The Biden administration recently issued a rule making changes to the 340B drug discount program’s dispute resolution process. The final rule, which became effective in mid-June, is meant to make dispute resolution more accessible and efficient, according to the Health Resources and Services Administration, the agency that oversees 340B. Along with lowering barriers to enter the process, the rule requires parties to make a good faith effort to resolve disputes before bringing them to arbiters and creates an appeals process if either party doesn’t like the result. Provider groups the American Hospital Association and 340B Health said the rule should streamline the arbitration process and preserve the integrity of the controversial program. Meanwhile, pharmaceutical lobby PhRMA said the new process “panders to 340B hospitals” while ignoring drugmakers’ concerns.
Final Rule
The final rule is substantially similar to the proposed version released back in 2022. At a high level, the ADR process can be used by (1) covered entities alleging that a manufacturer may have overcharged for covered outpatient drugs, or (2) manufacturers of 340B drugs alleging, after a manufacturer-conducted audit of a covered entity, that a covered entity may have violated the prohibitions against duplicate discounts or diversion.
HRSA’s stated goal in finalizing changes to the ADR process is to improve accessibility, administrative feasibility, and timeliness. HRSA purports to accomplish this by making the process less trial-like and more administrative in nature. For example, the Final Rule shifts the ADR process away from the use of the Federal Rules of Evidence and Civil Procedure, as HRSA believes these more formal and complex rules could have been creating unnecessary delays and preventing potential petitioners from accessing ADR. Overall, HRSA seeks to create a process that all entities can access without regard to their ability to retain counsel or engage in a lengthy trial.
HRSA also asserts that the processes that existed under the 2020 ADR final rule were more likely to have been a barrier to covered entities accessing the ADR process than to manufacturers. Finally, HRSA discourages covered entities and manufacturers from using the ADR process to pursue “minor or de minimis claims given the time and resource investment required of the parties involved,” while at the same time removing the current processes’ $25,000 minimum threshold for an ADR claim.
Most notably, the finalized ADR process will permit covered entities to directly challenge ongoing manufacturer policies restricting 340B pricing availability via contract pharmacy arrangements, a move simultaneously celebrated by covered entities and heavily criticized by manufacturers. In a significant departure from the proposed rule, the final ADR rule now permits the consideration of disputes even if the disputed issue is currently being litigated in a federal court.
Reaction
The American Hospital Association’s General Counsel Chad Golder said, “The Administration’s final rule for the 340B drug pricing program administrative dispute resolution (ADR) process is an important step in ensuring the integrity of the 340B program. The final rule contains several important process improvements, including a clear timeline for when ADR decisions must be made and an opportunity for reconsideration when parties are dissatisfied with the initial ADR decision. The AHA is particularly pleased that the final rule makes clear that an overcharge claim includes instances where a drug company has limited a hospital’s ability to purchase 340B drugs at or below the 340B ceiling price. This rule will help hold drug companies accountable for their rampant abuses of the 340B program and the patients it serves.”
In contrast, PhRMA opposed the rule. The process “panders to 340B hospitals while ignoring concerns manufacturers raised,” Nicole Longo, deputy vice president of public affairs for PhRMA, said. “The administration chose not to consider issues we raised in our comments, exacerbating ongoing program integrity issues that have been well documented by independent watchdogs,” Longo said in a statement. The rule “underscores the critical need for Congress to act on comprehensive changes to the 340B program,” she said.