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The Biden administration wants major changes to the 340B program administrative dispute resolution process, including giving OPA the only votes on ADR panels.

340B Dispute Resolution Proposed Rule Would Eject CMS Staff and HHS Lawyers from Process and Put OPA in Charge

As we were the first to report on Tuesday morning, the Biden administration has proposed major changes to the 340B program administrative dispute resolution process, including stripping the Centers for Medicare & Medicaid Services and the Department of Health and Human Services Office of General Counsel of their roles on ADR panels and giving the Health Resources and Services Administration’s Office of Pharmacy Affairs the only votes. 

HRSA released the proposed rule to the public on Nov. 29 and formally published it in the Federal Register yesterday. Comments are due Jan. 30. HRSA would have to publish a final rule for the changes to take effect. There is no deadline for it to do so.

There is no guarantee that HRSA will issue a final rule. Covered entity or manufacturer stakeholders might sue in federal court to try to stop a final rule’s implementation or enforcement. PhRMA, for example, is suing HRSA now over the existing ADR final rule. Eli Lilly and Sanofi included claims against the current rule in their 340B contract pharmacy lawsuits against HRSA.

If the proposal is finalized, all ADR panelists would come from OPA, the HRSA office that directly manages 340B. Under the current process implemented during the Trump administration’s last days, each three-member panel consists of a CMS staffer, an OGC staffer, and a HRSA staffer not involved in 340B. OPA’s only role is to supply each panel with a non-voting adviser.

Some covered entity stakeholders—hospitals representatives, in particular—argued that having CMS staffers serve on ADR panels raised potential conflicts of interest. For instance, 340B provider advocates pointed out that CMS runs the Medicaid rebate program and its primary constituent are state Medicaid programs which are often skeptical of the 340B program. 340B hospitals also raised concerns that the agency had singled out 340B hospitals for significant Medicare Part B cuts. 340B hospitals recently won a four-year battle to reverse the cuts after a recent Supreme Court decision that ruled that the cuts were illegal.

Proposal’s Main Features

Other notable elements of the proposed rule include:

  • The ADR process would be limited to claims regarding diversion, duplicate discounts, and overcharges, and the harm alleged would have to be specific to the parties identified in the claim.
  • If a claim before an ADR panel is the same as or similar to one before a federal court, the panel “will suspend review of the claim until such time the issue is no longer pending in federal court,” HRSA says. In September, an ADR panel dismissed health centers’ 340B overcharging claims against AstraZeneca and Sanofi over their 340B contract pharmacy policies on such grounds.
  • If the rule is finalized, any existing claims filed under the old ADR system would be automatically transferred to the new system.
  • The HHS secretary would appoint no less than 10 staff from OPA to serve on ADR panels. The OPA director would select at least three from the roster to form an ADR panel. The OPA director would screen panelists for potential conflicts of interest.
  • Parties no longer would have to show that the relief sought totals at least $25,000 in order to file a claim.
  • A party would have to show it made a good faith effort to resolve the matter before it could file a petition. HRSA now just encourages such efforts.
  • Claims would have to be filed within three years of the alleged program violation.
  • Claims would be submitted “through a secure electronic mechanism,” the details of which would be provided in future sub-regulatory guidance. 
  • Manufacturers would still to have to audit covered entities before filing a complaint.
  • As under the current system, multiple entities or manufacturers could combine claims against individual parties. In another carryover, entity associations or organizations could file joint claims on behalf of their members but manufacturer associations or organizations could not. In a change from current practice, entities could no longer file claims against multiple manufacturers in a single petition. 
  • It would be up to an ADR panel to decide what information and documents a manufacturer would have to turn over to an entity that files a complaint.
  • ADR panels could consult with experts within or outside of OPA.
  • There would be no limit on how long it could take an ADR panel to reach a decision.
  • Within 20 business days of getting an ADR panel’s decision letter, either party could ask the panel to reconsider its ruling. The HRSA administrator or their designee would decide whether the ruling should be revised or left standing.
  • The HRSA administrator could reconsider an ADR panel’s decision on their own authority.
  • If neither side requests reconsideration, the ADR panel’s decision letter “will serve as the final agency decision.” It will be binding only on the parties involved in the dispute and would not set a program-wide precedent. A dissatisfied party could seek judicial review of the final agency decision, and a federal court could invalidate the order.
  • Once the parties have been notified of the final agency decision, it would be up to the OPA director to decide whether to take enforcement action or ensure corrective action. The HHS secretary could “review and reverse or alter the 340B ADR panel’s decision.”
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