The Obama administration issued draft regulations that would impose fines on drug companies that overcharge hospitals and clinics for medication purchased under the government's 340B drug discount program.
The penalties are part of a proposed rule the Health Resources and Services Administration released Wednesday that establishes a system for calculating “ceiling prices” for covered outpatient drugs.
Under the policy, drug companies must reimburse providers that paid more than the ceiling price for new medications and would have to pay fines up to $5,000 per instance for doing so "knowingly and intentionally."
Pharmaceutical Research and Manufacturers of America, the industry's trade group, said in a statement that it was reviewing the proposal and would provide comments to HRSA, which are due Aug. 17.
“PhRMA believes the 340B program needs reform and remains committed to working with HRSA and stakeholders to ensure 340B benefits the vulnerable or uninsured patients it was intended to help,” Lori Reilly, executive vice president for the organization, said in a statement.
Established by Congress in 1992, the 340B program requires drug companies as a condition of their participation in Medicaid to provide discounts of 20%-50% to hospitals and clinics for outpatient drugs. The program is intended to provide low-income patients greater access to medications.
The proposed regulations on ceiling prices are the first that HRSA has attempted to issue on the program since a U.S. District Court struck down a 340B rule last year that entitled providers to discounts on expensive "orphan drugs" for rare diseases if they were being used for common conditions. The lawsuit was filed by drug companies, who argue the scope of the program has exceeded what Congress intended.
Critics—principally drugmakers but also community oncology practices that compete with 340B hospitals—complain the program is being abused and that some hospitals are benefiting from discounts despite serving relatively few low-income patients.
A 2014 analysis conducted by Avalere Health found roughly two-thirds of hospitals participating in 340B provide less charity care than the average U.S. hospital.
But an analysis conducted in May by healthcare policy consulting firm, Dobson DaVanzo & Associates found 340B hospitals provided nearly twice as much care to Medicaid and low-income Medicare beneficiaries compared with hospitals not participating in the program.
HRSA estimates the program saved providers $3.8 billion in drug costs in 2013. Drug companies, meanwhile, want the government to require participants to demonstrate those savings go toward patient care.