[Federal Register Volume 83, Number 88 (Monday, May 7, 2018)]
[Proposed Rules]
[Pages 20008-20011]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09711]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

42 CFR Part 10

RIN 0906-AB18


340B Drug Pricing Program Ceiling Price and Manufacturer Civil 
Monetary Penalties Regulation

AGENCY: Health Resources and Services Administration, HHS.

ACTION: Notice of proposed rulemaking; further delay of effective date.

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SUMMARY: The Health Resources and Services Administration (HRSA) 
administers section 340B of the Public Health Service Act, referred to 
as the ``340B Drug Pricing Program'' or the ``340B Program.'' HHS is 
soliciting comments on further delaying the

[[Page 20009]]

effective date of the January 5, 2017, final rule that sets forth the 
calculation of the ceiling price and application of civil monetary 
penalties, and applies to all drug manufacturers that are required to 
make their drugs available to covered entities under the 340B Program. 
HHS proposes to further delay the effective date of the final rule 
published in the Federal Register from July 1, 2018, to July 1, 2019. 
HHS proposes this action to allow a more deliberate process of 
considering alternative and supplemental regulatory provisions and to 
allow for sufficient time for additional rulemaking.

DATES: Submit comments on or before May 22, 2018.

ADDRESSES: You may submit comments, identified by the Regulatory 
Information Number (RIN) 0906-AB18, by any of the following methods. 
Please submit your comments in only one of these ways to minimize the 
receipt of duplicate submissions.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow instructions for submitting comments. This is the preferred 
method for the submission of comments.
     Email: [email protected]. Include 0906-AB11in the 
subject line of the message.
     Mail: Office of Pharmacy Affairs (OPA), Healthcare Systems 
Bureau (HSB), Health Resources and Services Administration (HRSA), 5600 
Fishers Lane, Mail Stop 08W05A, Rockville, MD 20857.
    All comments submitted will be available to the public in their 
entirety. Please do not submit confidential commercial information or 
personally identifying information that you do not want in the public 
domain.

FOR FURTHER INFORMATION CONTACT: CAPT Krista Pedley, Director, OPA, 
HSB, HRSA, 5600 Fishers Lane, Mail Stop 08W05A, Rockville, MD 20857, or 
by telephone at 301-594-4353.

SUPPLEMENTARY INFORMATION:

I. Background

    HHS published a notice of proposed rulemaking (NPRM) on June 17, 
2015, to implement civil monetary penalties (CMPs) for manufacturers 
that knowingly and intentionally charge a covered entity more than the 
ceiling price for a covered outpatient drug; to provide clarity 
regarding the requirement that manufacturers calculate the 340B ceiling 
price on a quarterly basis; and to establish the requirement that a 
manufacturer charge $.01 (penny pricing) for each unit of a drug when 
the ceiling price calculation equals zero (80 FR 34583, June 17, 2015). 
After review of the initial comments, HHS reopened the comment period 
(81 FR 22960, April 19, 2016) to invite additional comments on the 
following areas of the NPRM: 340B ceiling price calculations that 
result in a ceiling price that equals zero (penny pricing); the 
methodology that manufacturers use when estimating the ceiling price 
for a new covered outpatient drug; and the definition of the ``knowing 
and intentional'' standard to be applied when assessing a CMP for 
manufacturers that overcharge a covered entity.
    On January 5, 2017, HHS published a final rule in the Federal 
Register (82 FR 1210, January 5, 2017); comments from both the original 
comment period established in the NPRM and the reopened comment period 
announced in the April 19, 2016, notice were considered in the 
development of the final rule. The provisions of that final rule were 
to be effective March 6, 2017; however, HHS issued a subsequent final 
rule (82 FR 12508, March 6, 2017) delaying the effective date to March 
21, 2017, in accordance with a January 20, 2017, memorandum from the 
Assistant to the President and Chief of Staff, titled ``Regulatory 
Freeze Pending Review.'' \1\
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    \1\ See: https://www.whitehouse.gov/the-press-office/2017/01/20/memorandum-heads-executive-departments-and-agencies.
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    To provide affected parties sufficient time to make needed changes 
to facilitate compliance, and because questions were raised, HHS issued 
an interim final rule (82 FR 14332, March 20, 2017) to delay the 
effective date of the final rule to May 22, 2017. HHS solicited 
additional comments on whether that date should be further extended to 
October 1, 2017. After careful consideration of the comments received, 
HHS delayed the effective date of the January 5, 2017, final rule to 
October 1, 2017 (82 FR 22893, May 19, 2017).
    HHS later solicited comment on delaying the effective date of the 
January 5, 2017, final rule to July 1, 2018 (82 FR 39553, August 21, 
2017). After consideration of the comments received, HHS delayed the 
effective date of the January 5, 2017, final rule to July 1, 2018 (82 
FR 45511, September 29, 2017).

