Thursday, October 1, 2015

Pre-Conference Workshop | Symposium C – 340B Mega Guidance

Today’s workshop was chaired by Mike Benedict, Vice President, Apexus, who opened with fundamentals of the 340B program and an overview of Apexus’ services which was helpful for those newer to the program. Next, an overview of the key areas within the Mega Guidance was covered by Connie Wilkson and Alan Arville (Epstein Becker Green) with a bit more detail on how we got to where we are today, including the purpose of the guidance, to provide clarity and address concerns of the program by the various stakeholders. Although this guidance was originally intended to be issued as a rule, it was issued as guidance because of PhRMA’s (successful) challenge that HRSA does not have the authority to promulgate a legislative rule related to orphan drugs. The guidance has been issued in part because of ongoing criticism by the OIG, the GAO, and Congress, including the lack of consistency with 340B eligibility, duplicate discounts, patient discounts, and what is being done with the revenues realized by the covered entities (“CEs”).

Other topics from the Mega Guidance that were reviewed were the definition of a “Covered Outpatient Drug,” the procedures manufacturers should follow in the event they need to issue refunds to the CEs, the necessary standards for limited distribution plans, recertification, records retention/audits, the GPO prohibition for CEs, contract pharmacies, and the definition of an eligible patient.

Of importance with the Mega Guidance is that it is not binding but it must be considered in the event a case is before a court, recognizing that the agency has expertise in this area. 

John Shakow (King & Spalding) covered HRSA’s Proposed Rule, not the Proposed Guidance, for Ceiling Prices & Manufacturer Civil Monetary Penalties (CMPs). These topics were those that HRSA believed they still had authority to make a rule about after the determination they did not have the authority related to orphan drugs. This included two areas. The first is the determination of the 340B Ceiling Price, including penny pricing and the pricing of new drugs. HRSA continues to believe that charging $0 is unreasonable and $0.01 is reasonable and that no other viable options exist when AMP minus URA is zero or negative. Additionally, it includes the requirement for manufacturers to estimate the 340B price and retroactively refund the difference of the actual and estimated price, even if a CE does not request one.

For CMPs, the Proposed Rule imposes a penalty of up to $5,000 for each instance of “knowingly and intentionally” overcharging by manufacturers. Areas of concern for manufacturers include the requirements that manufacturers must “police” intermediaries, including wholesalers, and the prices a CE is charged for a manufacturer’s product by a third party. Also in the Proposed Rule is the change to the definition of a 340B drug as one that is at or below the ceiling price.

Comments to the Proposed Rule by CEs of interest to manufacturers included:

1.   An instance of overcharging should be based on a per unit basis, not per order basis;
2.   CMPs should be imposed on manufacturers who overcharge based on “deliberate ignorance” and “recklessness,” not just “knowing and intentional.”

While comments by manufacturers and trade associations included:

1.    HRSA lacks the statutory authority to issue ceiling prices;
2.    Penny pricing is not reasonable;
3.    New drugs should have a 340B Ceiling Price using the minimum rebate percentage (e.g., WAC minus 23.1% for S & I products);
4.    An instance of overcharging should be per ceiling price report, not per order;
5.    Refunds should take into account a “de minimis” exception and allow offsetting/netting.

In most cases, McKesson (as a wholesaler) and HDMA agreed with manufacturers in their comments.

Kathleen Black (Pfizer) spoke about manufacturer’s 340B Ceiling Price reporting requirements and then Alice Leiter (Hogan Lovells) went through a “policy and procedure compliance checklist.”  Kathleen focused on the mechanics for the calculations and reporting by manufacturers, and Alice went through the things a manufacturer should have such as a 340B policy, that includes the ceiling price calculation as well as the manufacturer’s specific policies including things such as limited distribution plans, the definition of a covered outpatient drug, new product pricing, product acquisition and divestitures, restatements, and audits of CEs. She stressed that this is especially valuable when the “right” way has not been clearly defined by the government. 

In the afternoon, the workshop focused more on the operational side with regards to manufacturers, including best practices and lessons learned from audits of CEs from Debbie Walters-Francique (Pfizer), the opportunities and challenges for manufacturers because of the potential overlap of Medicaid and the 340B program, and duplicate discounts that may occur (Lisa Norton from Lilly USA, Glen Huttar from Johnson & Johnson Health Care Systems, Jeremy Docken, from IMS Health, and Daksha Bogdon from Genentech). Besides CEs being required to prevent diversion and duplicate discounts related to their own purchases, CEs must also ensure compliance with the program requirements if they use contract pharmacies for the 340B program. For manufacturers to audit a CE, there must be reasonable cause and a manufacturer must submit an audit plan and obtain approval from the OPA. Audits have not been heavily utilized by manufacturers. So far, there have only been seven audits by manufacturers, although there have been many others conducted by the OPA. The best defense for manufacturers may be the establishment and following of policies and procedures to identify duplicate discounts and diversion when they occur.

Finally, the workshop ended with a discussion of the 340B “hot topics”, moderated by Erin Estey Hertzog (Biotechnology Industry Organization). Many of the topics covered earlier in the day were raised again with greater input and discussion from the audience. And as always with the various government programs, it was reinforced that where regulations and guidance are silent, manufacturers must and should make reasonable assumptions, and these should be well documented.

Check back tomorrow for more updates from MDRP and if you would like more information on the proposed changes to the 340B program, please reach contact me. There’s a lot going on in this program, and I can help your organization figure out what is relevant and how best to prepare! Katie Lapins, Government Pricing Specialists, LLC, 303.993.6466,

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