340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 22893-22895 [2017-10149]
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Federal Register / Vol. 82, No. 96 / Friday, May 19, 2017 / Rules and Regulations
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[FR Doc. 2017–10245 Filed 5–18–17; 8:45 am]
BILLING CODE 6560–50–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
42 CFR Part 10
RIN 0906–AA89
340B Drug Pricing Program Ceiling
Price and Manufacturer Civil Monetary
Penalties Regulation
Health Resources and Services
Administration, HHS.
ACTION: Final rule; further delay of
effective date.
AGENCY:
The Health Resources and
Services Administration (HRSA)
administers section 340B of the Public
Health Service Act (PHSA), referred to
as the ‘‘340B Drug Pricing Program’’ or
the ‘‘340B Program.’’ HRSA published a
final rule on January 5, 2017, that set
forth the calculation of the ceiling price
and application of civil monetary
penalties. The final rule applied to all
drug manufacturers that are required to
make their drugs available to covered
entities under the 340B Program. In
accordance with a January 20, 2017,
memorandum from the Assistant to the
President and Chief of Staff, entitled
‘‘Regulatory Freeze Pending Review,’’
HRSA issued an interim final rule that
delayed the effective date of the final
rule published in the Federal Register
(82 FR 1210, (January 5, 2017)) to May
22, 2017. HHS invited commenters to
provide their views on whether a longer
delay of the effective date to October 1,
2017, would be more appropriate. After
consideration of the comments received
on the interim final rule, HHS is
delaying the effective date of the
January 5, 2017 final rule, to October 1,
2017.
DATES: As of May 19, 2017, the effective
date of the final rule published in the
Federal Register (82 FR 1210, (January
5, 2017)) is further delayed to October
1, 2017.
FOR FURTHER INFORMATION CONTACT:
CAPT Krista Pedley, Director, Office of
Pharmacy Affairs, Healthcare Systems
Bureau, HRSA, 5600 Fishers Lane, Mail
Stop 08W05A, Rockville, MD 20857, or
by telephone at 301–594–4353.
SUPPLEMENTARY INFORMATION:
nlaroche on DSK30NT082PROD with RULES
SUMMARY:
I. Background
In September 2010, HHS published an
advanced notice of proposed
rulemaking (ANPRM) in the Federal
Register, ‘‘340B Drug Pricing Program
VerDate Sep<11>2014
14:45 May 18, 2017
Jkt 241001
Manufacturer Civil Monetary Penalties’’
(75 FR 57230, (September 20, 2010)).
HHS subsequently published a notice of
proposed rulemaking (NPRM) in June
2015 to implement civil monetary
penalties (CMPs) for manufacturers who
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
a $.01 (penny pricing policy) for drugs
when the ceiling price calculation
equals zero (80 FR 34583, (June 17,
2015)). The public comment period
closed August 17, 2015, and HRSA
received 35 comments. 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. The comment period closed May
19, 2016, and HHS received 72
comments.
On January 5, 2017, HHS published a
final rule in the Federal Register (82 FR
1210, (January 5, 2017)) and comments
from both the NPRM and the reopening
notice were considered in the
development of the final rule. The
provisions of that 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, entitled
‘‘Regulatory Freeze Pending Review.’’ 1
In the January 5, 2017 final rule, HHS
recognized that the effective date fell
during the middle of a quarter and
stakeholders needed time to adjust
systems and update their policies and
procedures. As such, HHS stated that it
intended to enforce the requirements of
the final rule at the start of the next
quarter, which began April 1, 2017.
After further consideration and to
provide affected parties sufficient time
to make needed changes to facilitate
compliance, and because there were
questions raised, HHS issued an interim
1 See: https://www.whitehouse.gov/the-pressoffice/2017/01/20/memorandum-heads-executivedepartments-and-agencies.
PO 00000
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22893
final rule (82 FR 14332, (March 20,
2017)) to delay the effective date of the
final rule to May 22, 2017, and solicited
additional comment on whether that
date should be further delayed to
October 1, 2017. HHS received a
number of comments on the interim
final rule both supporting and opposing
the delay of the effective date to May 22,
2017, or alternatively to October 1,
2017. After careful consideration of the
comments received, HHS has decided to
delay the effective date of the January 5,
2017 final rule to October 1, 2017. As
the effective date of the final rule has
been changed to October 1, 2017,
enforcement will be correspondingly
delayed to October 1, 2017. HHS
continues to believe that the delay of the
effective date provides regulated entities
sufficient time to implement the
requirements of the rule.
