340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 45511-45514 [2017-20911]
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Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Rules and Regulations
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Dated: September 25, 2017
Kara Wenzel,
Acting General Counsel, Chemical Safety and
Hazard Investigation Board.
[FR Doc. 2017–20853 Filed 9–28–17; 8:45 am]
BILLING CODE 6350–01–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
42 CFR Part 10
RIN 0906–AB11
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), known 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. On
August 21, 2017, HHS solicited
comments on further delaying the
effective date of the January 5, 2017,
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SUMMARY:
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final rule to July 1, 2018 (82 FR 39553).
HHS proposed this action to allow a
more deliberate process of considering
alternative and supplemental regulatory
provisions and to allow for sufficient
time for additional rulemaking. After
consideration of the comments received
on the proposed rule, HHS is delaying
the effective date of the January 5, 2017,
final rule, to July 1, 2018.
DATES: As of September 29, 2017, the
effective date of the final rule published
in the Federal Register (82 FR 1210,
January 5, 2017) is further delayed to
July 1, 2018.
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
On September 30, 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)
on June 17, 2015, to implement CMPs
for manufacturers that 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 $.01 (penny
pricing) for drugs when the ceiling price
calculation equals zero (80 FR 34583,
June 17, 2015). The public comment
period closed on 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); comments from
both the original comment period
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45511
established in the NPRM and the
reopened comment period announced
in the April 19, 2016 notice were
considered in the development of the
final rule. The provisions of that final
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, titled
‘‘Regulatory Freeze Pending Review.’’ 1
In the January 5, 2017, final rule, HHS
acknowledged 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 questions were
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
comments on whether that date should
be further extended to October 1, 2017.
HHS received 51 comments on the
interim final rule, some supporting and
some 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 delayed the effective date of the
January 5, 2017, final rule to October 1,
2017 (82 FR 22893, May 19, 2017).
HHS subsequently published a
proposed rule (82 FR 39553, August 21,
2017) to further delay the effective date
of the final rule to July 1, 2018. The
further delay allows necessary time to
fully consider the substantial questions
of fact, law, and policy raised by the
rule, consistent with the aforementioned
‘‘Regulatory Freeze Pending Review,’’
memorandum. Requiring manufacturers
to make targeted and potentially costly
changes to pricing systems and business
procedures in order to comply with a
rule that is under further consideration
and for which substantive questions
have been raised would be disruptive.
The further delay allows HHS to
consider objections regarding the timing
of the effective date and challenges
associated with complying with the
rule, as well as other objections to the
rule.
In addition, Executive Order 13765
(82 FR 8351) titled, ‘‘Minimizing the
1 See: https://www.whitehouse.gov/the-pressoffice/2017/01/20/memorandum-heads-executivedepartments-and-agencies.
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Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Rules and Regulations
Economic Burden of the Patient
Protection and Affordable Care Act
Pending Repeal,’’ specifically instructs
HHS and all other heads of executive
offices to utilize all authority and
discretion available to delay the
implementation of certain provisions or
requirements of the Patient Protection
and Affordable Care Act.2 HHS based
the January 5, 2017, final rule on
changes made to the 340B Program by
the Patient Protection and Affordable
Care Act. HHS proposed to delay the
effective date of the January 5, 2017,
final rule to July 1, 2018, to allow for a
sufficient amount of time to consider
the regulatory burdens that may be
posed by this final rule. HHS continues
to examine important substantive issues
in matters covered by the rule and
intends to engage in additional
rulemaking on these issues.
HHS received a number of comments
on the proposed rule both supporting
and opposing the delay of the effective
date to July 1, 2018. After careful
consideration of the comments received,
HHS has decided to delay the effective
date of the January 5, 2017, final rule to
July 1, 2018. As HHS changed the
effective date of the final rule to July 1,
2018, enforcement will be delayed to
July 1, 2018. HHS continues to believe
that the delay of the effective date
provides regulated entities sufficient
time to implement the requirements of
the rule, as well as allowing a more
deliberate process of considering
alternative and supplemental regulatory
provisions, and to allow for sufficient
time for additional rulemaking.
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 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 on October 1,
2017, for several weeks before a final
rule delaying the effective date until
July 1, 2018, would go into effect. To
preclude this uncertainty in the
marketplace and to ease the burdens of
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
2 See: https://www.whitehouse.gov/the-pressoffice/2017/01/2/executive-order-minimizingeconomic-burden-patient-protection-and.
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takes effect will assist stakeholders in
preparing to comply with these new
program requirements.
II. Analysis and Responses to Public
Comments
In the proposed rule, HHS solicited
comments regarding whether we should
delay the January 5, 2017, final rule to
July 1, 2018. We received 97 comments
containing a number of issues from
covered entities, manufacturers, and
groups representing these stakeholders.
In this final rule, we will only respond
to comments related to whether HHS
should delay the January 5, 2017, final
rule to July 1, 2018. We did not consider
and do not address comments that
raised issues beyond the narrow scope
of the proposed rule, including
comments related to withdrawal of the
rule or comments related to broader
policy matters. However, HHS intends
to engage in further rulemaking on
issues covered in the January 5, 2017,
final rule. We have summarized the
relevant comments received and
provided our responses below.
Comment: Some commenters
supported HHS’s proposed delay of the
effective date of the final rule until not
only July 1, 2018, but until HHS fulfills
its commitment to engage in additional
rulemaking that cures the substantive
legal and practical concerns with the
final rule. These commenters
recommend that HRSA tie the further
delay of the effective date of the final
rule to the completion of such
rulemaking, as opposed to a certain
date.
Response: HHS has decided to delay
the effective date to July 1, 2018, to
provide affected parties sufficient time
to make needed changes to facilitate
compliance and because HHS continues
to examine important substantive issues
arising from the January 5, 2017, final
rule. After reviewing the comments
received from stakeholders regarding
objections on the timing of the effective
date and challenges associated with
complying with the final rule, HHS has
determined that delaying the effective
date to July 1, 2018, is necessary to
consider some of the issues raised. HHS
believes that delaying the effective date
to July 1, 2018, provides sufficient time
to address these issues and does not
believe a further delay is necessary at
this time.
Comment: Some commenters stated
that the January 5, 2017, final rule
contains several policies that are
inconsistent with the 340B statute and
imposes needless burdens on
manufacturers. These commenters urge
HHS to delay the effective date to July
1, 2018, and use the additional time to
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reconsider the policies included in the
final rule.
Responses: HHS intends to engage in
further rulemaking and believes that
this delay will provide HHS with time
to consider the substantial questions of
fact, law, and policy raised by the rule.
Comment: Several commenters
explained that a delay in the effective
date of the final rule is also necessary
to align with the Administration
priorities of analyzing final, but not yet
effective, regulations, and removing or
minimizing unwarranted economic and
regulatory burdens related to the
Affordable Care Act, the law that added
the provisions of the 340B statute that
are the subject of the final rule.
Response: HHS agrees with the
commenters. Executive Order 13765
instructs agencies to use discretion to
delay the implementation of certain
provisions of requirements of the
Patient Protection and Affordable Care
Act. As previously mentioned, HHS
based the January 5, 2017, final rule on
changes made to the 340B Program by
the Patient Protection and Affordable
Care Act. As such, HHS is complying
with Executive Order 13765 to delay
implementation on provisions of that
law that ‘‘. . . impose a fiscal burden on
any State or a cost, fee, tax, penalty, or
regulatory burden on individuals,
families, healthcare providers, health
insurers, patients, recipients of
healthcare services, purchasers of health
insurance, or makers of medical devices,
products, or medications.’’ The policies
finalized in the January 5, 2017, final
rule will require targeted and
potentially costly changes to pricing
systems and business procedures for
manufacturers affected by the rule.
Thus, HHS is delaying the effective date
to July 1, 2018.
Comment: Some commenters
recommend that HHS delay the effective
date of the final rule until HHS
concurrently addresses 340B covered
entity compliance obligations and
penalties under the 340B statute, which
is necessary to strengthen the integrity
of the 340B Program.
Response: HHS plans to issue separate
policy documents for the different areas
of the 340B program integrity provisions
in the 340B statute and disagrees with
the commenters advising HHS to
address these issues concurrently.
Comment: Many commenters opposed
delaying the effective date to July 1,
2018. Commenters recommended that
HHS use its statutory rulemaking
authority to balance the scales of
enforcement and oversight in the 340B
Program, and expressed concern that
drug manufacturers have engaged in
discriminatory pricing strategies due to
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a lack of oversight and enforcement
with respect to manufacturer behavior.
They explained that various factors,
including extensive data regarding
overcharging covered entities, HHS’s
inability to address overcharges, and
HHS’s admission that many
manufacturers are still out of
compliance highlight the need for the
final rule to go into effect immediately.
They further explained that the January
5, 2017, final rule is critical to ensuring
that drug manufacturers uphold the
intent of the 340B Program. The
commenters also disagreed that ‘‘a more
deliberative process is needed’’ as there
have been multiple delays and
stakeholders were given various
opportunities to comment.
Response: HHS does not agree that
that we should enforce the final rule
immediately. We are delaying the
effective date of the January 5, 2017,
final rule to July 1, 2018, because the
delay will provide stakeholders with
additional time to come into compliance
and provide time to consider the
substantial questions of fact, law, and
policy raised by the rule. The final rule
does not represent the only method for
HHS to address manufacturer
overcharges. In addition to the final
rule, HHS performs audits of
manufacturers, investigates all
allegations of overcharging, and
participates in settlements that have
returned millions of dollars to covered
entities. HHS believes that it would be
disruptive to require stakeholders to
make potentially costly changes to
pricing systems and business
procedures in order to comply with a
rule that is under further consideration
and for which substantive questions
have been raised.
While stakeholders had the
opportunity to provide comments on the
final rule, the 340B Program is a
complex program that is affected by
changes in other areas of health care.
HHS has determined that this
complexity and changing environment
warrants further review of the final rule.
Comment: Many commenters
supported further delaying the effective
date to July 1, 2018, at a minimum, and
agreed with HHS that more time was
needed for stakeholders to come into
compliance and to consider substantial
questions of fact, law and policy raised
by the January 5, 2017, final rule.
Response: HHS agrees with the
commenters and will delay the effective
date of the January 5, 2017, final rule to
July 1, 2018.
III. Regulatory Impact Analysis
HHS examined the effects of this final
rule as required by Executive Order
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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), Executive Order
13132 on Federalism (August 4, 1999),
the Congressional Review Act, and
Executive Order 13771 on Reducing
Regulation and Controlling Regulatory
Costs (January 30, 2017).
Executive Orders 12866, 13563 and
13771
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
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) and is therefore, not
a major rule under the Congressional
Review Act.
HHS does not believe that a delay of
the effective date of the January 5, 2017,
final rule will have an economic impact
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45513
of $100 million or more, and is,
therefore, not designated as an
‘‘economically significant’’ 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.
Executive Order 13771, titled
‘‘Reducing Regulation and Controlling
Regulatory Costs,’’ was issued on
January 30, 2017. This final rule is not
expected to be an EO 13771 regulatory
action because this final rule is not
significant under EO 12866.
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 by
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 has
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 that 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
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Federal Register / Vol. 82, No. 188 / Friday, September 29, 2017 / Rules and Regulations
aggregate, or by the private sector, of
$100 million or more (adjusted annually
for inflation) in any one year.’’ In 2017,
that threshold is approximately $148
million. HHS does not expect this rule
to exceed the threshold.
S5.3.11 Dynamic ozone test. A
hydraulic brake hose shall not show
cracks visible without magnification
after having been subjected to a 48-hour
dynamic ozone test (S6.9).
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Executive Order 13132—Federalism
[FR Doc. 2017–21085 Filed 9–28–17; 8:45 am]
HHS has 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.’’
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.
Comments are welcome on the accuracy
of this statement.
Dated: September 22, 2017.
George Sigounas,
Administrator, Health Resources and Services
Administration.
Thomas E. Price,
Secretary, Department of Health and Human
Services.
[FR Doc. 2017–20911 Filed 9–28–17; 8:45 am]
BILLING CODE 4165–15–P
DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety
Administration
49 CFR Part 571
Federal Motor Vehicle Safety
Standards
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CFR Correction
In Title 49 of the Code of Federal
Regulations, Parts 400 to 571, revised as
of October 1, 2016, on page 319, in
§ 571.106, standard S5.3.11 is reinstated
to read as follows:
§ 571.106
Standard No. 106; Brake hoses.
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*
S5. Requirements—hydraulic brake
hose, brake hose assemblies, and brake
hose end fittings.
*
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BILLING CODE 1301–00–D
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
50 CFR Part 300
[Docket No. 170815764–7877–01]
RIN 0648–BH12
International Fisheries; Pacific Tuna
Fisheries; Revised 2017 Fishing
Restrictions for Tropical Tuna in the
Eastern Pacific Ocean
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Final rule.
AGENCY:
NMFS is issuing regulations
under the Tuna Conventions Act to
implement amendments to Resolution
C–17–01 (Conservation of Tuna in the
Eastern Pacific Ocean During 2017) per
Resolution C–17–02 (Conservation
Measures for Tropical Tunas in the
Eastern Pacific Ocean During 2018–
2020 and Amendment to Resolution C–
17–01) which was adopted by the InterAmerican Tropical Tuna Commission
(IATTC or Commission) in July 2017.
Applicable to the purse seine fleet
fishing for tropical tunas (bigeye,
yellowfin, and skipjack tuna) in the
eastern Pacific Ocean (EPO) and only for
the remainder of the 2017 calendar year,
the amendments to Resolution C–17–01
remove the total allowable catches
(TACs) for bigeye tuna (BET) and
yellowfin tuna (YFT), and replace them
with an extension in the purse seine
closure period from 62 days to 72 days.
Additionally, to ensure that the time/
area closure, known as the corralito,
does not overlap with the extended
closure periods, the amendments also
shift the dates for the corralito closure.
This rule is necessary for the
conservation of tropical tuna stocks in
the EPO and for the United States to
satisfy its obligations as a member of the
IATTC.
DATES: This final rule is effective
September 29, 2017.
ADDRESSES: Copies of supporting
documents that were prepared for this
final rule, including the regulatory
SUMMARY:
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impact review (RIR) are available via the
Federal e-Rulemaking Portal: https://
www.regulations.gov, docket NOAA–
NMFS–2017–0024 or contact with the
Regional Administrator, Barry A. Thom,
NMFS West Coast Region, 1201 NE
Lloyd Blvd., Suite 1100, Portland, OR
97232–1274, or
RegionalAdministrator.WCRHMS@
noaa.gov.
FOR FURTHER INFORMATION CONTACT:
Taylor Debevec, NMFS at 562–980–
4066.
SUPPLEMENTARY INFORMATION:
Background on the IATTC
The United States is a member of the
IATTC, which was established under
the 1949 Convention for the
Establishment of an Inter-American
Tropical Tuna Commission. In 2003, the
IATTC took the first step to dramatically
revise the 1949 Convention by adopting
the Convention for the Strengthening of
the IATTC Established by the 1949
Convention between the United States
of America and the Republic of Costa
Rica (Antigua Convention), which did
not enter into force until 2010 when the
requite number of members agreed to
the revisions. After the Antigua
Convention had entered into force in
2010, the United States acceded to the
Antigua Convention on February 24,
2016. The full text of the Antigua
Convention is available at: https://
www.iattc.org/PDFFiles2/Antigua_
Convention_Jun_2003.pdf.
The IATTC consists of 21 member
nations and four cooperating nonmember nations and facilitates scientific
research into, as well as the
conservation and management of, tuna
and tuna-like species in the IATTC
Convention Area. The IATTC
Convention Area is defined as waters of
the EPO within the area bounded by the
west coast of the Americas and by 50°
N. latitude, 150° W. longitude, and 50°
S. latitude. The IATTC maintains a
scientific research and fishery
monitoring program and regularly
assesses the status of tuna, sharks, and
billfish stocks in the EPO to determine
appropriate catch limits and other
measures deemed necessary to promote
sustainable fisheries and prevent the
overexploitation of these stocks.
International Obligations of the United
States Under the Antigua Convention
As a Party to the Antigua Convention
and a member of the IATTC, the United
States is legally bound to implement
decisions of the IATTC. The Tuna
Conventions Act (16 U.S.C. 951 et seq.)
directs the Secretary of Commerce, in
consultation with the Secretary of State
E:\FR\FM\29SER1.SGM
29SER1
]]>Agencies
[Federal Register Volume 82, Number 188 (Friday, September 29, 2017)]
[Rules and Regulations]
[Pages 45511-45514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20911]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Part 10
RIN 0906-AB11
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.
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SUMMARY: The Health Resources and Services Administration (HRSA)
administers section 340B of the Public Health Service Act (PHSA), known
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. On August 21, 2017, HHS solicited comments on further
delaying the effective date of the January 5, 2017, final rule to July
1, 2018 (82 FR 39553). HHS proposed this action to allow a more
deliberate process of considering alternative and supplemental
regulatory provisions and to allow for sufficient time for additional
rulemaking. After consideration of the comments received on the
proposed rule, HHS is delaying the effective date of the January 5,
2017, final rule, to July 1, 2018.
DATES: As of September 29, 2017, the effective date of the final rule
published in the Federal Register (82 FR 1210, January 5, 2017) is
further delayed to July 1, 2018.
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
On September 30, 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) on June 17, 2015, to implement CMPs for manufacturers that
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 $.01 (penny pricing) for drugs when the ceiling
price calculation equals zero (80 FR 34583, June 17, 2015). The public
comment period closed on 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); comments from both the original
comment period established in the NPRM and the reopened comment period
announced in the April 19, 2016 notice were considered in the
development of the final rule. The provisions of that final 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, titled ``Regulatory
Freeze Pending Review.'' \1\ In the January 5, 2017, final rule, HHS
acknowledged 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.
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\1\ See: https://www.whitehouse.gov/the-press-office/2017/01/20/memorandum-heads-executive-departments-and-agencies.
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After further consideration and to provide affected parties
sufficient time to make needed changes to facilitate compliance, and
because questions were 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 comments on whether that date
should be further extended to October 1, 2017. HHS received 51 comments
on the interim final rule, some supporting and some 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 delayed
the effective date of the January 5, 2017, final rule to October 1,
2017 (82 FR 22893, May 19, 2017).
HHS subsequently published a proposed rule (82 FR 39553, August 21,
2017) to further delay the effective date of the final rule to July 1,
2018. The further delay allows necessary time to fully consider the
substantial questions of fact, law, and policy raised by the rule,
consistent with the aforementioned ``Regulatory Freeze Pending
Review,'' memorandum. Requiring manufacturers to make targeted and
potentially costly changes to pricing systems and business procedures
in order to comply with a rule that is under further consideration and
for which substantive questions have been raised would be disruptive.
The further delay allows HHS to consider objections regarding the
timing of the effective date and challenges associated with complying
with the rule, as well as other objections to the rule.
In addition, Executive Order 13765 (82 FR 8351) titled,
``Minimizing the
[[Page 45512]]
Economic Burden of the Patient Protection and Affordable Care Act
Pending Repeal,'' specifically instructs HHS and all other heads of
executive offices to utilize all authority and discretion available to
delay the implementation of certain provisions or requirements of the
Patient Protection and Affordable Care Act.\2\ HHS based the January 5,
2017, final rule on changes made to the 340B Program by the Patient
Protection and Affordable Care Act. HHS proposed to delay the effective
date of the January 5, 2017, final rule to July 1, 2018, to allow for a
sufficient amount of time to consider the regulatory burdens that may
be posed by this final rule. HHS continues to examine important
substantive issues in matters covered by the rule and intends to engage
in additional rulemaking on these issues.
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\2\ See: https://www.whitehouse.gov/the-press-office/2017/01/2/executive-order-minimizing-economic-burden-patient-protection-and.
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HHS received a number of comments on the proposed rule both
supporting and opposing the delay of the effective date to July 1,
2018. After careful consideration of the comments received, HHS has
decided to delay the effective date of the January 5, 2017, final rule
to July 1, 2018. As HHS changed the effective date of the final rule to
July 1, 2018, enforcement will be delayed to July 1, 2018. HHS
continues to believe that the delay of the effective date provides
regulated entities sufficient time to implement the requirements of the
rule, as well as allowing a more deliberate process of considering
alternative and supplemental regulatory provisions, and to allow for
sufficient time for additional rulemaking.
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
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 on October 1, 2017, for several weeks before a final rule
delaying the effective date until July 1, 2018, would go into effect.
To preclude this uncertainty in the marketplace and to ease the burdens
of 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 will assist
stakeholders in preparing to comply with these new program
requirements.
II. Analysis and Responses to Public Comments
In the proposed rule, HHS solicited comments regarding whether we
should delay the January 5, 2017, final rule to July 1, 2018. We
received 97 comments containing a number of issues from covered
entities, manufacturers, and groups representing these stakeholders. In
this final rule, we will only respond to comments related to whether
HHS should delay the January 5, 2017, final rule to July 1, 2018. We
did not consider and do not address comments that raised issues beyond
the narrow scope of the proposed rule, including comments related to
withdrawal of the rule or comments related to broader policy matters.
However, HHS intends to engage in further rulemaking on issues covered
in the January 5, 2017, final rule. We have summarized the relevant
comments received and provided our responses below.
Comment: Some commenters supported HHS's proposed delay of the
effective date of the final rule until not only July 1, 2018, but until
HHS fulfills its commitment to engage in additional rulemaking that
cures the substantive legal and practical concerns with the final rule.
These commenters recommend that HRSA tie the further delay of the
effective date of the final rule to the completion of such rulemaking,
as opposed to a certain date.
Response: HHS has decided to delay the effective date to July 1,
2018, to provide affected parties sufficient time to make needed
changes to facilitate compliance and because HHS continues to examine
important substantive issues arising from the January 5, 2017, final
rule. After reviewing the comments received from stakeholders regarding
objections on the timing of the effective date and challenges
associated with complying with the final rule, HHS has determined that
delaying the effective date to July 1, 2018, is necessary to consider
some of the issues raised. HHS believes that delaying the effective
date to July 1, 2018, provides sufficient time to address these issues
and does not believe a further delay is necessary at this time.
Comment: Some commenters stated that the January 5, 2017, final
rule contains several policies that are inconsistent with the 340B
statute and imposes needless burdens on manufacturers. These commenters
urge HHS to delay the effective date to July 1, 2018, and use the
additional time to reconsider the policies included in the final rule.
Responses: HHS intends to engage in further rulemaking and believes
that this delay will provide HHS with time to consider the substantial
questions of fact, law, and policy raised by the rule.
Comment: Several commenters explained that a delay in the effective
date of the final rule is also necessary to align with the
Administration priorities of analyzing final, but not yet effective,
regulations, and removing or minimizing unwarranted economic and
regulatory burdens related to the Affordable Care Act, the law that
added the provisions of the 340B statute that are the subject of the
final rule.
Response: HHS agrees with the commenters. Executive Order 13765
instructs agencies to use discretion to delay the implementation of
certain provisions of requirements of the Patient Protection and
Affordable Care Act. As previously mentioned, HHS based the January 5,
2017, final rule on changes made to the 340B Program by the Patient
Protection and Affordable Care Act. As such, HHS is complying with
Executive Order 13765 to delay implementation on provisions of that law
that ``. . . impose a fiscal burden on any State or a cost, fee, tax,
penalty, or regulatory burden on individuals, families, healthcare
providers, health insurers, patients, recipients of healthcare
services, purchasers of health insurance, or makers of medical devices,
products, or medications.'' The policies finalized in the January 5,
2017, final rule will require targeted and potentially costly changes
to pricing systems and business procedures for manufacturers affected
by the rule. Thus, HHS is delaying the effective date to July 1, 2018.
Comment: Some commenters recommend that HHS delay the effective
date of the final rule until HHS concurrently addresses 340B covered
entity compliance obligations and penalties under the 340B statute,
which is necessary to strengthen the integrity of the 340B Program.
Response: HHS plans to issue separate policy documents for the
different areas of the 340B program integrity provisions in the 340B
statute and disagrees with the commenters advising HHS to address these
issues concurrently.
Comment: Many commenters opposed delaying the effective date to
July 1, 2018. Commenters recommended that HHS use its statutory
rulemaking authority to balance the scales of enforcement and oversight
in the 340B Program, and expressed concern that drug manufacturers have
engaged in discriminatory pricing strategies due to
[[Page 45513]]
a lack of oversight and enforcement with respect to manufacturer
behavior. They explained that various factors, including extensive data
regarding overcharging covered entities, HHS's inability to address
overcharges, and HHS's admission that many manufacturers are still out
of compliance highlight the need for the final rule to go into effect
immediately. They further explained that the January 5, 2017, final
rule is critical to ensuring that drug manufacturers uphold the intent
of the 340B Program. The commenters also disagreed that ``a more
deliberative process is needed'' as there have been multiple delays and
stakeholders were given various opportunities to comment.
Response: HHS does not agree that that we should enforce the final
rule immediately. We are delaying the effective date of the January 5,
2017, final rule to July 1, 2018, because the delay will provide
stakeholders with additional time to come into compliance and provide
time to consider the substantial questions of fact, law, and policy
raised by the rule. The final rule does not represent the only method
for HHS to address manufacturer overcharges. In addition to the final
rule, HHS performs audits of manufacturers, investigates all
allegations of overcharging, and participates in settlements that have
returned millions of dollars to covered entities. HHS believes that it
would be disruptive to require stakeholders to make potentially costly
changes to pricing systems and business procedures in order to comply
with a rule that is under further consideration and for which
substantive questions have been raised.
While stakeholders had the opportunity to provide comments on the
final rule, the 340B Program is a complex program that is affected by
changes in other areas of health care. HHS has determined that this
complexity and changing environment warrants further review of the
final rule.
Comment: Many commenters supported further delaying the effective
date to July 1, 2018, at a minimum, and agreed with HHS that more time
was needed for stakeholders to come into compliance and to consider
substantial questions of fact, law and policy raised by the January 5,
2017, final rule.
Response: HHS agrees with the commenters and will delay the
effective date of the January 5, 2017, final rule to July 1, 2018.
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), Executive Order 13132 on Federalism (August 4, 1999),
the Congressional Review Act, and Executive Order 13771 on Reducing
Regulation and Controlling Regulatory Costs (January 30, 2017).
Executive Orders 12866, 13563 and 13771
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 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) and is therefore, not a major
rule under the Congressional Review Act.
HHS does not believe that a delay of 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'' 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.
Executive Order 13771, titled ``Reducing Regulation and Controlling
Regulatory Costs,'' was issued on January 30, 2017. This final rule is
not expected to be an EO 13771 regulatory action because this final
rule is not significant under EO 12866.
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 by 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 has 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 that 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
[[Page 45514]]
aggregate, or by the private sector, of $100 million or more (adjusted
annually for inflation) in any one year.'' In 2017, that threshold is
approximately $148 million. HHS does not expect this rule to exceed the
threshold.
Executive Order 13132--Federalism
HHS has 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.''
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. Comments are welcome on the
accuracy of this statement.
Dated: September 22, 2017.
George Sigounas,
Administrator, Health Resources and Services Administration.
Thomas E. Price,
Secretary, Department of Health and Human Services.
[FR Doc. 2017-20911 Filed 9-28-17; 8:45 am]
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