[Federal Register Volume 75, Number 181 (Monday, September 20, 2010)]
[Proposed Rules]
[Pages 57230-57232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-23461]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Chapter I
340B Drug Pricing Program Manufacturer Civil Monetary Penalties
AGENCY: Health Resources and Services Administration, HHS.
ACTION: Advance notice of proposed rulemaking and request for comments.
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SUMMARY: Section 602 of Public Law 102-585, the ``Veterans Health Care
Act
[[Page 57231]]
of 1992'' enacted Section 340B of the Public Health Service Act (PHSA).
Section 340B implements a drug pricing program by which manufacturers
enter into an agreement to sell covered outpatient drugs to particular
covered entities at a price not exceeding the amount determined under a
statutory formula. Manufacturers are required by section 1927(a) of the
Social Security Act to enter in agreements with the Secretary that
comply with section 340B if they participate in the Medicaid Drug
Rebate Program. Section 7102(a) of the Patient Protection and
Affordable Care Act (Affordable Care Act) (Pub. L. 111-148) requires
the Secretary of HHS to develop and issue regulations for the 340B Drug
Pricing Program (340B Program) establishing standards for the
imposition of sanctions in the form of civil monetary penalties for
manufacturers that knowingly and intentionally overcharge a covered
entity for a 340B drug. As HHS never has had civil monetary penalty
authority that addresses manufacturing overcharging of the 340B
Program, these regulations present a number of issues that have the
potential to impact stakeholders. Accordingly, the Health Resources and
Services Administration (HRSA) is issuing this advance notice of
proposed rulemaking (ANPRM) to solicit public comment on multiple
issues regarding the implementation of this requirement. These comments
will be used to help draft a proposed rule that will be published in
the Federal Register for public comments.
DATES: Submit electronic or written comments by November 19, 2010.
ADDRESSES: Comments in response to this ANPRM should be marked
``Comments on the Civil Monetary Penalties'' and sent to Mr. Bradford
R. Lang, Public Health Analyst, Office of Pharmacy Affairs (OPA),
Health Systems Bureau (HSB), Health Resources and Services
Administration (HRSA), 5600 Fishers Lane, Parklawn Building, Room 10C-
03, Rockville, MD 20857. Comments may also be e-mailed to:
[email protected].
FOR FURTHER INFORMATION CONTACT: CDR Krista Pedley, Director, Office of
Pharmacy Affairs (OPA), Healthcare Services Bureau (HSB), Health
Resources Services Administration (HRSA), 5600 Fishers Lane, Parklawn
Building, Room 10C-03, Rockville, MD 20857.
SUPPLEMENTARY INFORMATION:
I. Background
The Affordable Care Act introduces a number of changes to the 340B
Program. The Affordable Care Act creates several new categories of
eligibility for program participation and provides a number of tools
for improving program compliance by manufacturers and covered entities.
As one of the many changes created by the Affordable Care Act, section
7102(a) amends section 340B(d) of the PHSA to require the Secretary of
HHS to provide for the imposition of civil monetary penalties against
manufacturers. As amended by the Affordable Care Act, section
340B(d)(1)(B)(vi) of the PHSA provides for:
(vi) The imposition of sanctions in the form of civil monetary
penalties, which--
(I) Shall be assessed according to standards established in
regulations to be promulgated by the Secretary not later than 180 days
after the date of enactment of the Patient Protection and Affordable
Care Act;
(II) Shall not exceed $5,000 for each instance of overcharging a
covered entity that may have occurred; and
(III) Shall apply to any manufacturer with an agreement under this
section that knowingly and intentionally charges a covered entity a
price for purchase of a drug that exceeds the maximum applicable price
under subsection (a)(1).
Section 7102(a) of the Affordable Care Act requires the Secretary
of HHS to use funds appropriated under section 340B(d)(4) of the PHSA
to provide for improvements in compliance by manufacturers and covered
entities. The Affordable Care Act also includes provisions to improve
covered entity compliance and the imposition of sanctions. These
provisions addressing sanctions for covered entities will be addressed
separately.
