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January 2017

  

Drug Manufacturer Pricing Under the Microscope: HRSA's 340B Civil Monetary Penalty and Drug Pricing Final Rule

  

 
 

  

     

  

 
 

For more information about this e-Alert, please contact:

  

Lauren Z. Groebe

816.572.4588

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Travis F. Jackson

310.203.5343

Email | Bio

  

Emily Shaw

816.218.1291

Email | Bio

  

Kyle A. Vasquez

312.463.6338

Email | Bio

  

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The Health Resources and Services Administration recently surprised the 340B Drug Pricing Program community with the release of its regulations pertaining to drug manufacturer ceiling price calculations and civil monetary penalties.

HRSA's new rule, titled "340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation" (Final Rule), 82 Fed. Reg. 1210 (January 5, 2017), is available here. The Final Rule addresses the calculation of the 340B ceiling price and establishes the rules by which significant CMPs would be imposed on a manufacturer who knowingly and intentionally overcharges a covered entity. It replaces all former HRSA guidance on Penny Pricing and New Drug Pricing, and the Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992 New Drug Pricing.

The Final Rule appears to be an attempt by HRSA to balance the scales between covered entities and drug manufacturers. It purports to impose significant penalties on manufacturers that knowingly and intentionally violate the terms of the 340B statute. The timing of the Final Rule is a potential problem in light of the recent election. While HRSA clearly has regulatory authority to issue the Final Rule, its authority originated from the Affordable Care Act (ACA) – the program that is under intense scrutiny by the new Administration. It is yet to be seen what effect the current political environment and new Administration's threatened repeal of the ACA will have on the Final Rule (or to the 340B Program), if any.

HRSA has already encountered its first roadblock relative to the Final Rule. On January 20, 2017, President Trump issued an executive branch-wide freeze on all pending regulations. On its face, this regulatory freeze applies to the Final Rule as it was published with a future effective date (February 28, 2017). There is an argument that the Administrative Procedure Act limits President Trump's ability to delay final rules that have already been published in the Federal Register, but HRSA can address this limitation by issuing a notice and comment delaying the Final Rule. Chief of Staff Priebus's regulatory freeze memorandum can be found here. A discussion regarding the President's ability to impact the effective date of pending regulations can be found here.

To view the full alert including a detailed review of HRSA's Final Rule, please click here.

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