On December 10, 2020, the Health Resources and Services Administration (HRSA) released a Final Rule to establish an administrative dispute resolution (ADR) process and ADR panels to resolve certain 340B Program disputes between drug manufacturers and 340B covered entities.
The establishment of a 340B ADR process was mandated by the Affordable Care Act (ACA) more than 10 years ago. Nevertheless, the timing of the release has raised concerns regarding the effectiveness of the Final Rule in light of recent efforts by drug manufacturers to limit access to 340B drugs for dispensing under contracted pharmacy arrangements. Questions also remain as to when ADR panels will be established and begin hearing claims.
Development and Timing of the Final Rule
The ACA requires the establishment of a binding ADR process for certain disputes between drug manufacturers and 340B covered entities arising under the 340B Program.
In 2010, HRSA issued an advanced notice of proposed rulemaking requesting input on the development of the ADR process, followed in 2016 by a proposed rule describing the ADR process and requesting further comments. The proposed rule was subsequently withdrawn in 2017, making the release of the Final Rule, more than three years later, somewhat unexpected.
The Final Rule
340B ADR Panels
The Final Rule establishes a 340B ADR Board (Board) consisting of at least six members appointed by the Secretary of HHS, with equal numbers of members from HRSA, the Centers for Medicare and Medicaid Services (CMS) and the HHS Office of General Counsel (OGC).
For each claim brought to HRSA for review under the ADR process, the HRSA Administrator will select three members of the Board to form an ADR Panel, one each from HRSA, CMS and OGC. There will also be one ex-officio, non-voting member from the staff of the HRSA Office of Pharmacy Affairs (OPA).
Jurisdiction
The 340B ADR Panel’s jurisdiction is restricted two types of claims and any issues ancillary to these types of claims:
- 340B covered entities are permitted to bring claims that they have been overcharged for covered outpatient drugs by manufacturers.
- Drug manufacturers are permitted to bring claims that a covered entity has violated the 340B Program prohibition on diversion or duplicate discounts.
Parties bringing claims before the 340B ADR Panel must generally do so within three years of the conduct giving rise to the claim and must seek damages exceeding $25,000, or seek equitable relief which will likely have a value of more than $25,000 during the 12-month period following the 340B ADR Panel’s decision.
Unlike 340B covered entities, drug manufacturers seeking to bring claims are subject to certain conditions prior to adjudication. Consistent with the 340B statute, drug manufacturers may only bring claims following a formal audit of a covered entity, which requires use of an independent auditor and approval of the audit protocol by HRSA. HRSA expects drug manufacturers and covered entities to attempt (and document) good-faith resolution of disputes before bringing them to the ADR Panel for review.
Joint or Consolidated Claims
Covered entities are permitted to jointly file claims of overcharges by the same manufacturer for the same drug or drugs. Additionally, an association or organization may file consolidated claims of overcharges on behalf of multiple covered entities if each covered entity represented could file a claim against the manufacturer, is a member of the association or organization, and has agreed to the representation by the association or organization.
Multiple manufacturers may request to consolidate claims against the same covered entity if the 340B ADR Panel determines that such consolidation is appropriate and consistent with the goals of fairness and economy of resources. However, in contrast to covered entities, associations or organizations representing the interests of drug manufacturers are not permitted to file consolidated claims on behalf of their members.
Information Requests and Sanctions
The 340B ADR Panel may request additional information from either party in a case. If a party fails to respond to an information request, the 340B ADR Panel may take actions such as:
- Holding facts to have been established in the proceeding
- Precluding a party from presenting or contesting a particular issue
- Excluding evidence
- Judgment in the proceeding or dismissal of proceeding.
ADR Proceedings
The 340B ADR Panel has discretion to determine the form and timeline of the ADR process. The Final Rule does require the 340B ADR Panel to conduct an evidentiary hearing when there are material facts in dispute. Further, unless the parties and the 340B ADR Panel agree otherwise, the Federal Rules of Civil Procedure and the Federal Rules of Evidence apply to the ADR proceedings.
Final Agency Action
Following the proceedings, the 340B ADR Panel members will decide whether a violation has occurred based on a preponderance of the evidence standard; that is, whether a violation is more likely to have occurred than not. The decision of a majority of the members of the 340B ADR Panel will be a precedential and binding final agency decision. The 340B ADR Panel will submit the final agency decision to all parties, and to HRSA for appropriate action regarding refunds, penalties, removal or referral to other appropriate federal authorities. Where appropriate, the 340B ADR Panel may make recommendations to HRSA for sanctions, including referrals to the HHS Office of Inspector General for its consideration of civil monetary penalties. Final decisions of the 340B ADR panel will be made public by CMS and will be subject to judicial review under the Administrative Procedures Act.
Key Takeaways
Timing
Although HRSA has not made any public statements addressing the timing of the Final Rule, it
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