HHS Releases Much Awaited Final 340B Rule, Sets Fines for Noncompliant Manufacturers

The Health Resources and Services Administration (HRSA) within HHS has finalized a rule for all drug manufacturers who are required to make their drugs available to covered care providers under the 340B drug pricing program. This final rule now sets the 340B ceiling price and application of civil monetary penalties.

The final rule was developed after considering all the comments received by HRSA during the general comment period. Under the new rule, the HRSA can fine a manufacturer up to $5000 for each incident of knowing and intentional overcharging of 340B hospitals for drugs that were purchased under the program. The rule includes information for manufacturers to calculate the 340B ceiling price and the imposition of CMPs against manufacturers who knowingly and intentionally overcharged a covered entity.

The regulation also requires manufacturers to offer refunds for overcharges on new drugs instead of maintaining the current rule, which needs covered entities to request refunds. The rule also gives the Office of the Inspector General authority to impose those penalties. However, there is some wiggle room. Manufacturers would not be considered to have the requisite intent if:

• The manufacturer made an inadvertent, unintentional, or unrecognized error in calculating the ceiling price
• A manufacturer acted on a reasonable interpretation of agency guidance
• A manufacturer established an alternative allocation procedure where there is an inadequate supply of product to meet market demand, as long as covered entities can purchase on the same terms as all other similarly-situated non-340B covered entitites.

340B Health, an organization that has a membership of public and private nonprofit hospitals and health systems that participate in the 340B Drug Pricing Program, released a statement that welcomes the final rule: “Today’s new 340B drug discount program rule should help prevent the drug industry from overcharging America’s 340B health providers for lifesaving medicines. It’s a welcome development in light of public outrage about the unsustainable cost of prescription drugs." The specifics in the rule on how 340B ceiling prices should be calculated will ensure that the prices are right, the statement affirmed.

The release noted that the economic impact of the final rule will not exceed $100 million in a year, and so is not designated to be “economically significant.” The total savings from the 340B Program as a whole are estimated at $6 billion in 2015 alone.

HRSA will begin enforcing the rule from April 1, 2017, anticipating that drug manufacturers will have sufficient time from now until the effective date to update their policies and procedures.