Final Rule re. 340B Administrative Dispute Resolution Process

On April 19, 2024, the Health Resources and Services Administration (HRSA) issued a Final Rule with regards to the administrative dispute resolution process (ADR) between manufacturers and Covered Entities (CEs) who participate in the 340B Program. Once again, at least through our lens, HRSA has shown their bias towards CEs. Items of note include:

§10.21 Claims

1. Claims by CEs vs. Claims by Manufacturers:

   A CE may submit a claim to the ADR Panel if it believes it has been overcharged, including if it believes a manufacturer has limited the CE’s ability to purchase eligible drugs at the 340B price. Claims can be filed jointly by CEs and an association on their behalf against the same manufacturer
   
   Before a manufacturer may file a claim to the ADR Panel, it must conduct an audit of the CE and still comply with the 3-year deadline. Multiple manufacturers may jointly file a claim against the same CE if approved by the ADR Panel but claims may not be consolidated by associations.


   
   In the “Comments” section, HRSA provides justification for not allowing manufacturers to consolidate their claims:


   
   “… due to the requirement that a manufacturer must first audit a covered entity before submitting an ADR claim, it would be difficult to have each manufacturer of the association or organization conduct an audit of a covered entity before filing a claim.”
   
   Also in the “Comments” is the following assertion regarding manufacturer audits:

   
   “In the last 5 years, six [manufacturers] have followed the guidelines to request audits of covered entities. During that same time frame, HRSA has not denied a request for a manufacturer audit of a covered entity, thereby, demonstrating the guidelines are not overly burdensome or present any barriers to a manufacturer’s ability to perform an audit of a covered entity.”


   
   Stating that six manufacturers over the course of five years have conducted audits does not reinforce HRSA’s claim that audits are not “overly burdensome,” but rather, indicates that the process is one full of obstacles and roadblocks. Manufacturers are fully aware of the revenue leakage from their participation in the 340B Program but identifying the specific instances can be tedious and the data is often nebulous, making it difficult to audit.

2. Overcharge

   The term “overcharge” is not defined in the Rule and provides no guidance for manufacturers who use an alternative distribution mechanism for 340B sales, including restricting the number of contract pharmacies. In §10.21 (a)(1), the Rule states that permissible claims include, “Claims by a covered entity that it has been overcharged by a manufacturer for a covered outpatient drug, including claims that a manufacturer has limited the covered entity’s ability to purchase covered outpatient drugs at or below the 340B ceiling price…”
   
   The American Hospital Association interprets this as saying that an overcharge would include a manufacturer’s attempt to limit the number of contract pharmacies a covered entity may use. As said best by Stephanie Trunk, partner at ArentFox Schiff, “This seems to be an overreach by the AHA.” It is certainly a perspective that is likely to be met with resistance by manufacturers.

§10.22 Covered entity information and document requests

1. Information from a manufacturer to a covered entity:

   There are a number of requirements of a manufacturer to comply with information requests by a CE, including the requirement to respond to the CE request in writing within 20 days. This includes all relevant information including data from a wholesaler or other parties involved in the distribution of their drugs. (Extensions can be requested but the ADR Panel may approve or deny the request.)

2. Information from a covered entity to a manufacturer:

   The manufacturer is required to submit their request for information to the 340B ADR Panel who will review the request, and based on our interpretation of the Rule, the Panel will request the information they deem “appropriate” from the CE. There are no timelines for the ADR to review the request nor for the CE to provide the information.

The Final Rule is relatively short but contains a lot of information that we, as always, recommend each manufacturer determine how these changes could impact their operations and consult with their own legal counsel for specific guidance. And if you would like more information, including more on our perspective of the Final Rule, please feel free to reach out to us.