[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]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \1\ See: https://www.whitehouse.gov/the-press-office/2017/01/20/memorandum-heads-executive-departments-and-agencies.
---------------------------------------------------------------------------

    After further consideration and to provide affected parties 
sufficient time to make needed changes to facilitate compliance, and 
because 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.
---------------------------------------------------------------------------

    \2\ See: https://www.whitehouse.gov/the-press-office/2017/01/2/executive-order-minimizing-economic-burden-patient-protection-and.
---------------------------------------------------------------------------

    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]
BILLING CODE 4165-15-P