340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation, 25943-25947 [2018-12103]
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(NTTAA) (15 U.S.C. 272 note). Pursuant
to the Regulatory Flexibility Act (RFA)
(5 U.S.C. 601 et seq.), the Agency
previously assessed whether
establishment of tolerances, exemptions
from tolerances, raising of tolerance
levels, expansion of exemptions, or
revocations might significantly impact a
substantial number of small entities and
concluded that, as a general matter,
these actions do not impose a significant
economic impact on a substantial
number of small entities. These analyses
for tolerance establishments and
modifications, and for tolerance
revocations were published in the
Federal Register of May 4, 1981 (46 FR
24950) and December 17, 1997 (62 FR
66020) (FRL–5753–1), respectively, and
were provided to the Chief Counsel for
Advocacy of the Small Business
Administration. In a memorandum
dated May 25, 2001, EPA determined
that eight conditions must all be
satisfied in order for an import tolerance
or tolerance exemption revocation to
adversely affect a significant number of
small entity importers, and that there is
a negligible joint probability of all eight
conditions holding simultaneously with
respect to any particular revocation.
Furthermore, for alpha-cypermethrin,
the Agency knows of no extraordinary
circumstances that exist as to the
present rule that would change EPA’s
previous analysis. Taking into account
this analysis, and available information
concerning the pesticides listed in this
rule, EPA hereby certifies that this rule
will not have a significant negative
economic impact on a substantial
number of small entities. In addition,
the Agency has determined that this
action will not have a substantial direct
effect on States, on the relationship
between the national government and
the States, or on the distribution of
power and responsibilities among the
various levels of government, as
specified in Executive Order 13132,
entitled ‘‘Federalism’’ (64 FR 43255,
August 10, 1999). Executive Order
13132 requires EPA to develop an
accountable process to ensure
‘‘meaningful and timely input by State
and local officials in the development of
regulatory policies that have federalism
implications.’’ ‘‘Policies that have
federalism implications’’ is defined in
the Executive order to include
regulations that have ‘‘substantial direct
effects on the States, 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
action directly regulates growers, food
processors, food handlers, and food
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retailers, not States. This action does not
alter the relationships or distribution of
power and responsibilities established
by Congress in the preemption
provisions of FFDCA section 408(n)(4).
For these same reasons, the Agency has
determined that this action does not
have any ‘‘tribal implications’’ as
described in Executive Order 13175,
entitled ‘‘Consultation and Coordination
with Indian Tribal Governments’’ (65 FR
67249, November 9, 2000). Executive
Order 13175, requires EPA to develop
an accountable process to ensure
‘‘meaningful and timely input by tribal
officials in the development of
regulatory policies that have tribal
implications.’’ ‘‘Policies that have tribal
implications’’ is defined in the
Executive order to include regulations
that have ‘‘substantial direct effects on
one or more Indian tribes, on the
relationship between the Federal
Government and the Indian tribes, or on
the distribution of power and
responsibilities between the Federal
Government and Indian tribes.’’ This
action will not have substantial direct
effects on tribal governments, on the
relationship between the Federal
Government and Indian tribes, or on the
distribution of power and
responsibilities between the Federal
Government and Indian tribes, as
specified in Executive Order 13175.
Thus, Executive Order 13175 does not
apply to this action.
VII. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), EPA will
submit a report containing this rule and
other required information to the U.S.
Senate, the U.S. House of
Representatives, and the Comptroller
General of the United States prior to
publication of the rule in the Federal
Register. This action is not a ‘‘major
rule’’ as defined by 5 U.S.C. 804(2).
List of Subjects in 40 CFR Part 180
Environmental protection,
Administrative practice and procedure,
Agricultural commodities, Pesticides
and pests, Reporting and recordkeeping
requirements.
Dated: April 30, 2018.
Richard P. Keigwin, Jr.,
Director, Office of Pesticide Programs.
Therefore, 40 CFR chapter I is
amended as follows:
PART 180—[AMENDED]
1. The authority citation for part 180
continues to read as follows:
■
Authority: 21 U.S.C. 321(q), 346a and 371.