Section 553(d) of the Administrative
Procedure Act (APA) (5 U.S.C. 551 et
seq.) requires that Federal agencies
provide at least 30 days after
publication of a final rule in the Federal
Register before making it effective,
unless good cause can be found not to
do so. HHS finds that there is good
cause for making this final rule effective
less than 30 days after publication in the
Federal Register given that failure to do
so would result in the final rule
published on January 5, 2017, going into
effect for several weeks, before having a
delayed effective date of October 1,
2017. To preclude this uncertainty in
the marketplace and to ease the burdens
on all stakeholders, HHS believes that a
clear effective date is an important goal
and one that becomes particularly
important when it is paired with
potential civil monetary penalties. The
additional time provided to the public
before the rule takes effect constitutes
an extra quarter and will assist
stakeholders in preparing to comply
with these new program requirements.
II. Analysis and Responses to Public
Comments
In the interim final rule, we solicited
comments regarding whether HHS
should delay the January 5, 2017 final
rule to May 22, 2017, or alternatively to
October 1, 2017. We received a broad
range of 51 comments from covered
entities, manufacturers, and groups
representing these stakeholders. In this
final rule, we will only be responding to
comments related to whether HHS
should delay the January 5, 2017 final
rule to May 22, 2017, or to October 1,
2017. Comments that raised issues
beyond the narrow scope of the interim
final rule, including comments related
to withdrawal of the rule or comments
related to policy matters, were not
E:\FR\FM\19MYR1.SGM
19MYR1
nlaroche on DSK30NT082PROD with RULES
22894
Federal Register / Vol. 82, No. 96 / Friday, May 19, 2017 / Rules and Regulations
considered and are not addressed in this
rulemaking. We have summarized the
relevant comments received and
provided our responses below.
Comment: Some commenters
supported the May 22, 2017, effective
date and opposed further delaying the
final rule until October 1, 2017. The
commenters explain that adequate
enforcement of manufacturers’ pricing
obligations is key to the success of the
340B Program. These commenters also
suggest that further delay of the final
rule would result in a lack of oversight,
regulation and basic enforcements for
manufacturers, which would continue
to hamper the 340B Program and lessen
covered entities’ ability to stretch scarce
resources.
Response: HHS decided to delay the
effective date of the January 5, 2017
final rule to October 1, 2017, to provide
affected parties sufficient time to make
needed changes to facilitate compliance.
Given the comments received from
stakeholders on the interim final rule
regarding the challenges with
complying with the January 5, 2017
final rule, HHS determined that
delaying the effective date to October 1,
2017, is necessary to provide adequate
time for compliance and to mitigate
implementation concerns. HHS
disagrees that further delay of the final
rule would result in a lack of oversight,
regulation, and basic enforcements for
manufacturers.
Comment: Many commenters opposed
further delaying the effective date to
October 1, 2017, and suggested that the
final rule be enforced immediately.
These commenters noted that
overcharges in the 340B Program were
a widespread problem and that during
2003 and 2005, the HHS Office of the
Inspector General (OIG) issued a report,2
which found that HRSA lacked the
necessary oversight mechanisms to
ensure that covered entities pay at or
below the 340B ceiling price. The
commenters further noted that because
of these deficiencies, Congress amended
the 340B statute to improve
manufacturer compliance by directing
HRSA to implement standards for
calculating ceiling prices and establish
civil monetary penalties for
manufacturers that knowingly and
intentionally overcharge 340B covered
entities. Commenters said that these
standards were to be implemented in
2010 and given the long delay in
promulgating regulations, they do not
support any further delay of the January
5, 2017 final rule. The commenters
stated that civil monetary penalties are
2 See: OIG, Deficiencies in the Oversight of the
340B Drug Pricing Program (October 2005).
VerDate Sep<11>2014
14:45 May 18, 2017
Jkt 241001
needed now because they are the only
viable penalty that HRSA can impose on
manufacturers that violate their 340B
pricing obligations.
Response: HHS does not agree that
that the final rule should be enforced
immediately. We are delaying the
effective date of the January 5, 2017
final rule to October 1, 2017, to ensure
that affected parties have sufficient time
to make changes needed to facilitate
compliance, which we believe will
benefit all 340B stakeholders and
enhance program integrity.
Comment: Some commenters raised
concerns that the interim final rule did
not satisfy APA requirements for
rulemaking. Specifically, they argued
that HHS had not shown good cause for
delaying the effective date of the
January 5, 2017 final rule without prior
notice or opportunity for public
comment and making that change
effective immediately upon publication
in the Federal Register.