II. Proposal To Delay the Effective Date of the Final Rule

    HHS proposes to further delay the effective date of the January 5, 
2017, final rule as HHS intends to engage in additional or alternative 
rulemaking on these issues, and as discussed in more detail on page 5, 
the Department believes it would be counterproductive to effectuate the 
final rule prior to issuance of additional or alternative rulemaking on 
these issues. HHS is in the process of developing new comprehensive 
policies to address the rising costs of prescription drugs. Those 
policies will address drug pricing in government programs, such as 
Medicare Parts B & D, Medicaid, and the 340B discount drug program. 
Accordingly, we are proposing to delay the effective date of the final 
rule entitled ``340B Drug Pricing Ceiling Price and Manufacturer Civil 
Monetary Penalties Regulation.'' See 82 FR 1210 (Jan. 5, 2017).
    This rule is currently scheduled to go into effect on July 1, 2018; 
we are proposing to delay further the effective date to July 1, 2019. 
We do not believe that this delay will adversely affect any of the 
stakeholders in a meaningful way. The final rule implements both penny 
pricing and a provision in the Affordable Care Act contemplating civil 
money penalties for those who fail to provide the proper 340B discounts 
to covered entities. The so-called penny pricing provision would allow 
manufacturers to charge $0.01 for a drug with when the ceiling price 
calculation results in a zero amount. As discussed in the January 5, 
2017 final rule, a small number of manufacturers have informed HHS over 
the last several years that they charge more than $0.01 for a drug with 
a ceiling price below $0.01. However, this is a long-standing HHS 
policy, and HHS believes the majority of manufacturers currently follow 
the practice of charging a $0.01. Therefore, the delay of this portion 
of the regulation would not result in a significant economic impact.
    Delaying implementation of the 340B-specific CMPs should have no 
adverse effect given that other more significant remedies are available 
to entities that believe that they have not been provided the full 
discount that they are entitled to receive under the program. This 
proposed delay, though, will save the healthcare sector compliance 
costs, as described in the January 5, 2017 issuance of the final rule.
    HHS believes that the proposed delay would allow necessary time to 
consider more fully the substantial questions of fact, law, and policy 
identified by the Department during its review of the rule pursuant to 
the aforementioned ``Regulatory Freeze Pending Review,'' memorandum. 
Requiring manufacturers to make targeted and potentially costly changes 
to pricing systems and business procedures to comply with a rule that 
is under further consideration would be disruptive.

[[Page 20010]]

    As background, the January 20, 2017, Executive Order entitled, 
``Minimizing the Economic Burden of the Patient Protection and 
Affordable Care Act Pending Repeal,'' specifically instructs HHS and 
all other heads of executive offices to utilize all authority and 
discretion available to delay the implementation of certain provisions 
or requirements of the Patient Protection and Affordable Care Act.\2\ 
The January 5, 2017, final rule is based on changes made to the 340B 
Program by the Patient Protection and Affordable Care Act. HHS is 
proposing to further delay the effective date of the January 5, 2017, 
final rule to July 1, 2019, to more fully consider the regulatory 
burdens that may be posed by this final rule.
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    \2\ See: https://www.gpo.gov/fdsys/pkg/FR-2017-01-24/pdf/2017-01799.pdf.
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    At this time, HHS seeks public comment regarding the impact of 
delaying the effective date of the final rule, published January 5, 
2017, for an additional 12 months from the current effective date of 
July 1, 2018, to Ju1y 1, 2019, while a more deliberate rulemaking 
process is undertaken. HHS is soliciting public comments for a 
shortened 15-day period because parties have had ample opportunity to 
comment on the two prior delays of the effective date of the underlying 
340B regulation, and the impact of this delay on the regulated 
community is de minimis. Given the prior opportunities to comment on 
the underlying proposed regulation and the delays, we do not envision 
receiving any novel comments. Moreover, we believe that the delay of 
the CMP authority can be issued without the opportunity for public 
comment because it delays the effective date of a regulatory 
restriction. HHS encourages all stakeholders to provide comments on 
this proposed rule.

