On November 29, 2022, the Health Resources and Services Administration (HRSA) issued a proposed rule (Proposed Rule) to revise the alternative dispute resolution (ADR) procedures for disputes arising under the 340B drug pricing program between covered entities and manufacturers. HRSA says these proposals are designed to address the policy and operational challenges posed by the existing 340B ADR procedures. The proposed changes would, among other things, informalize the ADR procedures to improve accessibility and efficiency and revise the composition of the ADR panels.

The Affordable Care Act directed HHS to implement a binding ADR process to resolve disputes between covered entities and manufacturers arising under the 340B statute. In accordance with that directive, HHS adopted ADR procedures for 340B disputes in December 2020. Those procedures, which have been in effect since January 13, 2021, have evidently proven difficult to implement. HRSA says in the Proposed Rule that it has “encountered policy and operational challenges with implementation” of the ADR procedures adopted in 2020. Therefore, HRSA is proposing to revisit the ADR procedures to address and correct for those challenges.

First, HRSA proposes to eliminate the requirement that the ADR process conform to the Federal Rules of Civil Procedure (FRCP) and the Federal Rules of Evidence (FRE). According to HRSA, relying on the FRE and FRCP is likely to introduce unwarranted delays in the decision-making process and present operational difficulties because “it is challenging to assign ADR panel members with expertise in the FRE or FRCP.” HRSA also suggests that the existing rule makes ADR less accessible because covered entities with limited resources may not be able to afford counsel familiar with the FRCP and FRE.

Second, HRSA also proposes changing the composition of the ADR panels. Under the existing rules, panelists can be employees of HRSA, CMS or the HHS Office of General Counsel. HRSA believes that panel members “should have specific knowledge of the authorizing statute and the operational processes of the 340B Program.” Accordingly, the agency proposes that ADR panels consist entirely of staff from the Office of Pharmacy Affairs (OPA) who, according to HRSA are best suited to resolve 340B disputes. Under this proposal, HHS would appoint a roster of at least ten eligible OPA staff members. The OPA director would select three members from the roster to form ADR panels to facilitate review of ADR claims, subject to review for conflicts of interest.

Third, HRSA proposes requiring parties to engage in good faith efforts to resolve disputes prior to initiating the ADR process. Covered entities and manufacturers would be required, at the time of filing a request for ADR, to present a written summary of their efforts to resolve the dispute in good faith. Documented good faith efforts would include attempts to enter into discussions to resolve the disputes or communication records between the covered entity and manufacturer.

Fourth, HRSA is also proposing to define the specific categories of disputes that can be resolved in ADR to better align with the statute. According to the agency, the 340B statute only authorizes ADR to adjudicate claims by covered entities that they have been overcharged or claims by manufacturers that a covered entity has violated the prohibitions against diversion or duplicate discounts. The revised regulations would reflect HRSA’s interpretation of the statutory limitations on ADR review.

Fifth, HRSA proposes allowing parties dissatisfied with an ADR decision to request reconsideration. Parties seeking reconsideration would be required to submit requests in writing within 20 business days after receiving the ADR panel’s decision. Reconsideration requests would be decided by the HRSA Administrator.

In addition to the proposals mentioned above, HRSA is also proposing the following changes to the 340B ADR procedures:

• The ADR panel will suspend review of any claim if the specific issue in dispute is the same as, or similar to, an issue that is pending in Federal Court;

• Parties will have three years from the date of the alleged violation to file a request for ADR, after which time the claim is barred;

• Disputes will no longer be subject to a $25,000 materiality threshold; and

• The new procedures would automatically apply to any claims raised under the existing procedures.

A copy of the Proposed Rule is available here. Comments to the Proposed Rule must be submitted by January 30, 2023.