Response: HHS disagrees that the
good cause exemptions of the APA do
not apply here. Our finding that good
cause existed to waive the normal
rulemaking requirements of the APA
was based on our view that in this
limited instance notice and public
comment was impracticable,
unnecessary, or contrary to the public
interest. Because completion of a
rulemaking with notice and comment
procedures would not occur until after
the previously announced effective date,
we believe a delay in determining the
effective date would create confusion
that could disrupt orderly
implementation of the January 5, 2017
final rule, and would be impracticable,
unnecessary, and contrary to the public
interest. In addition, we reiterate that
we remain concerned that the original
effective date for the January 5, 2017
final rule did not allow for sufficient
time to consider the regulatory burdens
that may be posed and did not provide
stakeholders sufficient time to come
into compliance with the new program
requirements in the final rule. While
there was good cause to amend the
effective date of the January 5, 2017
final rule, without prior notice or
opportunity for public comment and to
make the action immediately effective,
we note that we implemented the action
on an interim basis only and provided
notice and an opportunity for comment
on the further delay of the effective date
of the final rule to October 1, 2017.
Based on the foregoing considerations as
well as the comments received on our
proposal in the interim final rule to
further delay the effective date, we are
delaying the effective date of the final
rule to October 1, 2017.
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Comment: Many commenters
supported further delaying the effective
date to October 1, 2017, at a minimum,
and agreed with HHS that more time
was needed for stakeholders to come
into compliance.
Response: HHS agrees with the
commenters and has decided to delay
the effective date of the January 5, 2017
final rule to October 1, 2017.
III. Regulatory Impact Analysis
HHS examined the effects of this final
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 and 13563
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
1 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 (RIA) must
be prepared for major rules with
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19MYR1
Federal Register / Vol. 82, No. 96 / Friday, May 19, 2017 / Rules and Regulations
economically significant effects ($100
million or more in any 1 year), and a
‘‘significant’’ regulatory action is subject
to review by the Office of Management
and Budget (OMB).
HHS does not believe the proposal to
delay the effective date of the January 5,
2017 final rule will have an economic
impact of $100 million or more, and is
therefore not designated as an
‘‘economically significant’’ final rule
under section 3(f)(1) of the Executive
Order 12866. Therefore, the economic
impact of having no rule in place related
to the policies addressed in the final
rule is believed to be minimal, as the
policies would not yet be required or
enforceable.
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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 of 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 for
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, 2017, over 12,000 covered
entities participate in the 340B Program,
which represent safety-net health care
providers across the country. HHS
determined, and the Secretary certifies
that this final rule will 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 the economic
impact on small entities and small
manufacturers will be minimal.
and Tribal governments, in the
aggregate, or by the private sector, of
$100 million or more (adjusted annually
for inflation) in any one year.’’ During
2013, that threshold level was
approximately $141 million. HHS does
not expect this final rule to exceed the
threshold.
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Executive Order 13132—Federalism
RIN 0938–AS90
HHS reviewed this final rule in
accordance with Executive Order 13132
regarding federalism, and has
determined that it does not have
‘‘federalism implications.’’ This final
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
responsibilities among the various
levels of government.’’ This final rule
would not adversely affect the following
family elements: Family safety, family
stability, marital commitment; parental
rights in the education, nurture, and
supervision of their children; family
functioning, disposable income or
poverty; or the behavior and personal
responsibility of youth, as determined
under Section 654(c) of the Treasury
and General Government
Appropriations Act of 1999.
Medicare Program; Advancing Care
Coordination Through Episode
Payment Models (EPMs); Cardiac
Rehabilitation Incentive Payment
Model; and Changes to the
Comprehensive Care for Joint
Replacement Model (CJR); Delay of
Effective Date
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
final rule is projected to have no impact
on current reporting and recordkeeping
burden for manufacturers under the
340B Program. This final rule would
result in no new reporting burdens.
Dated: May 10, 2017.
George Sigounas,
Administrator, Health Resources and Services
Administration.
Approved: May 15, 2017.
Thomas E. Price,
Secretary, Department of Health and Human
Services.
[FR Doc. 2017–10149 Filed 5–18–17; 8:45 am]
BILLING CODE 4165–15–P
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,
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14:45 May 18, 2017
Jkt 241001
22895
PO 00000
Centers for Medicare & Medicaid
Services
42 CFR Parts 510 and 512
[CMS–5519–F3]
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule; delay of effective
date.
