A new 340B dispute resolution process could create more opportunities for providers

Regulatory updates to the administrative dispute resolution (ADR) process in the 340B Drug Pricing Program seem likely to expedite the filing of claims over manufacturers’ refusal to offer discounts on drugs distributed at contract pharmacies.

HHS and the Health Resources and Services Administration (HRSA), which administers the 340B program, published a final rule that modifies ADR and takes effect June 18. Since the issuance of regulations that were drafted in late 2020 and implemented in 2021, ADR has been available to providers and drug manufacturers to settle disagreements over 340B discounts. But the process widely has been considered cumbersome, and no ADR claim has been resolved to date.

With the new rule, HRSA seeks to make the ADR process less like a trial and more like an administrative hearing, reducing the emphasis on adherence to the federal rules of evidence (FRE) and federal rules of civil procedure (FRCP).

Under those standards “Potential petitioners, many of whom are safety net providers in under-resourced communities, may lack the resources to undertake ADR even if it would be in their best interest to do so,” HRSA wrote in the rule.

Such entities “may not have the financial resources to hire an attorney to navigate the complex FRCP and FRE requirements and engage in a lengthy, trial-like process, as envisioned in the 2020 final rule,” HRSA added.

The new rule also eliminates a provision that set a minimum threshold of $25,000 for ADR disputes.

“Given the smaller, community-based nature of many covered entities, HHS believes that flexibility should be maintained with respect to the amount of damages,” the rule states.

What can be disputed

The regulations include descriptions of the types of claims that can be referred to ADR, as established in the 340B statute: overcharge, diversion and duplicate discounts.

Overcharge. In one key change from the proposed version of the new rule, HHS kept language from the 2020 rule clarifying that overcharge claims can address situations in which manufacturers prevent providers from purchasing 340B drugs at or below the ceiling price.

The American Hospital Association and the provider advocacy group 340B Health lauded that provision, which gives providers more leeway to use the newly streamlined ADR process to challenge instances when manufacturers restrict the availability of discounts at contract pharmacies.

Diversion. As filed by manufacturers, these disputes can center on use of a 340B-covered drug during an inpatient admission, HRSA clarified, since 340B drugs are a subset of those paid by Medicare Part B and thus should be limited to outpatient settings. Diversion-related disputes can involve an assessment of a provider’s 340B eligibility, but eligibility cannot be the primary question at issue during a dispute.

Duplicate discounts. Advocates had hoped disputes stemming from instances when providers receive discounts in both 340B and Medicaid managed care would not be subject to the ADR process. However, that accommodation was not made in the final rule.

“As duplicate discounts can occur with drugs subject to rebates under both Medicaid fee-for-service and Medicaid managed care, HHS declines to exclude Medicaid managed care claims from the 340B ADR process,” the rule states.

Litigation overlap permitted

340B Health commended HRSA for removing a proposed clause that would have delayed ADR claims if they mirror issues being decided in federal court. In the final rule, the agency said such a provision would have hampered its ability to ensure a fair, efficient and expeditious ADR process.

For providers, the change — particularly in combination with the authorization to use ADR to settle disputes that relate to the 340B ceiling price — likely will make it easier to challenge manufacturer restrictions involving contract pharmacies.

Starting in 2020, manufacturers sought to limit the discounts available for drugs that are distributed through those pharmacies. After HRSA subsequently published guidance stating that such policies constitute a violation of 340B requirements, manufacturers began challenging that interpretation in federal court.

District court decisions have been split. Manufacturers in early 2023 prevailed in the lone decision issued thus far at the appellate level regarding those cases.

Procedural changes

The rule adjusts the composition of the ADR Board as established in the 2020 rule. Instead of equal representation of HRSA, CMS and the HHS Office of General Counsel (OGC), the members will be subject-matter experts from HRSA’s Office of Pharmacy Affairs (OPA).

OPA staff that aren’t on the panel will provide an initial review of submitted claims to ensure the information is complete. The review also will flag claims that are redundant with respect to existing consolidated or joint claims.

The panel will work to facilitate ADR-related information requests from providers to manufacturers and will consider requests by manufacturers to receive additional information from providers.

HRSA also is seeking to put more emphasis on good-faith efforts between the parties to resolve issues before turning to ADR. Namely, the party that files the claim must submit a written attestation of steps that were taken to try to resolve the dispute.

The panel will have up to one year to settle each claim (340B Health had advocated for a 120-day limit). After a decision is rendered, parties will have 30 days to request a reconsideration. HRSA’s administrator can initiate a reconsideration, and the HHS secretary can change any initial decision or reconsideration. The secretary’s decision is final unless challenged in federal court.

Claims that are currently pending will be given top priority once the new process takes effect, and petitioners can revise or withdraw their claim if they choose.