Azar Promises Drugmaker Penalty Rule Coming

Other coming changes will affect the Stark Law, anti-kickback statutes, and a federal rule guarding mental health and substance abuse treatment information within patient medical records.

July 9—A five-times-delayed rule that would stiffen drugmaker penalties—among other provisions—will be implemented, the Trump administration’s healthcare policy leader told providers on Monday.

Drugmakers face penalties of up to $5,000 each time they intentionally charge a 340B hospital more than the program’s ceiling price, according to a Health Resources and Services Administration final rule that was most recently delayed in a notice published June 5. The 340B program allows qualifying providers to obtain pharmaceuticals at a discounted price while receiving regular payment from public and private payers. Hospitals can use the net revenue to provide services for low-income patients.

The final rule outlined how the ceiling price is calculated for drug companies participating in the 340B program, while the Affordable Care Act required penalties for drugmakers charging 340B hospitals more than the ceiling price.

The rule also codified the penny-pricing methodology for 340B drugs, which requires drug manufacturers to charge $0.01 for each unit of a drug when the ceiling price is zero.

“Some in the 340B community believe our delay of the penny-pricing regulation is in deference to the pharmaceutical industry; that couldn’t be further from the truth,” Health and Human Services (HHS) Secretary Alex Azar II said in a speech at the 340B Coalition Conference. “We will address this and propose other changes to the 340B program as part of our comprehensive approach to lowering drug prices and reducing out-of-pocket costs.”

340B Health, which is an association of more than 1,300 hospitals, has long supported the delayed rule, said Maureen Testoni, interim president and CEO.

However, Testoni said her organization doesn’t know how Azar might change the rule before it is finally implemented.

“We think it was good as proposed,” Testoni said in comments to reporters after Azar’s speech.

340B Changes

To address concerns with the 340B program, the Trump administration is pushing for greater transparency and defending a cut in Medicare payments for drugs bought using 340B discounts

The Hospital Outpatient Prospective Payment System (OPPS) final rule, published Nov. 1, cut the Medicare payment rate for Part B drugs purchased by hospitals through the 340B program to the average sales price (ASP) minus 22.5 percent from the previous standard of ASP plus 6 percent.

“The new payment level is still above the average price actually paid by 340B entities, but it is closer to reality,” Azar said. “Importantly, it will help many seniors pay less for their drugs, avoiding situations where they may have owed more in cost-sharing than the provider paid for a drug.”

340B participants differed in their view of the cut and have sued to reverse the policy change, which reallocated $1.6 billion that 340B hospitals would have received to all hospitals paid under the OPPS, according to the Centers for Medicare & Medicaid Services. In March, hospital advocates appealed a lower court’s dismissal of their lawsuit challenging the 340B cuts.

Azar raised a concern frequently cited by congressional critics of 340B: that little is known about how providers have spent the revenue—$16 billion in 2016—generated from the program.

“We don’t know the scale of benefits that have been delivered,” Azar said. “HHS works hard within the powers we have to oversee the program, but a comprehensive system for reporting on the distribution and use of the program’s benefits does not exist.”

President Donald Trump’s 2019 proposed budget sought authority to increase regulatory oversight of the program to help ensure 340B revenue reaches intended recipients.

“Covered entities that are responsibly investing their 340B savings have nothing to fear from such measures,” Azar said.

Other Coming Rules

Azar said the administration is formulating other changes to various healthcare regulations. For instance, HHS is reviewing ways that existing regulations “may be impeding care coordination,” Azar said.

The administration has released a request for information (RFI) on ways it could change the Stark Law. Upcoming RFIs will seek ways to change rules around federal anti-kickback statutes, the Health Insurance Portability and Accountability Act, and 42 CFR Part 2—a federal rule that provides special protections for substance use or mental health data in a patient’s medical record.

“These regulations, like the programs I’ve mentioned today, have not been adapted to changing circumstances,” Azar said.

For instance, Azar said the Stark Law “gets in the way of physicians coordinating care for their patients, which is essential if we want them to take responsibility for outcomes. The unintended consequence of the Stark Law, today, is that large health systems can coordinate care, while independent providers cannot.”

Azar also indicated additional initiatives could be aimed specifically at reducing drug prices.

Although Trump and members of his administration have promised in recent weeks that drug prices soon would be reduced, several drugmakers have increased them during that time. Azar said the timing of those decisions could come to be seen in the same light as WellPoint’s move to implement “huge price increases during a pivotal moment of the [ACA] debate [that] emboldened policymakers to control their rates.”

“As you may have recently seen on Twitter, the president’s noticed, I’ve noticed, and, more importantly, the American people have noticed,” Azar said. “Change is coming to prescription drug pricing, whether it’s painful or not for pharmaceutical companies.”

On July 9, Trump tweeted, “Pfizer & others should be ashamed that they have raised drug prices for no reason. They are merely taking advantage of the poor & others unable to defend themselves, while at the same time giving bargain basement prices to other countries in Europe & elsewhere. We will respond!”

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare