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The 340B Ceiling Price and CMP Rule . . . Changes on the Horizon?

After more than eight years in the making, the 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation (the “Rule”) seems to be a rudderless ship on a shoreless sea. On Monday, the Health Resources and Services Administration (HRSA) issued a notice of proposed rulemaking delaying the implementation date of the final Rule from July 1, 2018 to July 1, 2019. The final Rule was published eighteen months ago (January 5, 2017) and the implementation date has since been delayed on four different occasions. HRSA has cited a variety of reasons for each delay—compliance with the Regulatory Freeze issued by the incoming Trump Administration; providing stakeholders additional time to prepare for compliance with the Rule; yet more time for compliance preparations; and additional time for HRSA to “fully consider the substantial questions of fact, law, and policy raised by the [R]ule.”

For this fifth and most recent delay, HRSA stated that implementation of the final Rule would be “counterproductive” in light of HRSA’s intention to “engage in additional or alternative rulemaking[s] on these issues.” See 83 FR 20008, May 5, 2018. Notably, these additional/alternative rulemakings are linked to broader Health and Human Services’ efforts to “develop[] new comprehensive policies to address the rising costs of prescription drugs” in government programs such as “Medicare Parts B & D, Medicaid, and the 340B discount drug program.” Id. at 5.

However, linking the intended additional regulatory activity to the broader efforts to address drug pricing is curious in light of the HRSA’s limited rulemaking authority. See PhRMA v. HHS, 43 F. Supp. 3d 28 (D.D.C. 2014). Since Judge Contreras determined that HRSA’s rulemaking authority is limited to (1) establishment of an alternative dispute resolution process; (2) defining standards of methodology to calculate ceiling prices; and (3) imposition of civil monetary penalties, HRSA has not completed a rulemaking or regulatory issuance. See id. (vacating the Orphan Drug Rule); PhRMA v. HHS, 138 F. Supp. 3d 31 (D.D.C. 2015) (vacating the subsequent Orphan Drug Interpretive Rule); Office of Management and Budget, RIN: 0906-AB08 (Jan. 30, 2017) (withdrawing the 340 Program Omnibus Guidance); 340B Ceiling Price and CMP Rule, 3 FR 20008 (delaying implementation until July 1, 2019).

It is unclear whether the most recent delay means that the 340B Ceiling Price and CMP Rule is doomed to join the wreckage of its 340B regulatory brethren. However, this most recent update from HRSA indicates three things: (1) stakeholders are still operating in the pre-2015 framework; (2) the debate over the 340B program’s role in drug pricing is sure to continue; and (3) further challenges to HRSA’s regulatory authority may be on the horizon.

© 2020 Covington & Burling LLPNational Law Review, Volume VIII, Number 130


About this Author

Jennifer Plitsch, Litigation attorney, Covington

Jennifer Plitsch is co-chair of the firm’s Government Contracts practice group where her practice includes a wide range of contracting issues for large and small businesses in both defense and civilian contracting. Her practice involves advising clients on contract proposal, performance, and compliance questions as well as litigation, transactional and legislative issues. She has particular expertise in advising clients on intellectual property and data rights issues under the Federal Acquisition Regulations and Bayh-Dole Act, and has significant experience in...

Kassandra Maldonado,  Covington Burling, LLP, healthcare attorney

Kassandra Maldonado represents civilian and defense contractors in a broad array of litigation matters and regulatory issues. She litigates government contracts disputes and general civil cases in the U.S. Courts of Appeals, U.S. District Courts, U.S. Court of Federal Claims, the Government Accountability Office, and U.S. government agencies. Her advisory practice spans a number of subject areas, including intellectual property rights and participation in federal health care programs such as 340B.

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