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2. In § 180.418, in the table in
paragraph (a)(3):
■ i. Amend the existing entries for
‘‘Fruit, citrus, group 10–10’’; and ‘‘Hog,
fat’’ by adding footnote references and
add footnote 1 to the end of the table;
and
■ ii. Add alphabetically new entries for
‘‘Fruit, citrus, group 10–10’’; and ‘‘Hog,
fat’’.
The additions to the table in
paragraph (a)(3) read as follows:
■
§ 180.418 Cypermethrin and isomers
alpha-cypermethrin and zeta-cypermethrin;
tolerances for residues.
(a)(3) * * *
Parts per
million
Commodity
*
*
*
*
Fruit, citrus, group 10–10 1 .........
Fruit, citrus, group 10–10 ...........
*
*
*
*
Hog, fat 1 .....................................
Hog, fat .......................................
*
*
*
*
*
10
0.35
*
1.0
0.10
*
1 This tolerance expires on December 5,
2018.
*
*
*
*
*
[FR Doc. 2018–12066 Filed 6–4–18; 8:45 am]
BILLING CODE 6560–50–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
42 CFR Part 10
RIN 0906–AB18
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
SUMMARY:
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May 7, 2018, HHS solicited comments
on further delaying the effective date of
the January 5, 2017, final rule to July 1,
2019. HHS proposed this action to allow
a more deliberate process of considering
alternative and supplemental regulatory
provisions and to allow for sufficient
time for any 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,
2019.
DATES: As of July 1, 2018, the effective
date of the final rule published in the
Federal Register on January 5, 2017 at
82 FR 1210, delayed March 6, 2017 at
82 FR 12508, March 20, 2017 at 82 FR
14332, May 19, 2017 at 82 FR 22893,
and September 29, 2017 at 82 FR 45511,
is further delayed until July 1, 2019.
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
HHS published a notice of proposed
rulemaking (NPRM) on June 17, 2015, to
implement civil monetary penalties
(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
$0.01 (penny pricing) for each unit of a
drug when the ceiling price calculation
equals zero (80 FR 34583, June 17,
2015). After review of the 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.
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
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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
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. HHS
solicited additional comments on
whether that date should be further
extended 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 later solicited comments on
delaying the effective date to July 1,
2018 (82 FR 39553, August 21, 2017)
and subsequently delayed the January 5,
2017, final rule to July 1, 2018 (82 FR
45511, September 29, 2017).
HHS issued a proposed rule and
solicited additional comments to further
delay the effective date to July 1, 2019,
and received a number of comments
both supporting and opposing the delay
(83 FR 20008, May 7, 2018). After
consideration of the comments received,
HHS has decided to delay the effective
date of the January 5, 2017, final rule to
July 1, 2019. As HHS changed the
effective date of the final rule to July 1,
2019, enforcement will be delayed to
July 1, 2019. HHS continues to believe
that the delay of the effective date will
provide regulated entities with needed
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 any additional rulemaking.
HHS intends to engage in additional or
alternative rulemaking on these issues,
and believes it would be
counterproductive to effectuate the final
rule prior to issuance of additional or
alternative rulemaking on these issues.
HHS is developing new comprehensive
policies to address the rising costs of
prescription drugs. These policies will
address drug pricing in government
programs, such as Medicare Parts B & D,
Medicaid, and the 340B Program. Due to
the development of these
comprehensive policies, we are delaying
1 See: https://www.whitehouse.gov/the-pressoffice/2017/01/20/memorandum-heads-executivedepartments-and-agencies.
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the effective date of the January 5, 2017,
final rule to July 1, 2019.
HHS does not believe this delay will
adversely affect any of the stakeholders
in a meaningful way.
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 or for rules that grant or recognize
an exemption or relieve a restriction.
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 July 1, 2018,
several weeks before the final rule
delaying the effective date until July 1,
2019, 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 to prepare for
compliance with these new program
requirements.
II. Analysis and Responses to Public
Comments
In the proposed rule, HHS solicited
comments regarding the impact of
delaying the effective date of the final
rule, published January 5, 2017, to July
1, 2019, while a more deliberate
rulemaking process is undertaken. HHS
received 29 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,
2019. We did not consider and do not
address comments that raised issues
beyond the narrow scope of the
proposed rule, including comments
related to broader policy matters.
