On August 17, 2017, the U.S. Department of Justice (DOJ) announced that it had reached a $465 million false claims settlement with Mylan, the manufacturer of EpiPen, over the company’s alleged underpayment of Medicaid Drug Rebates for EpiPen. The settlement amount and terms were generally announced by Mylan in October 2016 – but back then DOJ refused to confirm the settlement.

Back in October 2016, we theorized that the announced “settlement” was likely a handshake deal, not yet reduced to writing and not signed off on by the necessary parties.  It’s not surprising that it would take ten months to finalize a health care false claims settlement.  In Ellyn’s government days, she worked cases that took years, not months, to get from handshake deal to announced settlement.

And in reviewing the EpiPen settlement and related unsealed documents, there were things we expected to see in the settlement; admittedly we are grizzled veterans when it comes to false claims settlements.  But there were some things about this settlement that raised our eyebrows. So we will (briefly) recap how we got here and the settlement terms, and discuss the four things that surprised us about this settlement.  Continue Reading The Four Things That Surprised Us in the EpiPen False Claims Settlement

On July 18, 2017, just days after CMS went public with its proposal to reduce Medicare Part B reimbursement to certain 340B covered entities, Congress held its first hearing on 340B Program Oversight since March 2015.  A common thread ran through the testimony of the three testifying witnesses:  Erin Bliss, Assistant Inspector General with HHS-OIG; Dr. Debra Draper, Director of Health Care at the GAO; and, Captain Krista Pedley, Director of the Office of Pharmacy Affairs at HRSA:  Congress needs to legislatively grant HRSA more administrative authority over the 340B Drug Discount Program.  Continue Reading Witnesses at Congressional Hearing on 340B Urge Congress To Give HRSA Broader Regulatory Authority

In March, I posted about the Uncertain Future of the 340B Drug Discount Program.  When opining about What Could Happen Next I speculated about possible changes to government reimbursement for 340B drugs “so that government safety net programs share in 340B savings.”

I reasoned that CMS already knew that “Medicare pays more for 340B drugs than the covered entities’ acquisitions cost.”   Continue Reading Six Questions and Answers About CMS’ Recommended Changes to 340B Medicare Reimbursement

Last week, the Department of Justice (DOJ) entered into a $34 million settlement with Mercy Hospital Springfield (“Hospital”) of Springfield, Missouri, and its affiliate Mercy Clinic (“Clinic”). The settlement resolves an allegation that the Clinic violated the Stark Law by compensating twelve Clinic physicians in a manner that took into account the volume and value of the physicians’ referrals to the Hospital’s infusion center.  The U.S. contended that the defendants’ Stark Law violations caused their reimbursement claims to Medicare for infusion services to violate the False Claims Act. Continue Reading Hospital and its Clinic Agree to $34 Million Settlement to False Claims Act Allegation that Compensation to Oncologists Violated the Stark Law

Here we are in March 2017 and no one is sure where things stand with the 340B Drug Discount Program.   HRSA and its oversight of the 340B program are subject to the recent Executive Orders restricting issuance of federal regulations and the promised repeal of the Affordable Care Act (ACA) has the potential to impact 340B operations.  In fact, the only thing that appears certain for the 340B program is that nothing is certain.  So let’s review several recent 340B developments, and potential developments to come.

Omnibus Guidance

In June 2016, I predicted in this blog that the final version of the long-promised HRSA 340B Omnibus Guidance, which would have provided clarity on 340B program standards, would never actually be issued or implemented.  And in fact, at the end of January 2017, HRSA withdrew the final 340B Omnibus Guidance while it is was still pending at OMB.  Even if it had issued, the Guidance would have been subject to the terms of the regulatory freeze President Trump imposed by Executive Order immediately after his inauguration on January 20, 2017. Continue Reading The Uncertain Future of the 340B Drug Discount Program

Thus far, 2016 has been a relatively quiet year for the 340B program at the federal level.  Neither Congress nor the Health Resource and Service Administration (HRSA) has shown an appetite to take on the issues plaguing the program.  In fact, late last month, the Department of Health and Human Services indicated that the program is likely to remain in its status quo until at least the end of the year.  In its regulatory agenda released May 2015, HRSA stated it will delay the release of its final 340B Program Omnibus Guidance to the end of 2016.  HRSA also indicated it will delay its 340B manufacturer civil monetary penalty rule and proposed administrative dispute resolution rule.