The 340B Program creates complex relationships, not only between
drug manufacturers and covered entities, but also involves, among
others, wholesalers, group purchasing organizations, pharmacies, and
state Medicaid agencies. Changes to the 340B Program have the potential
to alter these complex relationships. Prior to enactment of the
Affordable Care Act, HRSA did not have civil monetary penalty authority
for the 340B Program. This ANPRM is being issued to gather comments to
consider in the development of these regulations.
II. Request for Comments
The purpose of this document is to obtain information and public
comment on how to efficiently and effectively implement the civil
monetary penalties authorized Section 7102(a) of the Affordable Care
Act. Although HRSA has identified several issues and areas where HRSA
believes comment would be particularly helpful, comments may be
submitted on any issues directly relevant to the implementation of the
specified requirements.
Areas for which HRSA is expressly seeking comment include: (1)
Existing Models; (2) Threshold Determination; (3) Administrative
Process Elements; (4) Hearing; (5) Appeals Process; (6) Definitions;
(7) Penalty Computation; (8) Payment of Penalty; and (9) Integration of
Civil Monetary Penalties with Other Provisions in the Affordable Care
Act.
Commenters are requested to specify as clearly as possible which
statutory provision they are commenting on and provide a rationale for
their proposals.
1. Existing Models
HRSA is seeking comments regarding any aspects of other existing
models for civil monetary penalties that can be adapted to the 340B
Program. While the 340B Program has not had civil monetary penalty
authority in the past, HHS has experience with creating and
implementing civil monetary penalties in a number of other contexts.
Certain portions of these other civil monetary penalty authorities can
provide useful insight as HRSA implements the 340B Program civil
monetary penalty authority.
HRSA is currently reviewing the civil monetary penalty authority
exercised by the OIG, Federal Aviation Administration, Treasury, Food
and Drug Administration, United States Department of Agriculture,
Federal Deposit Insurance Corporation, and CMS to determine what
portions of these authorities may be adapted for the 340B Program.
Specifically, HRSA is reviewing the October 2005 DHHS Office of
Inspector General report ``Deficiencies in Oversight of the 340B Drug
Pricing Program'' (OEI-05-02-00072) which recommended that HRSA
consider as a model the Centers for Medicare and Medicaid Services'
(CMS) statutory authority to enforce the Medicaid rebate program,
pursuant to section 1927(b)(3)(C)(i) of the Social Security Act, and
seek similar authorities with respect to enforcement of the 340B
Program. HRSA is also contemplating the use and adaptation of the
procedures codified at 42 CFR part 1003, which includes procedures for
the imposition of civil monetary penalties by the OIG. As such, please
comment on the extent to which provisions similar to 42 CFR part 1003
should be applied in civil monetary penalty regulations applicable to
manufacturers. HRSA is seeking information on other existing
regulations or procedures on civil monetary penalties that may provide
additional guidance specifically relating
[[Page 57232]]
to manufacturers and civil monetary penalties.
2. Threshold Determination
HRSA welcomes comments on when the civil monetary penalty provision
should be applied. HRSA is contemplating an oversight process
incorporating a variety of elements to gather and consider grounds for
applying the penalty provision. These include, but are not limited to,
the amount of the overcharge, the frequency of the overcharge, the
compliance history of the manufacturer in question, and the number of
covered entities affected. The Affordable Care Act provides HRSA with a
range of new compliance tools. HRSA may use this information to
determine when it is most appropriate to utilize its civil monetary
penalty authority and when it is more appropriate to utilize its other
available compliance mechanisms.
3. Administrative Process Elements
HRSA is seeking comments on the administrative processes that would
best administer civil monetary penalties tailored to meet the unique
context of the 340B Program. Systems must be created to address how
civil monetary penalty claims will be processed, what type of notice
should be required for proposed determinations, what involvement should
be available to overcharged covered entities, and what type of notice
should be given to third parties and the public, etc. HRSA invites
comments on the applicability of the particular administrative
procedures in 42 CFR part 1003 and the appropriateness of additional
procedural elements.
4. Hearing
Civil monetary penalty systems typically offer the opportunity for
a hearing. HRSA is inviting comments on the manner in which such a
hearing would be structured. HRSA is considering a large number of
issues involved in creating a fair and efficient hearing process,
including, but not limited to: Decision-making individual or make-up of
the decision making body; ex parte contacts; prehearing conferences;
discovery; subpoenas; fees; form, filing, and service of papers;
motions; sanctions; burden of proof; evidence; and post-hearing briefs.
