shutterstock 62078380 webk - What does HRSA’s withdrawal of the 340B mega-reg really mean?

What does HRSA’s withdrawal of the 340B mega-reg really mean?

When it was announced last week that the Health Resources and Services Administration (HRSA) had withdrawn its long-awaited mega-reg, you may have momentarily breathed a sigh of relief. For months now, there’s been growing anxiety about what the mega-reg might address and how it might affect the 340B Program going forward. But HRSA’s latest action is not so much the end of the story as it is the start of a new chapter. We’ll have to stay tuned to see how it plays out in 2015.

The backstory

In the lead-up to the mega-reg, which was expected to be released during the last half of 2014, there was considerable speculation about what it would address. In January of 2014, OPA announced that a draft of the proposed regulation addressed the definition of an eligible patient, compliance requirements for contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site facilities. In addition, many 340B stakeholders hoped that the mega-reg might also provide rules relating to penalties for manufacturers’ noncompliance, the calculation of 340B drug ceiling prices, and the processes for dispute resolution.

The mega-reg was on course to follow a standard process, which includes a review by the White House Office of Management and Budget (OMB), followed by a published draft and a period for public review and comment, before being published as a final rule. But after arriving in the OMB office in April 2014, the mega-reg stalled.

Clarifying HRSA’s role in governance

If you’ve been following the ongoing orphan drug story, you’re already familiar with the impact of legal actions by the Pharmaceutical Research and Manufacturers of America (PhRMA) against HRSA. In a nutshell, this year-long legal saga has caused the courts to clarify the role that HRSA can play in authoring regulations. As a result, after a federal judge ruled that HRSA lacked the authority to create and enforce final legislative rulings, HRSA reissued their orphan drug guidance as an “interpretive rule,” and the judge affirmed HRSA’s authority for issuing this type of interpretive guidance.

It appears that HRSA’s withdrawal of the mega-reg may be an attempt to avoid another extended legal battle.

So, what’s next?

Although final briefs in the orphan lawsuit aren’t due until March of 2015, the rulings to date have had an obvious effect, and HRSA has changed its approach as a result. As Martin Kramer, a HRSA spokesperson, recently told Modern Healthcare: “We are only pursuing regulations where we have explicit authority in the statute.”

This seems to translate into two potential actions:

1. A statement on the HRSA website says that the agency is still “planning to issue proposed rules pertaining to civil monetary penalties for manufacturers, calculation of the 340B ceiling price, and administrative dispute resolution.” These are the areas where the statute is clear on HRSA’s rule-making authority.

2. HRSA has also stated that it will tackle other topics previously included in the proposed mega-reg with “guidance” designed to address “key policy issues raised by various stakeholders committed to the integrity of the 340B program.” If the orphan drug interpretive rule is any indication, the main difference here is semantics. Although HRSA cannot write legislation, it still expects stakeholders to follow the guidance it provides and will continue to enforce adherence to published guidelines through audits. We’ve been told that the process for developing this new “guidance” will include a period for comments from all stakeholders before the language is finalized.

In short, although HRSA is following a slightly different path, you can expect to see some level of change to the current 340B program structure, particularly with regard to civil monetary penalties for manufacturers, calculation of the 340B ceiling price and administrative dispute resolution.

As always, you can expect Sentry to keep you updated on proposed program changes and how they may affect your use of our solutions. In fact, a recent KLAS Performance Report on 340B Management Systems rated Sentry as the leader in “responding to legislative changes.” As details become available from HRSA over the upcoming months, we’ll communicate the latest developments, and any actions you may need to take, via our New & Noteworthy communications and targeted emails to affected covered entities.