Screenshot of regulations.gov 340B drug pricing program ADR document details.
340B contract pharmacy loomed large in stakeholders’ comments on HRSA's proposed revamp of the 340B program’s administrative dispute resolution system.

340B Stakeholders Weigh in on HRSA’s Proposal to Replace 340B Dispute Resolution Process

The fight over 340B contract pharmacy loomed large in stakeholders’ comments last week on a proposed federal regulation to revamp the 340B program’s administrative dispute resolution system.

Health care provider groups, citing manufacturers’ contract pharmacy policies, said they want the U.S. Health Resources and Services Administration’s ADR final rule to make it clear that 340B covered entities may file petitions against manufacturers that will not ship 340B-purchased drugs to more than one contract pharmacy per entity. Manufacturer groups meanwhile criticized HRSA for failing to address 340B drug diversion and duplicate discounts. Practically all companies that impose conditions on 340B contract pharmacy cite diversion and duplicate discounts as their main motivations.

Provider and manufacturer groups also weighed in on the proposed new ADR system’s procedural elements such as ADR board membership, reconsideration of ADR panel decisions, and combining claims.

Comments on HRSA’s proposal were due Jan. 30. HRSA says it wants to make the ADR process more accessible and less trial-like. It has not said when it plans to publish a final rule.

The existing ADR process has had a rough history. It was supposed to have been implemented by late 2010 but was not until early 2021. Just two petitions are known to have been filed, both against drug companies with contract-pharmacy-related conditions on 340B pricing. One petition was dismissed in September on the grounds that the same subject matter was before a federal appeals court. The other petition is still alive, but it was filed 25 months ago with no end in sight.

In March 2021, a federal district court stayed ADR proceedings against drug maker Lilly in the petition that was dismissed last fall. Last week, a federal appeals court voted 2-1 that Sanofi was not entitled to a stay in the same ADR proceedings.

340B contract pharmacy is woven into the ADR system’s history. It is a central theme in the comments that heath care provider and drug industry groups filed about the proposed replacement for the system. (The following descriptions are limited mainly to stakeholders’ comments related to the 340B contract pharmacy issue. They do not reflect the whole scope of commenters’ positions on HRSA’s proposed rule.)

Hospital group comments

The American Hospital Association told HRSA “the ADR process is intended to adjudicate disputes that arise when a drug manufacturer overcharges a 340B provider for covered drugs.”

“There is no more egregious example of this than the actions drug manufacturers have taken to limit or deny 340B pricing through arrangements with community and specialty pharmacies,” AHA said. The final rule should explicitly state that the ADR process is available to 340B hospitals seeking redress from these restrictions, it said. AHA said it “vigorously support[s]” efforts by the Department of Health and Human Services Office of Inspector General “to enforce the law and penalize drug manufacturers’ who intentionally break the law…. [A] whole-of-agency effort is needed.”

AHA “strongly urge[d]” HRSA not to suspend ADR proceedings that may involve issues pending before a federal court, as occurred with one of the two petitions filed under the current system. It also said ADR panels should have to decide cases within six months and not later than one year.

Hospital group 340B Health urged HRSA to clarify that covered entities may bring an overcharge claim in situations where a manufacturer has limited an entity’s ability to buy covered outpatient drugs at or below the 340B ceiling price. “Current manufacturer policies cutting off or conditioning access to 340B pricing for contract pharmacy demonstrates that these types of overcharges can have a substantial negative financial impact on covered entities,” it said.

340B Health opposed HRSA’s proposal to suspend ADR claims related to an issue pending in federal court. It said it supported HRSA’s proposal to prevent manufacturers from bringing claims related to a covered entity’s eligibility. It also said HRSA “should make clear that duplicate discount claims involving Medicaid managed care cannot be heard by the ADR.”

The group America’s Essential Hospitals urged HRSA to swiftly finalize an ADR process “through which covered entities can ensure manufacturers honor their obligations to provide discounted drugs.”

