Coming Proposed Rule Could Shed Light on HRSA’s 340B Enforcement Power

A forthcoming HHS proposed rule could more shed light on the Trump administration’s thinking about HRSA’s ability to enforce 340B program policy. | Source: Shutterstock

Coming Proposed Rule Could Shed Light on HRSA’s 340B Enforcement Power

The U.S. Health and Human Services Department (HHS) has signaled it is going publish a proposed rule soon setting standards for HHS administrative enforcement actions and adjudication.

With just 50 days left until President-elect Joe Biden’s inauguration, it’s unclear whether HHS under President Trump has enough time to publish a final rule. A proposed rule, however, could shed light on current HHS leadership’s thinking about civil enforcement and final agency determinations—a hot topic now in 340B circles. What HHS might do about pharmaceutical manufacturers’ denials of 340B pricing on drugs shipped to contract pharmacies is an example of a civil enforcement action. Also, the 340B administrative dispute resolution (ADR) process that HHS is preparing to launch is an example of civil administrative adjudication. (Although HHS says the 340B ADR process isn’t intended to be “trial-like,” its decisions will be final, binding, and appealable to a court.) HHS last month asked the White House to sign off on a 340B ADR final rule.

The day before Thanksgiving, HHS sent the White House Office of Management and Budget (OMB) a proposed rule to implement an executive order Trump signed in October 2019 mandating safeguards for regulated parties facing a civil administrative enforcement action or adjudication. As we previously reported, Trump signed a related executive order that same day in October 2019 requiring federal departments and agencies to treat program guidance as non-binding except as incorporated into a contract.

The U.S. Health Resources and Services Administration (HRSA) has been saying for months that, with respect to 340B guidance documents, its enforcement power is limited to clear violations of the 340B statute. Regarding the drug manufacturers that have been denying 340B pricing on drugs going to contract pharmacies, HRSA has said is studying whether the companies’ actions violate the 340B statute and whether sanctions may apply.

Trump’s executive order on agency enforcement actions and judgements includes an entire section on department or agency reliance on guidance documents. It says:

When an agency takes an administrative enforcement action, engages in adjudication, or otherwise makes a determination that has legal consequence for a person, it must establish a violation of law by applying statutes or regulations. The agency may not treat noncompliance with a standard of conduct announced solely in a guidance document as itself a violation of applicable statutes or regulations. When an agency uses a guidance document to state the legal applicability of a statute or regulation, that document can do no more, with respect to prohibition of conduct, than articulate the agency’s understanding of how a statute or regulation applies to particular circumstances.

The section also says an agency can cite a guidance document in an administrative enforcement action or adjudication only if the document has been published in the Federal Register or on the agency’s online policy guidance database. HHS launched its guidance portal in July.

Other sections of President Trump’s order address topics including advanced public notice for expected standards of conduct and jurisdictional claims in enforcement actions or adjudications; regulated parties’ appeal rights; procedures for information collections; and procedures for regulated parties to voluntarily disclose regulatory violations in exchange for reductions or waivers of civil penalties.

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340B Hospitals Will Know Soon if Part B Cuts Will Continue Next Year or Be Even Worse

The Trump administration is expected to announce at any time whether next year it will reduce what it pays hospitals for physician-administered drugs bought through the 340B program even below deeply reduced rates in place since 2018, or leave the current average sales price (ASP) minus 22.5 percent rate intact for another year.

The U.S. Centers for Medicare & Medicaid Services (CMS) sets the rate it pays hospitals under Medicare Part B for 340B-purchased drugs in its annual hospital Outpatient Prospective Payment System (OPPS) final rule. OPPS rules are for calendar years and are effective Jan 1. CMS normally releases its OPPS rule for the coming year at least 60 days in advance. This year, due to the COVID-19 pandemic, the agency said it expected to make the 2021 OPPS final rule available for public inspection at least 30 days before the Jan. 1 effective date.

In April and May, CMS surveyed hospitals for their net costs for 340B-purchased drugs billed to Part B. In August, in its OPPS proposed rule for 2021, CMS said based on the survey results, it might set Part B reimbursement for hospitals’ 340B purchased drugs at an ASP minus 28.7 percent effective rate—6.2 percent below the current rate. It said another option would be to leave the rate where it is at ASP minus 22.5 percent. Before the cuts began in 2018, the rate was ASP plus 6 percent.

The American Hospital Association (AHA) says the Part B cuts have cost hospitals about $1.6 billion annually since 2018. The potential deeper cut next year would take an additional $427 million away from hospitals, AHA says.

