On December 10, the Department of Health and Human Services (HHS) released their final rule implementing an Administrative Dispute Resolution (ADR) process for certain arguments arising under the 340B Program. The final rule goes into effect on January 13th, 2021. This regulation replaces the Health Resources and Services Administration’s (HRSA) informal dispute resolution process that has been in place since 1996 and establishes a final binding decision regarding disputes between Covered Entities and pharmaceutical manufacturers who otherwise cannot reach a resolution through good faith efforts.

The 340B ADR process is designed to resolve disputes between Covered Entities and manufacturers regarding overcharges, diversion, and duplicate discounts. Either Covered Entities or manufacturers can initiate a claim against the other party, but damages sought must be at least $25,000 in order to qualify for an ADR hearing. If equitable damages are sought, there is no threshold for past damages provided that the relief sought will be the equivalent of $25,000 or greater in the twelve months following the ADR decision. Covered Entities and manufacturers are permitted to aggregate claims against a single party to meet this threshold. In order for a manufacturer to bring a claim, it must first conduct an audit of the Covered Entity.

The rule also establishes a 340B ADR Board, consisting of members from HRSA, the Centers for Medicare and Medicaid Services (CMS), the HHS Office of General Counsel (OGC), and one non-voting member chosen from OPA staff. Such claims will be reviewed and decided by an ADR Panel, which consists of three members from the ADR Board, as selected by HRSA (one each from OGC, HRSA, and CMS). A summary of the ADR process follows. Read the full rule and additional details on the ADR process here.

The 340B ADR Process

The 340B ADR proceedings are governed by the Federal Rules of Civil Procedures and the Federal Rules of Evidence, to the extent practicable.

  1. A Covered Entity or manufacturer must meet federal pleading requirements and submit a petition for relief to HRSA within three years of the alleged violation. Petitioners must include documentation to sufficiently substantiate and support the claims.
  2. The opposing party will have 30 days to submit their response to the ADR Panel.
  3. The ADR Panel will evaluate the documentation provided by the parties and request additional information, as needed, and may initiate limited discovery.
  4. Unless the dispute is resolved through a Motion to Dismiss or Summary Judgment, the ADR Panel will hold an evidentiary hearing. The petitioner shall bear the burden of persuasion by a preponderance of the evidence.
  5. After hearing from the parties and the Office of Pharmacy Affairs (OPA), the ADR Panel will issue a final, binding decision. The decision is based on a majority vote and need not be unanimous.
  6. The ADR Panel may make recommendations to HRSA for sanctions, including referrals to the HHS Office of Inspector General for consideration of civil monetary penalties, as appropriate.
  7. Any appeals to the ADR decisions are governed by the Administrative Procedure Act.

Advis will continue to closely track the industry response to this new regulation, as well as any impacts resulting from the transitioning administration. Advis is also available to assist Covered Entities with filing petitions for relief, in addition to preparing and implementing additional strategies relating to manufacturer actions, specifically as it relates to the ongoing efforts by pharmaceutical manufacturers to limit Covered Entities’ access to 340B pricing. If your organization has been negatively impacted by manufacturers’ refusal to provide 340B pricing for contract pharmacies or if you have any questions regarding the new 340B ADR process, please contact our offices at (708) 478-7030 or email one of Advis’s 340B experts directly:

Published: December 11, 2020