However, HHS is considering 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: Commenters disagree with
HHS that delaying implementation of
the rule has no adverse effect given that
other more significant remedies are
available to entities who believe that
they have been overcharged by
manufacturers. Commenters request that
HHS explain what these ‘‘significant
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remedies’’ are, as they believe that
remedies do not exist. Commenters state
they cannot audit manufacturers or sue
companies in court. In addition,
manufacturers can decide not to
participate in the 340B program’s
current voluntary dispute resolution
process, and a proposal to make the
process mandatory has been withdrawn.
Currently, covered entities cannot check
if they are being charged the right price.
Any further postponement would
prevent Congress’ intent that HHS has
meaningful oversight and enforcement
authority.
Response: HRSA’s website describes
how it carefully reviews pricing
discrepancies brought to its attention. In
cases in which the 340B Program’s
ceiling price appears to have been
violated, covered entities are provided
the details necessary to settle any
discrepancy with the manufacturer
directly. It is in the manufacturer’s best
interest to ensure that they are
appropriately reporting AMP and URA
to CMS, as well as providing the 340B
Program ceiling price to 340B Program
covered entities. Inaccuracies in any of
this pricing information will negatively
impact other drug pricing programs,
such as Medicaid or Veterans Affairs
programs. Further, misreporting pricing
data to CMS could lead to State and
Federal False Claims Act liability,
which has the potential to carry triple
damages and other significant monetary
penalties.
Comment: Some commenters stated
that HHS alleges in the proposed rule
that the delay will not adversely affect
stakeholders, which ignores the extent
of overcharges as documented in OIG
reports. HHS also stated that ‘‘a small
number of manufacturers have informed
HHS over the last several years that they
charge more than $0.01 for a drug with
a ceiling price below $0.01’’ and that it
‘‘believes’’ a majority of manufacturers
follow the ‘‘long-standing HHS policy’’
on penny pricing. HHS’s statement that
it merely ‘‘believes’’ most manufacturers
are following the policy demonstrates
that HHS has not attempted to
investigate the extent of noncompliance.
The penny pricing policy serves as a
disincentive for manufacturers to raise
drug prices much quicker than the rate
of inflation and the rule should be
implemented immediately in order to
meet the Administration’s goal of
lowering drug prices. Until penny
pricing is codified in a regulation, there
is less incentive for manufacturers to
comply and the final rule should be
effective immediately.
Response: HHS has consistently
stated that ‘‘A small number of
manufacturers have informed HRSA
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over the last several years that they
charge more than $0.01 for a drug with
a ceiling price below $0.01. However,
this is a long-standing HRSA policy and
HRSA believes the majority of
manufacturers currently follow the
practice of charging a $0.01. Therefore,
this portion of the regulation will not
result in a significant impact.’’ (e.g., 80
FR 34586, June 17, 2015; 82 FR 1227,
January 5, 2017). The commenter does
not provide evidence that a majority of
manufacturers are not following the
practice of charging $0.01 for a drug
with a ceiling price below $0.01.
HRSA’s website describes how it
carefully reviews pricing discrepancies
brought to its attention. Through these
and other mechanisms, HRSA monitors
the program for noncompliance and
maintains its belief that a majority of
manufacturers follow the long-standing
practice of charging $0.01 for a drug
with a ceiling price below $0.01.
Comment: Many commenters oppose
delaying the effective date to July 1,
2019. Commenters express concern that
until the January 5, 2017, final rule is
implemented, covered entities remain
unprotected from overcharges that can
further exacerbate the negative effects of
high-cost drugs. They contend that all
accountability in the Program is placed
on covered entities, and manufacturers
are not being held accountable. They
contend that the January 5, 2017, final
regulation would have provided covered
entities with access to a secure database
to confirm ceiling prices. These
commenters explain that without access
to ceiling price information, covered
entities have to rely on HRSA to confirm
any instances in which the covered
entity suspects that it was overcharged
by a manufacturer, thereby hampering
any meaningful enforcement against
manufacturers. They conclude that
continued delay of the final rule inhibits
the ability of covered entities to verify
whether or not manufacturers’
calculations of ceiling prices are correct.
The commenters request that HHS
should implement the January 5, 2017,
rule immediately.