5. Appeals Process
HRSA is considering under what circumstances (if any) exist with
respect to establishing an appeal review process and who should hear
such an appeal. HRSA is also considering which types of matters may be
appealed. HRSA also invites comments on how the civil monetary process
should interact with the administrative dispute resolution process
required by section 340B(d)(3).
6. Definitions
There are a number of key terms needing a clearly established
definition in administering this provision in a fair and efficient
manner:
a. ``Instance''--HRSA believes that ``instance'' in this context
could potentially be defined either as a per unit of drug and/or per
commercial transaction. If an entity purchases 100 units of a
particular drug in a single transaction, should this constitute 100
instances or a single instance? HRSA also contemplates including
instances of refusing to sell a covered outpatient drug in violation of
the pharmaceutical pricing agreement to be subject to a penalty where a
covered entity has purchased the drug outside the 340B Program at a
price greater than the ceiling price.
b. ``Knowing and intentional''--HRSA contemplates a standard
whereby knowing and intentional can be inferred from the circumstances.
For example, the knowledge and intent of employees or agents of a
manufacturer may be attributed to the company as a whole. In cases
where the ceiling price is known by the manufacturer, the manufacturer
knows that a purchaser is a covered entity, and the covered entity is
knowingly charged a price in excess of the ceiling price, a finder of
fact would be able to infer intentionality of the violation even in
cases where no single individual had knowledge of all of these
elements. HRSA anticipates there may be circumstances where repeated
violations could be considered to be knowingly and intentional if, for
example, a manufacturer repeatedly miscalculates a ceiling price or
otherwise establishes a system where overcharges are a highly probable
consequence.
7. Penalty Computation
In cases where there is a finding that a manufacturer has knowingly
and intentionally charged a covered entity an amount in excess of the
ceiling price, HRSA contemplates application of variable penalties
under the statute. HRSA proposes the following criteria for
consideration: (i) Previous record of overcharging; (ii) timeliness of
response; (iii) cooperation and good faith; (iv) number of covered
entities impacted by the overcharges; (v) impact on patient access;
(vi) economic loss to covered entities; (vi) economic gain to the
manufacturer; and (vii) relative economic impact on manufacturer as to
sufficiency to deter. In determining the penalty, discretion would be
given to the deciding official or body. Furthermore, HRSA contemplates
that there may be circumstances under which a penalty may be waived for
reasons of equity or other good cause.
8. Payment of Penalty
Once a penalty is assessed there are a number of methods for
transferring the penalty to the government. HRSA expects to have the
application of interest from the date of the overcharge. HRSA also
contemplates the ability to adjust the amount of the penalty. To the
extent that a penalty payment or an assessment is not paid in a timely
manner, a civil action could be pursued by the government.
9. Integration of Civil Monetary Penalties With Other Provisions in
Affordable Care Act
In addition to the compliance tools already available to HRSA, such
as audits and alternative dispute resolution, the Affordable Care Act
provides HRSA with many additional tools to monitor compliance. These
additional tools include establishing procedures to verify the accuracy
of ceiling prices, creating processes for manufacturers to refund
overcharges, selective auditing of manufacturers, and providing access
to ceiling price information. To ensure its most effective use, the new
civil monetary penalty authority must be used in conjunction with these
other compliance tools. HRSA anticipates that information gathered from
these other compliance tools will be useful in civil monetary penalty
actions and also that information gathered in civil monetary penalty
actions will be useful in implementing these other compliance tools.
HRSA invites comments concerning the relationship between civil
monetary penalties and other oversight mechanisms, such as dispute
resolution, spot audits, and others.
While these nine areas were identified for comment, we welcome
comments on any other issues that stakeholders believe are relevant to
implementing an effective process for civil money penalties.
Dated: September 14, 2010.
Mary K. Wakefield,
Administrator.
[FR Doc. 2010-23461 Filed 9-17-10; 8:45 am]
BILLING CODE 4165-15-P