On Wednesday, the Department of Health and Human Services (“HHS”) reversed course in its delay of implementing fines against drug manufacturers that intentionally overcharge 340B providers. In a notice of proposed rulemaking, HHS intends to advance the effective date of its final rule on the 340B drug price ceiling and civil monetary penalties to January 1, 2019, rather than July 1, 2019, as previously proposed.

Published on January 5, 2017, the final rule set forth the calculation of the 340B drug price ceiling and created civil monetary penalties for drug manufacturers that intentionally charge 340B providers more than the ceiling price. These changes to the 340B program were mandated by the Patient Protection and Affordable Care Act, which requires HHS to develop “precisely defined standards and methodology” for calculating ceiling prices and impose sanctions against manufacturers that intentionally charge for drugs in excess of the ceiling price. While the rule was originally intended to go into effect on March 6, 2017, HHS repeatedly postponed its implementation, most recently with a June 5, 2018, final rule that delayed the rule’s effective date until July 1, 2019. At the time, the Department explained the delay was due to its development of “new comprehensive policies to address the rising costs of prescription drugs.” HHS said that it has since determined that the implementation of this 340B rule “will not interfere with the Department’s development of these comprehensive policies” and it “no longer believes a delay in the effective date is necessary.”  Accordingly, HHS proposed moving the effective date of the final rule to January 1, 2019.

The change comes at a time when HHS faces a lawsuit brought by the American Hospital Association and other trade groups and hospital systems over the delay. The lawsuit alleges that HHS’s lack of enforcement of the 340B rule has resulted in 340B hospitals being overcharged by drug companies.

The proposed rule will be published in the federal register on November 2, 2018. Comments are due within 21 days of publication.

If you have any questions about this 340B rule, please reach out to one of our healthcare attorneys.