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, 2019, because the
delay will allow HHS to consider
additional rulemaking. 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
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25945
entities. HHS believes that it would be
disruptive to require stakeholders to
make potentially costly changes to
pricing systems and business
procedures 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
and delaying the final rule affords HHS
the opportunity to consider alternative
and supplemental regulatory provisions
and to allow for sufficient time for any
additional rulemaking.
Comment: The commenters also
disagreed that ‘‘a more deliberative
process is needed’’ as HHS has already
spent 8 years considering and
responding to multiple delays and
stakeholders were given various
opportunities to comment. HHS has not
complied with the statutory deadline to
promulgate the regulation and any
further delay is unreasonable and
violates the Administrative Procedure
Act. Rather than implement the CMP
Rule, HHS would reward those
manufacturers that are flouting ceiling
price requirements. Comments assert
that the final rule would give HHS an
effective penalty to impose on
manufacturers that overcharge covered
entities and to deter other
manufacturers from doing so. In
addition, commenters contend that HHS
does not have authority to replace
Congress’ judgment with its own and
ignore the requirements of the law. They
urge HHS to immediately implement the
January 5, 2017, final rule.
Response: HHS believes it would be
counterproductive to effectuate the final
rule prior to consideration of additional
or alternative rulemaking as HHS is in
the process of developing new
comprehensive policies to address the
rising costs of prescription drugs not
limited to the 340B Program. As such,
HHS is delaying the effective date of the
January 5, 2017, final rule until July 1,
2019. In addition, HHS believes this
delay will not adversely impact covered
entities and will instead save the
healthcare sector compliance costs, as
discussed in the January 5, 2017, final
rule. Therefore, the rule is being delayed
to July 1, 2019.
Comment: Some commenters
supported HHS’s proposed delay of the
effective date of the final rule until not
only July 1, 2019, but until HHS fulfills
its commitment to engage in additional
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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 decided to delay the
effective date to July 1, 2019, 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, 2019, is necessary to consider some
of the issues raised. HHS believes that
delaying the effective date to July 1,
2019, provides sufficient time to address
these issues in junction with HHS’s
stated intention to consider undertaking
additional or alternative rulemaking on
these issues.
Comment: Some commenters stated
that the January 5, 2017, final rule
contains several policies that are
inconsistent with the 340B statute and
imposes unnecessary costs and needless
administrative burdens on
manufacturers. They believe that
manufacturers should not be required to
make updates to their systems, policies,
and business practices to comply with
the January 5, 2017, final rule if further
changes or additional rulemaking will
be forthcoming. These commenters urge
HHS to delay the effective date to July
1, 2019, 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 public comments
received. Requiring manufacturers to
make targeted and potentially costly
changes to pricing systems and business
procedures to comply with a rule that is
under further consideration would be
disruptive. Therefore, HHS is delaying
the January 5, 2017, final rule to July 1,
2019.
Comment: Several commenters
explained that a delay in the effective
date of the final rule is also necessary
to align with the Administration’s
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.
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Response: HHS agrees with the
commenters. Executive Order 13765
instructs agencies to use discretion to
delay the implementation of certain
provisions 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 the 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, 2019.
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 related to drug
pricing in government programs,
including the 340B Program, and
disagrees with the commenters advising
HHS to address these issues
concurrently.
Comment: Many commenters
supported further delaying the effective
date to July 1, 2019, at a minimum, and
urged HHS to take the opportunity to
refocus the 340B Program on its
mission, and issue new reforms and
new ceiling price and CMP rule as
expeditiously as possible.
Response: HHS agrees with the
commenters and will delay the effective
date of the January 5, 2017, final rule to
July 1, 2019.
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
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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).
This final rule will not have economic
impacts of $100 million or more in any
1 year, and, therefore, has not been
designated an ‘‘economically
significant’’ rule under section 3(f)(1) of
Executive Order 12866. The 340B
Program as a whole creates significant
savings for entities purchasing drugs
through the program; however, this final
rule would not have an economically
significant impact on the Program.
When the 2017 Rule was finalized, it
was described as not economically
significant. Therefore, delay of the
effective date of the 2017 Rule is also
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amozie on DSK3GDR082PROD with RULES
not likely to have an economically
significant impact.
Specifically, the RIA for the 2017 Rule
stated that, ‘‘[. . .] manufacturers are
required to ensure they do not
overcharge covered entities, and a civil
monetary penalty could result from
overcharging if it met the standards in
this final rule. HHS envisions using
these penalties in rare situations. Since
the Program’s inception, issues related
to overcharges have been resolved
between a manufacturer and a covered
entity and any issues have generally
been due to technical errors in the
calculation. For the penalties to be used
as defined in the statute and in this
[2017] rule, the manufacturer
overcharge would have to be the result
of a knowing and intentional act. Based
on anecdotal information received from
covered entities, HHS anticipates that
this would occur very rarely if at all.’’
Since the civil penalties envisioned in
the 2017 Rule were expected to be rare,
delay of these civil penalties is unlikely
to have an economically significant
impact.
Additionally, the 2017 Rule codified
the practice of manufacturers charging
$0.01 for drugs with a ceiling price
below $0.01, which the 2017 Rule RIA
described as ‘‘[. . .] a long-standing
HRSA policy, and HRSA believes the
majority of manufacturers currently
follow the practice of charging $0.01.’’
Delay of this rule will delay the
codification of this practice, but since it
is already a longstanding policy and
widespread practice, the impact of delay
is not likely to be economically
significant.
Executive Order 13771, titled
‘‘Reducing Regulation and Controlling
Regulatory Costs,’’ was issued on
January 30, 2017. This rule is not
subject to the requirements of E.O.
13771 because this rule results in no
more than de minimis costs.
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
VerDate Sep<11>2014
16:50 Jun 04, 2018
Jkt 244001
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, 2018, over 12,800 covered
entities participate in the 340B Program,
which represent safety-net health care
providers across the country.
In addition, the rule would affect drug
manufacturers (North American
Industry Classification System code
325412: Pharmaceutical Preparation
Manufacturing). The small business size
standard for drug manufacturers is 750
employees. Approximately 600 drug
manufacturers participate in the 340B
Program. While it is possible to estimate
the impact of the rule on the industry
as a whole, the data necessary to project
changes for specific or groups of
manufacturers is not available, as HRSA
does not collect the information
necessary to assess the size of an
individual manufacturer that
participates in the 340B Program. 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
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.’’
PO 00000
Frm 00067
Fmt 4700
Sfmt 4700
25947
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 30, 2018.
George Sigounas
Administrator, Health Resources and Services
Administration.
Approved: May 31, 2018.
Alex M. Azar II
Secretary, Department of Health and Human
Services.
[FR Doc. 2018–12103 Filed 6–1–18; 11:15 am]
BILLING CODE 4165–15–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Part 414
[CMS–6080–N]
Medicare Program; Update to the
Required Prior Authorization List of
Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies
(DMEPOS) Items That Require Prior
Authorization as a Condition of
Payment
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Update to list.
AGENCY:
This document announces the
addition of 31 Healthcare Common
Procedure Coding System (HCPCS)
codes to the Required Prior
Authorization List of Durable Medical
Equipment, Prosthetics, Orthotics, and
Supplies (DMEPOS) Items that require
prior authorization as a condition of
payment. Prior authorization for these
codes will be implemented nationwide.
DATES: Implementation is effective on
September 1, 2018.
FOR FURTHER INFORMATION CONTACT:
Emily Calvert, (410) 786–4277.
Andre Damonze, (410) 786–1795.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
Sections 1832, 1834, and 1861 of the
Social Security Act (the Act) establish
that the provision of durable medical
equipment, prosthetic, orthotics, and
supplies (DMEPOS) is a covered benefit
under Part B of the Medicare program.
E:\FR\FM\05JNR1.SGM
05JNR1
]]>Agencies
[Federal Register Volume 83, Number 108 (Tuesday, June 5, 2018)]
[Rules and Regulations]
[Pages 25943-25947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12103]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Part 10
RIN 0906-AB18
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), 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
[[Page 25944]]
May 7, 2018, HHS solicited comments on further delaying the effective
date of the January 5, 2017, final rule to July 1, 2019. HHS proposed
this action to allow a more deliberate process of considering
alternative and supplemental regulatory provisions and to allow for
sufficient time for any 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, 2019.
DATES: As of July 1, 2018, the effective date of the final rule
published in the Federal Register on January 5, 2017 at 82 FR 1210,
delayed March 6, 2017 at 82 FR 12508, March 20, 2017 at 82 FR 14332,
May 19, 2017 at 82 FR 22893, and September 29, 2017 at 82 FR 45511, is
further delayed until July 1, 2019.