Because the 2021 OPPS rule will have been in effect for three weeks by the time Joe Biden is sworn in as President, it would be extremely challenging for his administration to pause or rewrite it.

In mid-October, the full U.S. Court of Appeals for the District of Columbia Circuit denied a motion by the AHA, two other hospital groups, and three health systems to reconsider a three-judge panel’s late July decision upholding CMS’s reimbursement cuts for 340B hospitals. The plaintiffs have until mid-January to decide whether to ask the U.S. Supreme Court to take the case.

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HRSA Tees Up 340B Health Center Insulin Final Rule

In case you missed the news digest we published late on the day before Thanksgiving, the U.S. Health Resources and Services Administration (HRSA) last week Tuesday sent its final rule to implement President Trump’s executive order regarding community health centers’ 340B savings on insulin and injectable epinephrine to the White House Office of Management and Budget for final approval.

This moves the rule a big step closer to publication in the Federal Register. The incoming Biden administration, however, will probably halt the rule’s implementation, and it probably will be sympathetic to health centers’ requests to withdraw it. Health centers say the order is based on fundamental misunderstandings of how they and the 340B program operate, and if implemented would do “significantly more harm than good.” More than 100 U.S. House Democrats made the same points in a September letter asking the Trump administration to drop the rule.

HRSA’s proposed rule, published in late September, would condition health centers’ future federal grants on making insulin and injectable epinephrine available at 340B acquisition cost plus a minimal administration fee to patients with low incomes who also have one or more of the following:

  • a high cost sharing requirement for either insulin or injectable epinephrine

  • a high unmet deductible

  • no health care insurance.

Meanwhile, in early September, drug manufacturer Eli Lilly and Co. announced that, “consistent with” President Trump’s executive order, it would require all 340B covered entities to pass along all of their 340B savings on Lilly insulin products dispensed to eligible patients by contract pharmacies, with no mark-up or dispensing fees and without billing any applicable patient’s insurer or payer.

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Canada Acts to Stymie Drug Exports to the U.S.

The Canadian health ministry on Saturday banned its pharmaceutical manufacturers and wholesalers from exporting drugs to the United States in bulk if they have “reasonable grounds to believe that the distribution” will cause or exacerbate a drug shortage in Canada.

“Our health care system is a symbol of our national identity and we are committed to defending it,” Canadian Health Minister Patty Hajdu said. “The actions we are taking today will help protect Canadians’ access to the medication they rely on.”

Health Canada’s move came in advance of yesterday’s effective date of the Trump administration’s final rule letting states and Indian tribes apply to the U.S. Food and Drug Administration (FDA) to import less-expensive Canadian drugs, resulting “in cost savings for the American consumer.” Pharmaceutical Research and Manufacturers of America (PhRMA) last week sued the FDA and the U.S. Health and Human Services Department (HHS) to block the rule’s implementation. Florida last week submitted a proposal to the FDA to begin importing drugs in bulk from Canada to treat asthma, chronic obstructive pulmonary disease (COPD), diabetes, and HIV/AIDS, and other chronic health conditions.

In issuing the final rule, the FDA declined several commenters’ requests to answer how imported drugs would be treated under the 340B and Medicaid drug rebate program. It said HHS “may issue further guidance or rulemaking as appropriate.”

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Updates: Chuck Grassley, COVID-19 Relief Legislation

On Nov. 19, we reported that 87-year-old U.S. Sen. Chuck Grassley (R-Iowa)—one of the Senate’s most-engaged members on 340B matters—had tested positive for the virus that causes COVID-19 and was quarantining himself. Grassley announced yesterday that he was asymptomatic throughout his quarantine and was cleared to return to work by his doctors.

On his first day back, the Senate Finance Committee chair said Congress needs to “pass long overdue relief legislation to help families, businesses and communities get through this crisis.” The Democratic-controlled House passed a $2.2 trillion COVID-19 relief bill in early October—a thinner version of the $3.4 trillion relief bill it passed in May. Senate Majority Leader Mitch McConnell (R-Ky.) backs spending about $500 billion. This morning, a bipartisan group of senators held a news conference to announce that senators and representatives from both parties have agreed on a $908 billion framework to provide emergency COVID-19 relief through April 1, 2021. Its chances of passage remain in doubt.

According to the COVID Tracking Project, yesterday there were 96,039 individuals in the U.S. hospitalized due to COVID-19, a record-high for the pandemic. Of those, 18,545 were in intensive care units and 6,520 were on ventilators.

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