delayed the rule five times, most recently in June. That move delayed the rule's effectiveness date until July 2019.

    The American Hospital Association (AHA) along with several other groups in September filed a lawsuit to compel HHS to release the final rule.

    In October, the Health Resources and Services Administration (HRSA) issued a notice saying it intends to implement the rule on Jan. 1, 2019.

    Rule finalized

    On Thursday, HHS published the final rule, which outlines how ceiling prices in the 340B program will be calculated, as well as civil monetary penalties for drugmakers that deliberately overcharge providers for drugs purchased under the 340B program.

    HHS previously had said that it needed additional time to consider whether to replace the regulation written under the Obama administration with one written by the Trump administration. HHS now says it "does not believe that any further delay is necessary and is changing the effective date."

    Reaction

    The finalized rule has been well-received by hospital groups, including AHA, America's Essential Hospitals, and 340B Health.

    AHA in a statement said it was "pleased" with the finalization of the rule, and said it will continue to "strongly urge HHS to make available online drug pricing information for 340B hospitals as this rule requires as soon as possible after Jan. 1 and no later than April 1, so that instances of drug company overcharging can be uncovered and penalties enforced."

    Maureen Testoni, interim president and CEO of 304B Health, in a statement said the finalized rule "is a big step toward stopping drug companies from overcharging 340B hospitals, clinics and health centers."

    However, the Pharmaceutical Research and Manufacturers of America said that the rule's "flawed policies are not in line with the 340B statute and fail to address root problems in the 340B program that have enabled private 340B hospitals to generate record profit without commensurate benefit to patients" (Dickson, Modern Healthcare, 11/29; Morse, Healthcare Finance News, 11/29; Stein, Inside Health Policy, 11/29 [subscription required]; AHA statement, 11/29).

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