AGENCY:
This final rule finalizes May
20, 2017 as the effective date of the final
rule titled ‘‘Advancing Care
Coordination Through Episode Payment
Models (EPMs); Cardiac Rehabilitation
Incentive Payment Model; and Changes
to the Comprehensive Care for Joint
Replacement Model (CJR)’’ originally
published in the January 3, 2017
Federal Register. This final rule also
finalizes a delay of the applicability date
of the regulations at 42 CFR part 512
from July 1, 2017 to January 1, 2018 and
delays the effective date of the specific
CJR regulations listed in the DATES
section from July 1, 2017 to January 1,
2018.
DATES: Effective date: The final rule
published in the January 3, 2017
Federal Register (82 FR 180)) is
effective May 20, 2017, except for the
provisions of the final rule contained in
the following amendatory instructions,
which are effective January 1, 2018:
Number 3 amending 42 CFR 510.2;
number 4 adding 42 CFR 510.110;
number 6 amending 42 CFR 510.120;
number 14 amending 42 CFR 510.405;
number 15 amending 42 CFR 510.410;
number 16 revising 42 CFR 510.500;
number 17 revising 42 CFR 510.505;
number 18 adding 42 CFR 510.506; and
number 19 amending 42 CFR 510.515.
Applicability date: The applicability
date of the regulations at 42 CFR part
512 is January 1, 2018.
FOR FURTHER INFORMATION CONTACT:
Sean Harris (410) 786–0812. For
questions related to the EPMs:
EPMRULE@cms.hhs.gov. For questions
related to the CJR model: CJR@
cms.hhs.gov.
SUMMARY:
SUPPLEMENTARY INFORMATION:
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Agencies
[Federal Register Volume 82, Number 96 (Friday, May 19, 2017)]
[Rules and Regulations]
[Pages 22893-22895]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-10149]
=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Part 10
RIN 0906-AA89
340B Drug Pricing Program Ceiling Price and Manufacturer Civil
Monetary Penalties Regulation
AGENCY: Health Resources and Services Administration, HHS.
ACTION: Final rule; further delay of effective date.
-----------------------------------------------------------------------
SUMMARY: The Health Resources and Services Administration (HRSA)
administers section 340B of the Public Health Service Act (PHSA),
referred to as the ``340B Drug Pricing Program'' or the ``340B
Program.'' HRSA published a final rule on January 5, 2017, that set
forth the calculation of the ceiling price and application of civil
monetary penalties. The final rule applied to all drug manufacturers
that are required to make their drugs available to covered entities
under the 340B Program. In accordance with a January 20, 2017,
memorandum from the Assistant to the President and Chief of Staff,
entitled ``Regulatory Freeze Pending Review,'' HRSA issued an interim
final rule that delayed the effective date of the final rule published
in the Federal Register (82 FR 1210, (January 5, 2017)) to May 22,
2017. HHS invited commenters to provide their views on whether a longer
delay of the effective date to October 1, 2017, would be more
appropriate. After consideration of the comments received on the
interim final rule, HHS is delaying the effective date of the January
5, 2017 final rule, to October 1, 2017.
DATES: As of May 19, 2017, the effective date of the final rule
published in the Federal Register (82 FR 1210, (January 5, 2017)) is
further delayed to October 1, 2017.
FOR FURTHER INFORMATION CONTACT: CAPT Krista Pedley, Director, Office
of Pharmacy Affairs, Healthcare Systems Bureau, HRSA, 5600 Fishers
Lane, Mail Stop 08W05A, Rockville, MD 20857, or by telephone at 301-
594-4353.
SUPPLEMENTARY INFORMATION:
I. Background
In September 2010, HHS published an advanced notice of proposed
rulemaking (ANPRM) in the Federal Register, ``340B Drug Pricing Program
Manufacturer Civil Monetary Penalties'' (75 FR 57230, (September 20,
2010)). HHS subsequently published a notice of proposed rulemaking
(NPRM) in June 2015 to implement civil monetary penalties (CMPs) for
manufacturers who 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 a $.01 (penny pricing policy) for drugs when
the ceiling price calculation equals zero (80 FR 34583, (June 17,
2015)). The public comment period closed August 17, 2015, and HRSA
received 35 comments. 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. The
comment period closed May 19, 2016, and HHS received 72 comments.