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
HHS published a notice of proposed rulemaking (NPRM) on June 17,
2015, to implement civil monetary penalties (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 $0.01 (penny pricing) for each unit of a drug when
the ceiling price calculation equals zero (80 FR 34583, June 17, 2015).
After review of the 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.
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\
---------------------------------------------------------------------------
\1\ See: https://www.whitehouse.gov/the-press-office/2017/01/20/memorandum-heads-executive-departments-and-agencies.
---------------------------------------------------------------------------
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. HHS solicited
additional comments on whether that date should be further extended 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 later solicited
comments on delaying the effective date to July 1, 2018 (82 FR 39553,
August 21, 2017) and subsequently delayed the January 5, 2017, final
rule to July 1, 2018 (82 FR 45511, September 29, 2017).
HHS issued a proposed rule and solicited additional comments to
further delay the effective date to July 1, 2019, and received a number
of comments both supporting and opposing the delay (83 FR 20008, May 7,
2018). After consideration of the comments received, HHS has decided to
delay the effective date of the January 5, 2017, final rule to July 1,
2019. As HHS changed the effective date of the final rule to July 1,
2019, enforcement will be delayed to July 1, 2019. HHS continues to
believe that the delay of the effective date will provide regulated
entities with needed 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 any additional rulemaking. HHS intends to engage in additional
or alternative rulemaking on these issues, and believes it would be
counterproductive to effectuate the final rule prior to issuance of
additional or alternative rulemaking on these issues. HHS is developing
new comprehensive policies to address the rising costs of prescription
drugs. These policies will address drug pricing in government programs,
such as Medicare Parts B & D, Medicaid, and the 340B Program. Due to
the development of these comprehensive policies, we are delaying the
effective date of the January 5, 2017, final rule to July 1, 2019.
HHS does not believe this delay will adversely affect any of the
stakeholders in a meaningful way.
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 or for rules
that grant or recognize an exemption or relieve a restriction. 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 July 1, 2018, several weeks before the final rule delaying
the effective date until July 1, 2019, 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 to prepare
for compliance with these new program requirements.
II. Analysis and Responses to Public Comments
In the proposed rule, HHS solicited comments regarding the impact
of delaying the effective date of the final rule, published January 5,
2017, to July 1, 2019, while a more deliberate rulemaking process is
undertaken. HHS received 29 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, 2019. We did not consider and do not address comments that
raised issues beyond the narrow scope of the proposed rule, including
comments related to broader policy matters. However, HHS is considering
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: Commenters disagree with HHS that delaying implementation
of the rule has no adverse effect given that other more significant
remedies are available to entities who believe that they have been
overcharged by manufacturers. Commenters request that HHS explain what
these ``significant
[[Page 25945]]
remedies'' are, as they believe that remedies do not exist. Commenters
state they cannot audit manufacturers or sue companies in court. In
addition, manufacturers can decide not to participate in the 340B
program's current voluntary dispute resolution process, and a proposal
to make the process mandatory has been withdrawn. Currently, covered
entities cannot check if they are being charged the right price. Any
further postponement would prevent Congress' intent that HHS has
meaningful oversight and enforcement authority.
Response: HRSA's website describes how it carefully reviews pricing
discrepancies brought to its attention. In cases in which the 340B
Program's ceiling price appears to have been violated, covered entities
are provided the details necessary to settle any discrepancy with the
manufacturer directly. It is in the manufacturer's best interest to
ensure that they are appropriately reporting AMP and URA to CMS, as
well as providing the 340B Program ceiling price to 340B Program
covered entities. Inaccuracies in any of this pricing information will
negatively impact other drug pricing programs, such as Medicaid or
Veterans Affairs programs. Further, misreporting pricing data to CMS
could lead to State and Federal False Claims Act liability, which has
the potential to carry triple damages and other significant monetary
penalties.