Although HRSA has not provided any further information for the reason of the delay, it does not come as a surprise.  When the D.C. District Court invalidated HRSA’s orphan drug “interpretive” rule in October 2015, we hypothesized that this may call into question HRSA’s willingness to proceed on the Proposed Guidance.  The fact is, a number of the provisions in the Proposed Guidance impose duties in the name of compliance that go beyond statutory requirements, and under the Court’s decision, such provisions may be unenforceable.  This delay may be the first step in HRSA’s decision to eventually pull the Proposed Guidance and spare itself the attacks. Continue Reading Delays in 340B Mega-Guidance and a Recap of the Latest 340B Updates

Last week, Mintz Levin and ML Strategies released a joint Alert analyzing key provisions of the Covered Outpatient Drug final rule (“Final AMP Rule”) and their impact on manufacturers, pharmacy benefit managers (“PBMs”), and pharmacies.  The Alert focuses on the following four provisions: (i) the definition of bona fide service fees; (ii) the definition of bundled sales; (iii) the definition of retail community pharmacy; and (iv) the change in Medicaid reimbursement to reimbursement based on Actual Acquisition Cost (“AAC”).

On the heels of the release of the Final AMP Rule, CMS released a State Medicaid Director Letter providing guidance on implementation of the Final AMP Rule.  The letter provides practical instructions to the states on their obligation to adopt a Medicaid reimbursement methodology for AAC that reflects the “actual prices” pharmacy providers paid to acquire the drugs.  In addition to instructions for setting a Medicaid reimbursement methodology based on AAC, the letter advises states on their obligation to set a professional dispensing fee that reflects the pharmacist’s professional services and costs.   CMS does not dictate that states use a specific methodology or formula for establishing a professional dispensing fee, but warns that the fee must be sufficient to provide adequate reimbursement and ensure sufficient beneficiary access.

In the State Medicaid Director Letter, CMS also instructs states that their obligation to reimburse pharmacies at AAC carries consequences for the 340B Drug Discount Program. The AAC-based Medicaid reimbursement for drugs purchased through the 340B program should not exceed the 340B ceiling price – the price at which most covered entities will purchase the drug.  The requirement to reimburse at no more than the 340B ceiling price will apply regardless of whether the reimbursement is made to a 340B covered entity or its contract pharmacy. Continue Reading CMS Notifies States of AMP Rule Requirements: 340B Providers Should Take Note

Our recent post on HRSA’s Omnibus Proposed Guidance for the 340B Drug Discount Program (Proposed Guidance) noted that since the DC District Court had yet to rule on the validity of HRSA’s “interpretive” 340B orphan drug rule, it was an open question as to whether certain provisions in the Proposed Guidance would even be enforceable.

One week later, the Court in fact invalidated the orphan drug “interpretive” rule.  The Court’s reasoning may well provide fodder for challenges to the Proposed Guidance if and when it is finalized.  We have to wonder whether, like HRSA’s predecessor Omnibus 340B rule of June 2014, the final 340B Guidance never sees the light of day.  Continue Reading Does Invalidation of 340B Orphan Drug Rule Doom HRSA’s Guidance?

We have now had more than 30 days to digest HRSA’s proposed 340B Drug Pricing Program Omnibus Guidance (“Proposed Guidance”), intended to clarify expectations and provide guidance on key issues in the 340B Program.  There are several weeks remaining in the comment period on the Proposed Guidance, and there has already been much handwringing over some of the specific provisions.  Does HRSA really intend to prohibit the use of 340B drugs to fill discharge prescriptions?   Will HRSA really stand by its position that employees of covered entities do not become eligible to receive 340B drugs solely by being employees? Will HRSA actually limit access to 340B drugs to individuals who meet all of the components of the definition of “patient?”

Given that the D.C. District Court has yet to rule on HRSA’s authority to issue interpretive rules in the pending 340B orphan drug litigation, whether certain provisions in the Proposed Guidance will even be enforceable is an open question.  But before the comment period closes, stakeholders may want to consider some of the clear winners, and just who is the biggest loser, under the Proposed Guidance. Continue Reading The Proposed 340B Guidance:  Who is the Biggest Loser?

The 340B Drug Discount Program has operated for more than 20 years with just a few governing regulations codified in 42 CFR Part 10.  Through the Affordable Care Act (“ACA”), Congress adopted several amendments to the 340B Program.  One of those amendments required the Department of Health and Human Services (“HHS”) to impose a maximum $5000 civil monetary penalty on participating manufacturers for each instance in which the manufacturer knowingly and intentionally charged a participating 340B entity a purchase price for a 340B drug that exceeds the statutory ceiling price.  Congress specifically authorized the Health Resources and Services Administration (“HRSA”) to promulgate regulations implementing this requirement within 180 days of the ACA enactment, i.e. by September 2010.

And in fact, in September 2010 HRSA published an Advance Notice of Rulemaking on this requirement, seeking stakeholder input on the requirement.

Finally, on June 17, 2015, HRSA issued proposed rules to implement that requirement.  What took so long?  HRSA’s commentary to the proposed rules, combined with the recent history of the 340B Program, provide the answers.  These proposed rules may be the first steps, but not the last, in what may be major changes to the 340B Program. Continue Reading HRSA Takes its First Steps on 340B Rules