On January 5, 2017, HHS published a final rule in the Federal
Register (82 FR 1210, (January 5, 2017)) and comments from both the
NPRM and the reopening notice were considered in the development of the
final rule. The provisions of that 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, entitled ``Regulatory Freeze Pending Review.'' \1\
In the January 5, 2017 final rule, HHS recognized that the effective
date fell during the middle of a quarter and stakeholders needed time
to adjust systems and update their policies and procedures. As such,
HHS stated that it intended to enforce the requirements of the final
rule at the start of the next quarter, which began April 1, 2017.
---------------------------------------------------------------------------
\1\ See: https://www.whitehouse.gov/the-press-office/2017/01/20/memorandum-heads-executive-departments-and-agencies.
---------------------------------------------------------------------------
After further consideration and to provide affected parties
sufficient time to make needed changes to facilitate compliance, and
because there were questions 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, and solicited additional comment on whether
that date should be further delayed to October 1, 2017. HHS received a
number of comments on the interim final rule both supporting and
opposing the delay of the effective date to May 22, 2017, or
alternatively to October 1, 2017. After careful consideration of the
comments received, HHS has decided to delay the effective date of the
January 5, 2017 final rule to October 1, 2017. As the effective date of
the final rule has been changed to October 1, 2017, enforcement will be
correspondingly delayed to October 1, 2017. HHS continues to believe
that the delay of the effective date provides regulated entities
sufficient time to implement the requirements of the rule.
Section 553(d) of the Administrative Procedure Act (APA) (5 U.S.C.
551 et seq.) requires that Federal agencies provide at least 30 days
after publication of a final rule in the Federal Register before making
it effective, unless good cause can be found not to do so. HHS finds
that there is good cause for making this final rule effective less than
30 days after publication in the Federal Register given that failure to
do so would result in the final rule published on January 5, 2017,
going into effect for several weeks, before having a delayed effective
date of October 1, 2017. To preclude this uncertainty in the
marketplace and to ease the burdens on all stakeholders, HHS believes
that a clear effective date is an important goal and one that becomes
particularly important when it is paired with potential civil monetary
penalties. The additional time provided to the public before the rule
takes effect constitutes an extra quarter and will assist stakeholders
in preparing to comply with these new program requirements.
II. Analysis and Responses to Public Comments
In the interim final rule, we solicited comments regarding whether
HHS should delay the January 5, 2017 final rule to May 22, 2017, or
alternatively to October 1, 2017. We received a broad range of 51
comments from covered entities, manufacturers, and groups representing
these stakeholders. In this final rule, we will only be responding to
comments related to whether HHS should delay the January 5, 2017 final
rule to May 22, 2017, or to October 1, 2017. Comments that raised
issues beyond the narrow scope of the interim final rule, including
comments related to withdrawal of the rule or comments related to
policy matters, were not
[[Page 22894]]
considered and are not addressed in this rulemaking. We have summarized
the relevant comments received and provided our responses below.
Comment: Some commenters supported the May 22, 2017, effective date
and opposed further delaying the final rule until October 1, 2017. The
commenters explain that adequate enforcement of manufacturers' pricing
obligations is key to the success of the 340B Program. These commenters
also suggest that further delay of the final rule would result in a
lack of oversight, regulation and basic enforcements for manufacturers,
which would continue to hamper the 340B Program and lessen covered
entities' ability to stretch scarce resources.
Response: HHS decided to delay the effective date of the January 5,
2017 final rule to October 1, 2017, to provide affected parties
sufficient time to make needed changes to facilitate compliance. Given
the comments received from stakeholders on the interim final rule
regarding the challenges with complying with the January 5, 2017 final
rule, HHS determined that delaying the effective date to October 1,
2017, is necessary to provide adequate time for compliance and to
mitigate implementation concerns. HHS disagrees that further delay of
the final rule would result in a lack of oversight, regulation, and
basic enforcements for manufacturers.
Comment: Many commenters opposed further delaying the effective
date to October 1, 2017, and suggested that the final rule be enforced
immediately. These commenters noted that overcharges in the 340B
Program were a widespread problem and that during 2003 and 2005, the
HHS Office of the Inspector General (OIG) issued a report,\2\ which
found that HRSA lacked the necessary oversight mechanisms to ensure
that covered entities pay at or below the 340B ceiling price. The
commenters further noted that because of these deficiencies, Congress
amended the 340B statute to improve manufacturer compliance by
directing HRSA to implement standards for calculating ceiling prices
and establish civil monetary penalties for manufacturers that knowingly
and intentionally overcharge 340B covered entities. Commenters said
that these standards were to be implemented in 2010 and given the long
delay in promulgating regulations, they do not support any further
delay of the January 5, 2017 final rule. The commenters stated that
civil monetary penalties are needed now because they are the only
viable penalty that HRSA can impose on manufacturers that violate their
340B pricing obligations.
