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Perspectives

340B Drug Pricing Program restatements and refunds

Navigate current requirements and plan for the future

The 340B Drug Pricing Program is becoming more complex. So are manufacturers’ responsibilities around 340B price restatements and refunds to customers. In this report by Hogan Lovells and Deloitte Risk and Financial Advisory, find out how manufacturers can prepare now and take precautions to mitigate compliance and reputational risk.

Today’s 340B drug pricing restatement and refund requirements

The 340B statute requires manufacturers to "offer each covered entity outpatient drugs for purchase at or below the applicable ceiling price."1 Because of changes from the Affordable Care Act, the 340B statute requires the Health Resources and Services Administration (HRSA) to enact regulations regarding civil monetary penalties and to provide a mechanism for manufacturers to make refunds to covered entities in cases of overcharges.

Manufacturers that don't adhere to 340B program requirements face compliance risk as well as reputational risk with their 340B customers and within the industry.

1 42 U.S.C. § 256b(a)(1).

Restating 340B drug ceiling prices and issuing refunds to 340B covered entities

Prior to the Ceiling Price and Manufacturer Civil Monetary Penalties Regulation (Final Rule), HRSA didn't address how manufacturers should restate the 340B ceiling price or issue refunds to covered entities in connection with Medicaid Drug Rebate Program (MDRP) restatements—either as a result of the correction of errors or due to Best Price (BP) true-up.

In instances where manufacturers see that it's appropriate to offer refunds to covered entities, they have kept consistent with their obligations under the 340B statute and Pharmaceutical Pricing Agreement.

Many manufacturers are applying their standard commercial practices in the context of 340B-covered entity refunds, which may include:

  • Offsetting overcharges against undercharges
  • Establishing a de minimis, or materiality, threshold for the amount of any refund

How can manufacturers prepare for the 340B Drug Pricing Program?

The Final Rule as published by HRSA in January 2017, addresses many topics relating to manufacturer restatements and refunds to 340B-covered entities. Even though the Final Rule isn't yet in effect, manufacturers may want to evaluate if it may be appropriate to move ahead with adopting some of the Final Rule provisions, in particular the ceiling price estimation for new drugs.

We cover each of these in further detail in the report:

  • MDRP restatements. A requirement for manufacturers to restate 340B ceiling prices and issue refunds to covered entities within a defined time frame as a result of MDRP restatements (i.e., in the case of Average Manufacturer Price (AMP) or BP restatements for errors and in the case of BP true-ups for late-arriving data).
  • True-up of estimated ceiling prices. A requirement for manufacturers to true-up estimated ceiling prices for new drugs and issue refunds to covered entities within a defined time frame.
  • Offsetting/de minimis threshold. A prohibition that manufacturers cannot offset overcharges against undercharges to 340B-covered entities. It's also against applying a de minimis threshold to refunds, absent consent from the covered entity that's due a refund.
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Staying a step ahead of the 340B Drug Pricing Program

The Final Rule could become effective as published in 2017. If it does, it would transform HRSA from an agency that has historically been limited to issuing only guidance to one with the authority to initiate civil monetary penalty proceedings against manufacturers. Statutory changes to the 340B Drug Pricing Program remain possible as well.

At this time, manufacturers should be proactive and plan ahead now for the changes ahead. It's never clear how much time they will have to establish compliance once a new requirement is announced or becomes effective.

Manufacturers should consider defining and piloting new restatement and refund processes prior to the Final Rule effective date to support timely and efficient implementation.

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Our 340B regulatory compliance specialists and former industry professionals understand the challenges of complying with the 340B program and the uncertainty and pressure that come with implementing new government regulations.

We offer services that can help you address these challenges and support your 340B compliance.

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