The Health Resources & Services Administration (“HRSA”) Office of Pharmacy Affairs recently launched an online tool that identifies the maximum allowable prices that drug manufacturers participating in Medicaid can charge covered entities. This website is one of the elements mandated in the final rule of the 340B drug pricing program. Section 340B of the Public Health Service Act (“PHSA”) instructs the Department of Health and Human Services (“HHS”) to enter into agreements with drug manufacturers of certain outpatient drugs, wherein the manufacturers are required to provide the drugs to 340B covered entities at a price not to exceed a particular “ceiling price.” Additionally, civil monetary penalties are to be applied to drug manufacturers that “knowingly and intentionally” overcharge for covered drugs. HRSA notes that the 340B program “enables covered entities to stretch scarce federal resources” to reach as many eligible patients as possible with comprehensive services.
The 340B ceiling price is calculated by taking the Average Manufacturer Price (“AMP”) and subtracting the Unit Rebate Amount (“URA”). Manufacturers submit the AMP and URA amount to the Center for Medicare and Medicaid Services (“CMS”). The HRSA then uses that data to calculate the ceiling prices. The new online tool allows HRSA to collect this information directly from manufacturers to verify the accuracy of 340B ceiling prices, and then make ceiling prices available to covered entities. This allows HRSA to efficiently identify and resolve discrepancies with minimal burden to the drug manufacturers.
In November 2018, we wrote about the final rule which was published on January 5, 2017, but was then subject to multiple implementation delays. The effective date was ultimately set to January 1, 2019. Some of the delays were imposed so that HHS could develop comprehensive new policies to address the rising cost of drugs. Those policies would implicate drug pricing in other Federal government programs, including Medicare Parts B & D and Medicaid.
The 340B program has not been without controversy. In 2017, several industry groups sued CMS after it changed the reimbursement rate for the covered drugs, resulting in a $1.6 billion decrease in payments. In the suit, the groups argued that the payment cuts would “dramatically threaten access to health care for many patients, including uninsured and other vulnerable populations.” This suit is still pending. In addition, the Pharmaceutical and Research Manufacturers of America (“PhRMA”) which represents drug manufacturers, argues that “340B program is driving up costs for patients and the health care system” due to “perverse incentives have steered it away from its original intent.” It remains to be seen if the new online tool will improve efficiency in the 340B program.03