III. Regulatory Impact Analysis

    HHS has examined the effects of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 8, 2011), the Regulatory Flexibility Act (Pub. L. 96-
354, September 19, 1980), the Unfunded Mandates Reform Act of 1995 
(Pub. L. 104-4), and Executive Order 13132 on Federalism (August 4, 
1999).

Executive Orders 12866, 13563, and 13771

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 is supplemental to and reaffirms the principles, 
structures, and definitions governing regulatory review as established 
in Executive Order 12866, emphasizing the importance of quantifying 
both costs and benefits, of reducing costs, of harmonizing rules, and 
of promoting flexibility. Section 3(f) of Executive Order 12866 defines 
a ``significant regulatory action'' as an action that is likely to 
result in a rule: (1) Having an annual effect on the economy of $100 
million or more in any one year, or adversely and materially affecting 
a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or Tribal 
governments or communities (also referred to as ``economically 
significant''); (2) creating a serious inconsistency or otherwise 
interfering with an action taken or planned by another agency; (3) 
materially altering the budgetary impacts of entitlement grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raising novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in the Executive Order. A regulatory impact analysis must be prepared 
for major rules with economically significant effects ($100 million or 
more in any one year), and a ``significant'' regulatory action is 
subject to review by the Office of Management and Budget (OMB).
    HHS does not believe that the proposal to further delay the 
effective date of the January 5, 2017, final rule will have an economic 
impact of $100 million or more, and therefore, this NPRM has not been 
designated as an ``economically significant'' proposed rule under 
section 3(f)(1) of the Executive Order 12866. The economic impact of 
having no rule in place related to the policies addressed in the final 
rule is believed to be minimal.
    Executive Order 13771, entitled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017. This action's 
designation as regulatory or deregulatory will be discussed in the 
final rule and be informed by comments received in response to this 
proposed rule.

The Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) and the 
Small Business Regulatory Enforcement and Fairness Act of 1996, which 
amended the RFA, require HHS to analyze options for regulatory relief 
for small businesses. If a rule has a significant economic effect on a 
substantial number of small entities, the Secretary must specifically 
consider the economic effect of the rule on small entities and analyze 
regulatory options that could lessen the impact of the rule. HHS will 
use an RFA threshold of at least a 3 percent impact on at least 5 
percent of small entities.
    For purposes of the RFA, HHS considers all health care providers to 
be small entities either by meeting the Small Business Administration 
(SBA) size standard for a small business, or by being a nonprofit 
organization that is not dominant in its market. The current SBA size 
standard for health care providers ranges from annual receipts of $7 
million to $35.5 million. As of January 1, 2018, over 12,800 covered 
entities participate in the 340B Program, representing safety-net 
health care providers across the country. HHS has determined, and the 
Secretary certifies, that this proposed rule would not have a 
significant impact on the operations of a substantial number of small 
manufacturers; therefore, we are not preparing an analysis of impact 
for this RFA. HHS estimates that the economic impact on small entities 
and small manufacturers would be minimal. HHS welcomes comments 
concerning the impact of this proposed rule on small manufacturers.

Unfunded Mandates Reform Act

    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and Tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year.'' In 2017, the threshold level was 
approximately $148 million. HHS does not expect this rule to exceed the 
threshold.

Executive Order 13132--Federalism

    HHS has reviewed this proposed rule in accordance with Executive 
Order 13132 regarding federalism, and has determined that it does not 
have ``federalism implications.'' This proposed rule would not ``have 
substantial direct effects on the States, or on the relationship 
between the national government and the States, or on the distribution 
of power and

[[Page 20011]]

responsibilities among the various levels of government.''

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires 
that OMB approve all collections of information by a federal agency 
from the public before they can be implemented. This proposed rule is 
projected to have no impact on current reporting and recordkeeping 
burden for manufacturers under the 340B Program. This proposed rule 
would result in no new reporting burdens. Comments are welcome on the 
accuracy of this statement.

    Dated: May 1, 2018.
George Sigounas,
Administrator, Health Resources and Services Administration.
    Approved: May 2, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-09711 Filed 5-4-18; 8:45 am]
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