Comment: Some commenters stated that HHS alleges in the proposed
rule that the delay will not adversely affect stakeholders, which
ignores the extent of overcharges as documented in OIG reports. HHS
also stated that ``a small number of manufacturers have informed HHS
over the last several years that they charge more than $0.01 for a drug
with a ceiling price below $0.01'' and that it ``believes'' a majority
of manufacturers follow the ``long-standing HHS policy'' on penny
pricing. HHS's statement that it merely ``believes'' most manufacturers
are following the policy demonstrates that HHS has not attempted to
investigate the extent of noncompliance. The penny pricing policy
serves as a disincentive for manufacturers to raise drug prices much
quicker than the rate of inflation and the rule should be implemented
immediately in order to meet the Administration's goal of lowering drug
prices. Until penny pricing is codified in a regulation, there is less
incentive for manufacturers to comply and the final rule should be
effective immediately.
Response: HHS has consistently stated that ``A small number of
manufacturers have informed HRSA over the last several years that they
charge more than $0.01 for a drug with a ceiling price below $0.01.
However, this is a long-standing HRSA policy and HRSA believes the
majority of manufacturers currently follow the practice of charging a
$0.01. Therefore, this portion of the regulation will not result in a
significant impact.'' (e.g., 80 FR 34586, June 17, 2015; 82 FR 1227,
January 5, 2017). The commenter does not provide evidence that a
majority of manufacturers are not following the practice of charging
$0.01 for a drug with a ceiling price below $0.01. HRSA's website
describes how it carefully reviews pricing discrepancies brought to its
attention. Through these and other mechanisms, HRSA monitors the
program for noncompliance and maintains its belief that a majority of
manufacturers follow the long-standing practice of charging $0.01 for a
drug with a ceiling price below $0.01.
Comment: Many commenters oppose delaying the effective date to July
1, 2019. Commenters express concern that until the January 5, 2017,
final rule is implemented, covered entities remain unprotected from
overcharges that can further exacerbate the negative effects of high-
cost drugs. They contend that all accountability in the Program is
placed on covered entities, and manufacturers are not being held
accountable. They contend that the January 5, 2017, final regulation
would have provided covered entities with access to a secure database
to confirm ceiling prices. These commenters explain that without access
to ceiling price information, covered entities have to rely on HRSA to
confirm any instances in which the covered entity suspects that it was
overcharged by a manufacturer, thereby hampering any meaningful
enforcement against manufacturers. They conclude that continued delay
of the final rule inhibits the ability of covered entities to verify
whether or not manufacturers' calculations of ceiling prices are
correct. The commenters request that HHS should implement the January
5, 2017, rule immediately.
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, 2019, because the delay will allow HHS to
consider additional rulemaking. 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 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 and delaying the final rule affords HHS the opportunity to
consider alternative and supplemental regulatory provisions and to
allow for sufficient time for any additional rulemaking.
Comment: The commenters also disagreed that ``a more deliberative
process is needed'' as HHS has already spent 8 years considering and
responding to multiple delays and stakeholders were given various
opportunities to comment. HHS has not complied with the statutory
deadline to promulgate the regulation and any further delay is
unreasonable and violates the Administrative Procedure Act. Rather than
implement the CMP Rule, HHS would reward those manufacturers that are
flouting ceiling price requirements. Comments assert that the final
rule would give HHS an effective penalty to impose on manufacturers
that overcharge covered entities and to deter other manufacturers from
doing so. In addition, commenters contend that HHS does not have
authority to replace Congress' judgment with its own and ignore the
requirements of the law. They urge HHS to immediately implement the
January 5, 2017, final rule.
Response: HHS believes it would be counterproductive to effectuate
the final rule prior to consideration of additional or alternative
rulemaking as HHS is in the process of developing new comprehensive
policies to address the rising costs of prescription drugs not limited
to the 340B Program. As such, HHS is delaying the effective date of the
January 5, 2017, final rule until July 1, 2019. In addition, HHS
believes this delay will not adversely impact covered entities and will
instead save the healthcare sector compliance costs, as discussed in
the January 5, 2017, final rule. Therefore, the rule is being delayed
to July 1, 2019.
Comment: Some commenters supported HHS's proposed delay of the
effective date of the final rule until not only July 1, 2019, but until
HHS fulfills its commitment to engage in additional
[[Page 25946]]
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 decided to delay the effective date to July 1, 2019,
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, 2019, is necessary to consider some of the
issues raised. HHS believes that delaying the effective date to July 1,
2019, provides sufficient time to address these issues in junction with
HHS's stated intention to consider undertaking additional or
alternative rulemaking on these issues.
