In mid-December 2020, the United States Department of Health and Human Services (HHS) finalized the long-awaited rule that sets forth the requirements and procedures for the 340B drug discount program administrative dispute resolution (ADR) process.
The process outlined in the final rule is slated to resolve claims that a drug company overcharged a safety net hospital or other entity in the 340B program. It also provides an avenue for drug companies to appeal if a covered entity violated part of the program, such as violating the prohibition on diversion or obtaining duplicative discounts.
Under the final rule, the HHS Secretary shall establish a 340B Administrative Dispute Resolution Board consisting of at least six members appointed by the Secretary. The six members should be pulled in equal numbers from the Health Resources and Services Administration (HRSA), the Centers for Medicare and Medicaid Services (CMS), and the Office of the General Counsel (OGC). Of those six chosen members, ADR panels of three members each (one from each of the three HHS operating/staff divisions involved) shall be selected by the HRSA Administrator to review claims and make precedential and binding final agency decisions on the matters that come before them. There should also be one ex-officio, non-voting member chosen from the staff of the HRSA Office of Pharmacy Affairs.
The final rule also outlines what happens in the event a member of the ADR panel has a conflict of interest.
There has been a battle between manufacturers and 340B covered entities as to whether the covered entities are allowed to employ a contract pharmacy, which sometimes results in discounts given by drug manufacturers not trickling down to the patients. The final rule indicates that the ADR process may weigh in on this issue, noting that a panel “may find it necessary to resolve related issues such as whether someone is a “patient” or whether a pharmacy is part of a “covered entity.” However, as covered below, HHS has since issued further guidance on the topic.
The ADR process is not intended to replace current good faith efforts encouraged by HHS by manufacturers and covered entities to work together to attempt to resolve disputes, but should instead be considered as a last resort if good faith efforts to resolve disputes have failed.
This rule has been a long time coming, as the Affordable Care Act directed HHS to put forth an administrative dispute resolution process for 340B back when it was passed in 2010. HHS didn’t propose the regulation until 2016, and that proposed rule was pulled in 2017.
HHS Advisory Opinion on 340B Discounts and Contract Pharmacies
The rule comes on the heels of several drug makers restricting access to drugs discounted through the program, including Eli Lilly, AstraZeneca, and Novartis. Eli Lilly and AstraZeneca both announced that they will restrict the sales of 340B discounted drugs to contract pharmacies while Novartis announced it would not provide 340B discounted drugs to contract pharmacies more than forty miles from the covered entity.
On December 30, 2020, the HHS Office of the General Counsel released an advisory opinion that concludes that drug manufacturers are required to deliver 340B discounted drugs on covered outpatient drugs when contract pharmacies serve as agents of 340B covered entities.
While advisory opinions do not carry the force of law, they do outline the agency’s current views on issues, and therefore, it can be expected that cases that raise the issue through the ADR process will result in the manufacturer needing to provide 340B discounted drugs to applicable contract pharmacies.