HHS has scrapped plans to issue sweeping regulations clarifying the federal 340B drug discount program in light of a court ruling against another 340B rule challenged by the pharmaceutical industry.
Drug manufacturers, hospitals and pharmacies that participate in the 340B program have been waiting since last spring for what they call a “mega-reg,” a regulation that may narrow the reach of the drug discount program. The rapid expansion of the program in recent years has been a chief complaint of the pharmaceutical industry.
The change in direction stems from a lawsuit filed last year by the Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry trade group, which sued HHS over a regulation that required drugmakers to offer reduced prices for orphan drugs if they were used for non-orphan conditions or diseases. Orphan drugs are some of the most expensive drugs sold in the U.S. and many have been approved to treat a wide range of indications.
A judge struck down that rule but the HHS agency that oversees the 340B program eventually re-issued the policy as an interpretative rule.
HHS' Health Resources and Services Administration is looking to avoid a similar battle and outcome with a draft regulation that has been under review by the Office of Management and Budget and has now been withdrawn. “We are only pursuing regulations where we have explicit authority in the statute,” said Martin Kramer, a HRSA spokesman.
In a notice posted to its website, HRSA said that, rather than issue the omnibus regulation it initially drafted, the agency will instead propose guidance next year that will address “key policy issues raised by various stakeholders committed to the integrity of the 340B program.” It will separately issue proposed rules related to civil monetary penalties for manufacturers, how the ceiling prices of 340B drugs are calculated and dispute resolution.
“We look forward to reviewing the guidance when it is released and assessing how it might address a number of issues relating to the administration and operation of the 340B program,” Lori Reilly, PhRMA's executive vice president of policy and research, said in a statement.
Under the 340B program, drug manufacturers provide discounts between 20% and 50% on certain outpatient drugs to hospitals that serve large numbers of low-income and uninsured patients. The savings and revenue generated by the discounts can be used to improve patient care, including the addition of new services. Hospitals can decide for themselves how to use the discounts.
Drugmakers and some lawmakers have criticized the 340B program, arguing it creates perverse incentives for hospitals to buy up physician's offices and clinics that serve indigent patient populations in order to gain access to the discounts. The drug industry has advocated for rules requiring hospitals to demonstrate that 340B savings are used directly to treat the patient populations that qualified them for the program.
Hospitals say the program is an invaluable tool for helping them continue to care for patients.
“The forthcoming guidance should be written in a way that enables our member hospitals to continue meeting those objectives,” said Randy Barrett, a spokesman for Safety Net Hospitals for Pharmaceutical Access, a trade group for hospitals that participate in the 340B program.
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