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\2\ See: OIG, Deficiencies in the Oversight of the 340B Drug
Pricing Program (October 2005).
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Response: HHS does not agree that that the final rule should be
enforced immediately. We are delaying the effective date of the January
5, 2017 final rule to October 1, 2017, to ensure that affected parties
have sufficient time to make changes needed to facilitate compliance,
which we believe will benefit all 340B stakeholders and enhance program
integrity.
Comment: Some commenters raised concerns that the interim final
rule did not satisfy APA requirements for rulemaking. Specifically,
they argued that HHS had not shown good cause for delaying the
effective date of the January 5, 2017 final rule without prior notice
or opportunity for public comment and making that change effective
immediately upon publication in the Federal Register.
Response: HHS disagrees that the good cause exemptions of the APA
do not apply here. Our finding that good cause existed to waive the
normal rulemaking requirements of the APA was based on our view that in
this limited instance notice and public comment was impracticable,
unnecessary, or contrary to the public interest. Because completion of
a rulemaking with notice and comment procedures would not occur until
after the previously announced effective date, we believe a delay in
determining the effective date would create confusion that could
disrupt orderly implementation of the January 5, 2017 final rule, and
would be impracticable, unnecessary, and contrary to the public
interest. In addition, we reiterate that we remain concerned that the
original effective date for the January 5, 2017 final rule did not
allow for sufficient time to consider the regulatory burdens that may
be posed and did not provide stakeholders sufficient time to come into
compliance with the new program requirements in the final rule. While
there was good cause to amend the effective date of the January 5, 2017
final rule, without prior notice or opportunity for public comment and
to make the action immediately effective, we note that we implemented
the action on an interim basis only and provided notice and an
opportunity for comment on the further delay of the effective date of
the final rule to October 1, 2017. Based on the foregoing
considerations as well as the comments received on our proposal in the
interim final rule to further delay the effective date, we are delaying
the effective date of the final rule to October 1, 2017.
Comment: Many commenters supported further delaying the effective
date to October 1, 2017, at a minimum, and agreed with HHS that more
time was needed for stakeholders to come into compliance.
Response: HHS agrees with the commenters and has decided to delay
the effective date of the January 5, 2017 final rule to October 1,
2017.
III. Regulatory Impact Analysis
HHS examined the effects of this final 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 and 13563
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 1 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 (RIA) must be
prepared for major rules with
[[Page 22895]]
economically significant effects ($100 million or more in any 1 year),
and a ``significant'' regulatory action is subject to review by the
Office of Management and Budget (OMB).
HHS does not believe the proposal to delay the effective date of
the January 5, 2017 final rule will have an economic impact of $100
million or more, and is therefore not designated as an ``economically
significant'' final rule under section 3(f)(1) of the Executive Order
12866. Therefore, the economic impact of having no rule in place
related to the policies addressed in the final rule is believed to be
minimal, as the policies would not yet be required or enforceable.
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
of 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 for 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, 2017, over 12,000 covered
entities participate in the 340B Program, which represent safety-net
health care providers across the country. HHS determined, and the
Secretary certifies that this final rule will 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 the economic impact on small entities and
small manufacturers will be minimal.
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.'' During 2013, that threshold level was
approximately $141 million. HHS does not expect this final rule to
exceed the threshold.
Executive Order 13132--Federalism
HHS reviewed this final rule in accordance with Executive Order
13132 regarding federalism, and has determined that it does not have
``federalism implications.'' This final 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 responsibilities among the various levels of government.''
This final rule would not adversely affect the following family
elements: Family safety, family stability, marital commitment; parental
rights in the education, nurture, and supervision of their children;
family functioning, disposable income or poverty; or the behavior and
personal responsibility of youth, as determined under Section 654(c) of
the Treasury and General Government Appropriations Act of 1999.
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 final rule is
projected to have no impact on current reporting and recordkeeping
burden for manufacturers under the 340B Program. This final rule would
result in no new reporting burdens.
Dated: May 10, 2017.
George Sigounas,
Administrator, Health Resources and Services Administration.
Approved: May 15, 2017.
Thomas E. Price,
Secretary, Department of Health and Human Services.
[FR Doc. 2017-10149 Filed 5-18-17; 8:45 am]
BILLING CODE 4165-15-P