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Manufacturers That Overcharge Under the 340B Program Now Face Monetary Penalties

Posted in Hospitals and Institutions, Legislation and Public Policy, Medicare and Medicaid, Pharmaceuticals

Beginning April 1, 2017, for the first time, manufacturers participating in the 340B Drug Pricing Program who fail to make their drugs available to covered providers in accordance with the ceiling price set forth by the Health Resources and Services Administration (HRSA) will face civil monetary penalties imposed by the Department of Health and Human Services’ Office of Inspector General (OIG). A final rule titled “340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation” was published in the Federal Register on January 5.

Under the 340B Program, covered entities (certain hospitals and other healthcare providers) obtain discounts on covered outpatient drugs from manufacturers who want the drugs to be covered under Medicaid. The final rule grants the OIG the authority to impose sanctions of up to $5,000 per occurrence of knowingly and intentionally charging a covered entity a price for a drug covered by the 340B program that exceeds the ceiling price. In addition to creating enforcement authority, the final rule sets forth the methodology for calculating 340B ceiling prices and requires that such calculations be done quarterly.

Under the new rule, manufacturers will be required to refund entities within 120 days of determining that an overcharge has occurred. The rule also clarifies HRSA’s penny pricing policy which requires a manufacturer to charge $0.01 per unit when the 340B ceiling price equals zero.

The ability to impose civil monetary penalties will give the government a strong enforcement tool to ensure that manufacturers are charging covered entities appropriately, and suggests that manufacturers can expect more rigorous oversight of the 340B Program in the future.

HRSA summarized the final rule and the 340B program on its website.

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