The 340B Program, named after its section within the 1992 Public Health Service Act, allows covered entities to stretch their scarce federal resources as far as possible, by setting a ceiling price on the sale of covered outpatient drugs from participating pharmaceutical manufactures to covered entities. With the passage of the Patient Protection and Affordable Care Act in 2010, 340B’s oversight agency, the Health Resources and Services Administration (“HRSA”) within the Department of Health and Human Services (“HHS”), was directed to establish an administrative dispute resolution (“ADR”) process. Covered entities and pharmaceutical manufactures would then use the ADR process to settle claims such as drug overcharging, diversion, or duplicate discounts. It took ten years, but HHS has finally taken action.
On December 10, 2020, HRSA issued an advance copy of a final rule addressing the 340B ADR process. This final rule comes on the heels of a suit against HHS seeking to compel the establishment of an ADR process, and may provide some relief to covered entities in the wake of pharmaceutical manufacturers’ recent decision to stop selling covered outpatient drugs to certain contract pharmacies. This controversial and unprecedented practice, led by Eli Lilly in September, left many covered entities searching for a resolution. The final rule may provide one, but covered entities will still have to wait, as the final rule is not effective until 30 days after it is published in the Federal Register.
Administrative Dispute Resolution Panel
The Secretary of HHS must establish a 340B ADR Board consisting of at least 6 members appointed by the Secretary. ADR Board membership must be split equally among members from HRSA, CMS, and the HHS Office of the General Counsel. The HRSA Administrator will then select members from this ADR Board to staff three-person ADR Panels. These ADR Panels, which are subject to specific conflict of interest rules, will review claims and make precedential and binding agency decisions for any filed claims.
Generally, the ADR Panel has the following responsibilities (1) review and evaluate the documents and information submitted by the covered entities and manufactures, (2) request additional information or clarification if necessary, (3) when necessary, evaluate a claim in a separate session from the parties involved, (4) consult with the Office of Pharmacy Affairs regarding any inquiries or concerns, and finally (5) issue a final agency decisions, submitting the written decision to the parties and to HRSA.
Covered entities or manufacturers may bring claims for monetary damages (when seeking damages over $25,000), or equitable relief (where the relief would have a value of more than $25,000 during the twelve-month period after the ADR Panel’s final decision).
Covered entities are limited to bringing the following claims (1) they have been overcharged by a manufacture for a covered outpatient drug, or (2) a manufacture has limited the covered entity’s ability to purchase covered outpatient drugs at or below the 340B ceiling price.
Manufacturers may bring claims against covered entities for violating the prohibitions against duplicate discounts or diversion, as well as claims that an individual does not qualify as an “eligible patient” under 340B, but only after conducting a HRSA-approved audit of the covered entity.
Claims must be filed with HRSA within 3 years of the date of the alleged violation.
Final Agency Decision
Upon review of the submitted evidence, an ADR Panel majority issues an agency decision regarding whether a 340B violation has occurred, using a preponderance of the evidence standard. Notably, the final rule does not incorporate an appeals process. While HHS stated it “does not believe an appeals process is necessary,” the ADR decisions will be made publicly available, are binding on the involved parties, and will have precedential value. Accordingly, these ADR Panel decisions will serve as an important source of guidance for covered entities and manufacturers regarding the legal parameters of the 340B Program.