Comment: Some commenters stated that the January 5, 2017, final
rule contains several policies that are inconsistent with the 340B
statute and imposes unnecessary costs and needless administrative
burdens on manufacturers. They believe that manufacturers should not be
required to make updates to their systems, policies, and business
practices to comply with the January 5, 2017, final rule if further
changes or additional rulemaking will be forthcoming. These commenters
urge HHS to delay the effective date to July 1, 2019, 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 public
comments received. Requiring manufacturers to make targeted and
potentially costly changes to pricing systems and business procedures
to comply with a rule that is under further consideration would be
disruptive. Therefore, HHS is delaying the January 5, 2017, final rule
to July 1, 2019.
Comment: Several commenters explained that a delay in the effective
date of the final rule is also necessary to align with the
Administration's 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 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 the 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, 2019.
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 related to
drug pricing in government programs, including the 340B Program, and
disagrees with the commenters advising HHS to address these issues
concurrently.
Comment: Many commenters supported further delaying the effective
date to July 1, 2019, at a minimum, and urged HHS to take the
opportunity to refocus the 340B Program on its mission, and issue new
reforms and new ceiling price and CMP rule as expeditiously as
possible.
Response: HHS agrees with the commenters and will delay the
effective date of the January 5, 2017, final rule to July 1, 2019.
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).
This final rule will not have economic impacts of $100 million or
more in any 1 year, and, therefore, has not been designated an
``economically significant'' rule under section 3(f)(1) of Executive
Order 12866. The 340B Program as a whole creates significant savings
for entities purchasing drugs through the program; however, this final
rule would not have an economically significant impact on the Program.
When the 2017 Rule was finalized, it was described as not
economically significant. Therefore, delay of the effective date of the
2017 Rule is also
[[Page 25947]]
not likely to have an economically significant impact.
Specifically, the RIA for the 2017 Rule stated that, ``[. . .]
manufacturers are required to ensure they do not overcharge covered
entities, and a civil monetary penalty could result from overcharging
if it met the standards in this final rule. HHS envisions using these
penalties in rare situations. Since the Program's inception, issues
related to overcharges have been resolved between a manufacturer and a
covered entity and any issues have generally been due to technical
errors in the calculation. For the penalties to be used as defined in
the statute and in this [2017] rule, the manufacturer overcharge would
have to be the result of a knowing and intentional act. Based on
anecdotal information received from covered entities, HHS anticipates
that this would occur very rarely if at all.'' Since the civil
penalties envisioned in the 2017 Rule were expected to be rare, delay
of these civil penalties is unlikely to have an economically
significant impact.
Additionally, the 2017 Rule codified the practice of manufacturers
charging $0.01 for drugs with a ceiling price below $0.01, which the
2017 Rule RIA described as ``[. . .] a long-standing HRSA policy, and
HRSA believes the majority of manufacturers currently follow the
practice of charging $0.01.'' Delay of this rule will delay the
codification of this practice, but since it is already a longstanding
policy and widespread practice, the impact of delay is not likely to be
economically significant.
Executive Order 13771, titled ``Reducing Regulation and Controlling
Regulatory Costs,'' was issued on January 30, 2017. This rule is not
subject to the requirements of E.O. 13771 because this rule results in
no more than de minimis costs.
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, 2018, over 12,800 covered
entities participate in the 340B Program, which represent safety-net
health care providers across the country.
In addition, the rule would affect drug manufacturers (North
American Industry Classification System code 325412: Pharmaceutical
Preparation Manufacturing). The small business size standard for drug
manufacturers is 750 employees. Approximately 600 drug manufacturers
participate in the 340B Program. While it is possible to estimate the
impact of the rule on the industry as a whole, the data necessary to
project changes for specific or groups of manufacturers is not
available, as HRSA does not collect the information necessary to assess
the size of an individual manufacturer that participates in the 340B
Program. 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 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.
Dated: May 30, 2018.
George Sigounas
Administrator, Health Resources and Services Administration.
Approved: May 31, 2018.
Alex M. Azar II
Secretary, Department of Health and Human Services.
[FR Doc. 2018-12103 Filed 6-1-18; 11:15 am]
BILLING CODE 4165-15-P
