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HRSA Finalizes 340B Dispute Resolution Process Rule

Staff
April 22, 2024

The Health Resources and Services Administration (HRSA) on April 19 finalized proposed revisions to the existing 340B Drug Pricing Program administrative dispute resolution (ADR) process for covered entities and drug manufacturers.

This final rule is a significant step in the long-delayed implementation of an Affordable Care Act (ACA) requirement that HRSA create a binding ADR process within 180 days of the law’s enactment. HRSA first issued an advance notice of proposed rulemaking on this issue in 2010, followed by a proposed rule in 2016, and a final rule in December 2020. That final rule has been effective since Jan. 13, 2021, although it was immediately subject to federal legal challenge by manufacturers. In November 2022, HRSA proposed to revise the ADR regulations to address policy and operational challenges, including accessibility, administrative feasibility, and timeliness.

In response to the 2022 proposed rule, America’s Essential Hospitals praised the agency for its efforts to implement an ADR process that will ensure 340B program integrity and accountability without undue burden and formality, ensuring that covered entities can have their claims solved in a timely manner and with less burden to protect themselves and their patients from manufacturer overcharges. Together with 340B Coalition partners, the association urged HRSA to finalize several critical proposals and amend certain provisions to ensure the effectiveness of the ADR process. The final rule reflects HRSA’s agreement with nearly all essential hospital recommendations. In particular:

  • The ADR Panel will not include members from the Centers for Medicare & Medicaid Services, whose participation could create conflicts of interest related to Medicaid and Medicare drug-related policies. The final rule provides that Office of Pharmacy Affairs staff will comprise the entire panel, ensuring 340B expertise. Each panelist will undergo conflict of interest screening before being appointed to the roster of eligible panel members, as well as additional screening related to any specific claim before being assigned.
  • Covered entities can bring claims against manufacturers for being overcharged for covered outpatient drugs as under the current process. Contrary to the 2022 proposal, the final rule explicitly states that covered entity claims against manufacturers for overcharging for outpatient drugs can include “claims that a manufacturer has limited the covered entity’s ability to purchase covered outpatient drugs at or below the 340B ceiling price.” This could enable covered entities to challenge refusal to provide discounted drugs to contract pharmacies. HRSA also eliminated a minimum claim threshold to make the ADR process accessible. As in the existing process, covered entities can file claims jointly, and associations can bring claims on behalf of multiple covered entity members. Notably, manufacturer associations are not similarly permitted to bring claims per statute.
  • As in the existing process, manufacturers can bring claims against covered entities for violating the prohibition against duplicate discounts or diversion. Contrary to covered entity requests, HRSA finalized its proposal that duplicate discount claims subject to ADR review include claims of duplicate discounts under Medicaid managed care. Covered entities also asked HRSA to clarify that eligibility issues are outside the scope of permitted manufacturer claims. HRSA generally agreed but clarified that a claim about diversion to a nonpatient that relates to covered entity eligibility could be subject to ADR.
  • Covered entities and manufacturers could bring claims within three years of an alleged violation. The coalition requested that HRSA reconsider this requirement in instances where covered entities could not determine whether a price was lawfully calculated. HRSA opted instead to provide exception to the three-year limit for unspecified “extenuating circumstances.”
  • Critically, and different from the proposed rule, the ADR Panel will be able to hear claims relating to an issue pending in a federal court, avoiding a potentially significant delay in covered entities’ ability to challenge manufacturer behavior and get to federal court themselves.
  • Pending claims still going through the process established by the 2020 final rule will be evaluated under the new ADR process, with opportunity for additional or modification. Panel decisions, as well as decisions by the HRSA administrator as part of reconsideration or by the HHS secretary upon secretarial determination, would constitute final agency decisions that are binding on the involved parties, which means they can be appealed through the judicial process.
  • The final rule seeks to ensure timeliness of process, including by specifying that ADR Panel decisions will be completed within one year of submission of a complete claim, subject to extension by the Panel for situations beyond its control.
  • Finally, consistent with coalition comments, HRSA finalized its proposal to remove existing regulatory language suggesting ADR Panel decisions are precedential. This ensures that the panel is not making widespread 340B policy without notice and comment; rather, it decides issues based on the specific facts of and parties to each dispute.

The final rule is effective 60 days after publication in the Federal Register.

Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.

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