By: J. Parker Zopp and Alaina N. Crislip
On April 19, 2024, the Health Resources and Services Administration (HRSA) and the U.S. Department of Health and Human Services (HHS) issued a final rule pertaining to the administrative dispute resolution (ADR) process for certain disputes arising under the 340B Drug Pricing Program (the “340B Program”).[1] The 340B Program derives from Section 340B of the Public Health Service Act (PHSA),[2] which requires pharmaceutical manufacturers participating in Medicaid [through a pharmaceutical pricing agreement] to not exceed statutorily defined 340B ceiling prices for covered outpatient drug charges for covered entities meeting defined requirements, including the provision of health care services to uninsured and/or low-income patients.
An Overview of the ADR Process
Section 340B(d)(3) of the PHSA requires that HHS utilize a binding ADR process to resolve claims by (1) 340B Program covered entities claiming they have been overcharged for covered outpatient drugs by manufacturers; and (2) claims by manufacturers, after the manufacturer has conducted an audit, that a covered entity has violated diversion or duplicate discount prohibitions.[3] To administratively adjudicate each claim, HHS creates a 340B ADR Panel consisting of HHS staff drawn from a pool of eligible individuals.[4]
Changes to the ADR Process in the Final Rule
The final rule, which takes effect June 18, 2024, makes significant changes to the ADR process. The following are some of the most notable changes:
First, the rule removes the $25,000 minimum monetary threshold to file a claim through the ADR process.[5] Citing the fact that many covered entities are small, rural facilities or else exist in underserved areas, HHS removed the minimum monetary threshold to allow greater access to the ADR process.[6]
Second, the final rule removes the ADR process’s reliance on the Federal Rules of Civil Procure and the Federal Rules of Evidence.[7] By removing these formal procedures that govern civil and criminal matters in federal courts, HHS believes the ADR process will be more accessible to covered entities who have less resources to expend on legal counsel.[8]
Third, the rule changes the makeup of each 340B ADR Panel.[9] To form a sitting 340B ADR Panel under this new rule, the Director of HRSA’s Office of Pharmacy Affairs (OPA) will appoint three 340B experts from within OPA to review claims.[10]
Importantly, parties currently utilizing the ADR process should be advised that HHS is automatically transferring any pending claims to the new process in the final rule.[11] HHS will place these pending claims first in the queue to be reviewed once the final rule becomes effective. The final rule also describes that HHS will allow these petitioners pending claims to submit additional information or revise their petition, as necessary, in support of their original claim. Alternatively, petitioners can also withdraw their pending claims. HHS will provide details about the automatic transfer of pending claims to affected parties once the final rule becomes effective.
Almost as salient as the changes the final rule includes is what the final rule does not include. It does not revise the 1996 HRSA manufacturer audit guidelines.[12] Furthermore, the final rule does not establish a procedure for manufacturers to issue refunds to covered entities for overcharges, which was requested by several manufacturers.[13]
The revised ADR process is just one of many changes impacting the 340B landscape. Reach out to a member of the Jackson Kelly health care team should you have questions pertaining to the 340B ADR final rule or other changes on the horizon.
[1] “340B Drug Pricing Program; Administrative Dispute Resolution Regulation” 89 Fed. Reg. 28643 (April 19, 2024) (to be codified at 42 C.F.R. Part 10).
[2] Codified at 42 U.S.C. § 256b; 42 C.F.R Part 10.
[3] See 42 U.S.C. § 256b(d); 42 C.F.R. Part 10, Subpart C.
[4] See 42 C.F.R. § 10.20.
[5] See ADR Regulation, 89 Fed. Reg. at 28643, 28645.
[6] See id.
[7] See id. In making these changes, the final rule sets timelines for certain actions such as filing, or responding to, a claim. See id. at 28651.
[8] See id. at 28645.
[9] See id. at 28647.
[10] See id.
[11] See id. at 28645-46.
[12] See id. at 28649.
[13] See id. at 28646.