97-23019. Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Rebate Option

[Federal Register Volume 62, Number 168 (Friday, August 29, 1997)]
[Notices]
[Pages 45823-45824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23019]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Resources and Services Administration


Notice Regarding Section 602 of the Veterans Health Care Act of 
1992 Rebate Option

AGENCY: Health Resources and Services Administration.

ACTION: Notice.

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SUMMARY: Section 602 of Pub. L. 102-585, the ``Veterans Health Care Act 
of 1992,'' enacted section 340B of the Public Health Service (PHS) Act, 
``Limitation on Prices of Drugs Purchased by Covered Entities.'' 
Section 340B provides that a manufacturer who sells covered outpatient 
drugs to eligible entities must sign a pharmaceutical pricing agreement 
with the Secretary of HHS in which the manufacturer agrees to charge a 
price for covered outpatient drugs that will not exceed that amount 
determined under a statutory formula.
    The purpose of this notice is to request comments on the proposal 
of a rebate option for State AIDS Drug Assistance Programs (ADAPs) 
receiving funds under Title XXVI of the PHS Act.

DATES: The public is invited to submit comments on the proposed rebate

[[Page 45824]]

process by September 29, 1997. After consideration of comments 
submitted, the Secretary will issue the final guideline.

ADDRESSES: Comments should be submitted to: Annette Byrne, R. Ph., 
M.S., Director, Office of Drug Pricing, Bureau of Primary Health Care, 
Health Resources and Services Administration, 4350 East-West Highway, 
Bethesda, MD 20814, Phone [phone]; FAX [phone].

FOR FURTHER INFORMATION CONTACT: Robert Staley, R. Ph., Senior Program 
Manager, Office of Drug Pricing, Bureau of Primary Health Care, Health 
Resources and Services Administration, 4350 East-West Highway, 
Bethesda, MD 20814, Phone [phone]; Fax [phone].

SUPPLEMENTARY INFORMATION: Section 340B requires manufacturers, as a 
condition for the receipt of Medicaid matching funds with respect to 
their covered outpatient drugs, to charge participating entities no 
more than a ceiling price for such drugs. This price is determined by 
reducing the average manufacturer price of the drug by a rebate 
percentage. Entities eligible to access section 340B pricing (covered 
entities) include certain PHS grantees (e.g., federally-qualified 
health centers, certain family planning projects, AIDS assistance 
programs, black lung clinics, hemophilia treatment centers, Native 
Hawaiian health centers, and centers that treat sexually-transmitted 
disease and/or tuberculosis) and certain disproportionate share 
hospitals.
    Section 340B has no explicit language as to whether the required 
reduction in price should be obtained by an initial reduction in the 
purchase price (i.e., a discount mechanism) or received as a required 
reduction in cost rebated after purchase, dispensing, and payment are 
completed (i.e., a rebate option). Section 340B(a)(1) of the PHS Act 
provides that the amount to be paid to the manufacturers for covered 
drugs takes ``into account any rebate or discount, as provided by the 
Secretary. * * *'' Further, section 340B does not specify whether 
entities should receive the section 340B pricing ``through a point of 
purchase discount, through a manufacturer rebate, or through some other 
mechanism. A mechanism that is appropriate to one type of ``covered 
entity,'' such as community health centers, may not be appropriate to 
another type, such as State AIDS drug assistance programs * * * [T]he 
Secretary of HHS * * * will use the mechanism that is the most 
effective and most efficient. * * *'' H.R. Rep. No 102-384, 102d Cong., 
2d Sess., pt. 2, at 16 (1992).
    Initially, HRSA guidance for the section 340B program described 
only a discount process. Covered entities generally preferred a 
discount system, because they could negotiate lower prices and needed 
less initial outlay of drug purchasing money.
    Although the discount system is functioning successfully for most 
covered entities, most ADAPs have drug purchasing systems that have 
prevented their participation in the section 340B discount program. The 
use of a rebate option (in addition to the discount mechanism) should 
allow these groups to access section 340B pricing.
    The HRSA recognizes rebates obtained by the State ADAPs that equal 
or exceed the discount provided by the statutory ceiling price as a 
method of accessing the 340B program. State ADAPs wishing technical 
assistance in developing a rebate program should contact HRSA's Office 
of Drug Pricing at [phone] or [phone].
    Section 340B(a)(5)(A) of the PHS Act reflects Congressional 
recognition that there is a potential for drugs purchased by a covered 
entity at the 340B discount price to be subject to a Medicaid rebate, 
if the drug is reimbursed by the Medicaid program. State ADAPs need to 
be aware that regardless of whether a discount mechanism or a rebate 
option is chosen to access 340B pricing, the standards preventing 
duplicate discounts on drugs still apply. Guidance regarding billing 
State Medicaid Agencies at actual acquisition cost plus a dispensing 
fee established by the State Medicaid agency, and the prevention of 
duplicate discounts, was first published in the Federal Register on May 
7, 1993 (58 FR 27293) entitled ``Duplicate Discounts and Rebates on 
Drug Purchases.'' Further guidance was published in the Federal 
Register on December 29, 1993 (58 FR 68922). State ADAPs may find it 
necessary to work with State Medicaid Agencies to adapt these 
guidelines to meet the unique circumstances of each individual State, 
such as provisions permitting retroactive reimbursement of drug 
purchases while Medicaid eligibility was pending. This will assure that 
the discount to the covered entity will be passed on to the State 
Medicaid Agency.
    The HRSA is sensitive to concerns about diversion of covered drugs 
to individuals who are not patients of the covered entities. Guidelines 
have been issued to minimize this potential, and manufacturers have 
available to them specified remedies if they believe diversion has 
occurred. The HRSA believes that these guidelines and remedies will 
apply fully to drugs purchased under a rebate option and that 
instituting rebates will not increase the potential for diversion.

    Dated: August 22, 1997.
Claude Earl Fox,
Acting Administrator.
[FR Doc. 97-23019 Filed 8-28-97; 8:45 am]
BILLING CODE 4160-15-P