Key Takeaways:
- The Health Resources and Services Administration released a Proposed Rule on November 29, 2022 that aims to simplify and accelerate the Administrative Dispute Resolution (ADR) process for the 340B Drug Pricing Program.
- The existing ADR process has been the subject of litigation and a venue for disputes between manufacturers and covered entities about the use of contract pharmacies in the program.
- The Proposed Rule potentially narrows the applicability of the ADR process to contract pharmacy disputes and bars resolution of claims related to issues pending in Federal court.
- Comments on the Proposed Rule are due January 30, 2023.
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OVERVIEW
On November 29, 2022, the Health Resources and Services Administration (“HRSA”) published a notice of proposed rulemaking (“Proposed Rule”)[1] to implement an Administrative Dispute Resolution (“ADR”) process for resolving certain disputes related to the 340B Drug Pricing Program between manufacturers and covered entities. The Proposed Rule makes a number of changes to the ADR process first adopted in a final rule issued in 2020 (“2020 Final Rule”).[2]
The 2020 Final Rule is the subject of ongoing litigation and was itself the result of a long regulatory process beginning with the passage of the Affordable Care Act (ACA) in 2010. As drafted, the Proposed Rule appears designed to cure the procedural defects of the 2020 Final Rule, as well as exclude from the ADR process matters that are pending in Federal courts. Citing “policy and operational challenges” in the process established by the 2020 final rule, the Proposed Rule also proposes to simplify and expedite the ADR process, including through more specific deadlines, narrower opportunities for information requests and discovery, and elimination of both the minimum claim amount and specific evidentiary requirements. Comments on the Proposed Rule are due January 30, 2023.
Perhaps most notably, while the Proposed Rule does not directly address whether the ADR process can be used to resolve disputes regarding manufacturers’ limitations on 340B sales to contract pharmacies—currently the subject of Federal litigation[3] —it would suspend any ADR claims that involve an issue that is the same or similar to an issue pending in Federal court, shifting more responsibility toward the courts for resolving this issue, at least in the near term. The Proposed Rule may also narrow the applicability of the ADR process to contract pharmacy disputes even after their resolution in court, because it proposes to eliminate regulatory text from the 2020 Final Rule that expanded the process’ jurisdiction to include claims similar to those made in the contract pharmacy disputes.
COMPARISON OF 2020 FINAL RULE VS. 2022 PROPOSED RULE
The Proposed Rule proposes a number of procedural changes as compared with the 2020 Final Rule, many aimed at simplifying and expediting the process, while a number of provisions remain substantially the same. Below is a comparison of notable proposed changes:
CONCLUSION
In the coming year, litigation around contract pharmacy issues will continue, with Federal Appeals Court decisions expected this spring and a potential Supreme Court showdown in the Court’s 2023–2024 term. Litigation around the existing ADR process from the 2020 final rule may also continue, and would not become moot until a new proposed ADR process is finalized and takes effect. (The Proposed Rule provides that any existing disputes from the previous ADR process will be transferred to the new process.)
We are available to discuss the Proposed Rule and related issues regarding the 340B Program with you in further detail.
[1] 340B Drug Pricing Program; Administrative Dispute Resolution, Dep’t of Health and Human Svcs. (HHS) 87 Fed. Reg. 73,516 (Nov. 30, 2022) (“2022 Proposed Rule”), available at https://www.federalregister.gov/documents/2022/11/30/2022-25752/340b-drug-pricing-program-administrative-dispute-resolution.
[2] 340B Drug Pricing Program; Administrative Dispute Resolution Regulation, HHS, 85 Fed. Reg. 80,632 (Dec. 14, 2020) (“2020 Final Rule”).
[3] For a summary of a number of these cases, see https://www.medicaidandthelaw.com/2021/11/09/district-courts-issue-key-decisions-in-340b-contract-pharmacy-cases/.