Manufacturers’ decisions to withhold 340B-priced drugs from contract pharmacies “demonstrate the urgent need of an accessible and efficient process to hold manufacturers accountable when participating in 340B,” it said.

Grantee entity comments

The National Association of Community Health Centers and Ryan White Clinics for 340B Access, the groups behind the two petitions filed under the current system, made similar arguments in their comments.

“Because covered entities cannot participate in any judicial process to enforce the requirements of the 340B statute, the ADR process and rules should favor easy access for covered entities,” NACHC said. It said it “strongly oppose[d]” HRSA’s proposal to suspend the ADR process if the same or a similar matter is before a federal court. “By suspending the ADR process when an issue is being litigated by HRSA and manufacturers, HRSA would be essentially silencing the covered entity community with respect to the issue.”

NACHC said HRSA should define the term “overcharge” for 340B ADR purposes to include:

  • an attempt to collect a price in excess of the 340B ceiling price for a covered outpatient drug
  • any attempt to cause a drug wholesaler to decline to offer 340B pricing on a covered outpatient drug to a covered entity
  • any refusal by a manufacturer to sell a covered outpatient drug at 340B pricing.

“Further, the covered entity should not be required to make an over-priced purchase to establish that it is being overcharged,” it said.

NACHC said HRSA should remove the requirement that a party show good faith efforts at resolution before bringing an ADR claim. “If the manufacturer announces a new policy that indicates it will refuse to honor 340B pricing, covered entities should not be required to engage in futile and time-wasting good faith efforts with a party acting in bad faith,” it said.

RWC-340B asked HRSA to make clear in the final rule that a covered entity may submit an ADR petition against a manufacturer that denies access to 340B priced drugs. It said it vigorously opposes HRSA’s proposal to suspend ADR review of claims that involve issues pending in federal court.

HRSA should clarify that a covered entity may submit an ADR petition to contest the pricing data or calculations that a manufacturer uses to determine the 340B ceiling price, and it should allow discovery of data used to set ceiling prices, RWC-340B said.

The group also asked HRSA to clarify that ADR petitions related to potential duplicate discounts on Medicaid MCO claims will not be allowed.

Industry comments

Pharmaceutical Research and Manufacturers of America, which has sued to have the current ADR system struck down as unconstitutional and illegal, said it cannot support HRSA’s proposed rule because it exacerbates the existing ADR system’s deficiencies.

PhRMA said the proposal does not “develop a clear and meaningful definition of the pivotal statutory term ‘patient of the [covered] entity.’”

“The lack of a clear definition of ‘patient’ significantly undermines the 340B program, including the ADR process and parties’ ability to work together to resolve disputes in good faith, and the prospect for HRSA and manufacturers to conduct effective audits for diversion issues,” PhRMA said. “The proper scope of the term ‘patient’ is potentially implicated each time a diversion question or possible diversion issue is raised. HRSA should therefore revise and clarify its current guidance on the meaning of ‘patient.’”

PhRMA said HRSA also should update requirements for manufacturer audits of covered entities in light of “transformational changes” in the 340B program since the agency last issued manufacturer audit guidelines in 1996, PhRMA said. “That omission must be addressed in connection with any revisions to the current ADR process.”

“HRSA should clarify that manufacturers may bring an ADR claim if any manufacturer (the manufacturer itself or another manufacturer) has audited the covered entity and the claim is based on findings from the audit,” it said.

PhRMA also said the proposed rule “does not address HRSA’s statutory obligation to develop refund procedures, which are a necessary predicate to resolving disputes between manufacturers and covered entities.”

PhRMA “strongly supports” HRSA’s proposal to suspend review of ADR claims that are the same as or similar to issues pending in federal court. “Continuing parallel ADR proceedings in this circumstance would risk wasting limited ADR resources on complex legal questions that are more optimally resolved by federal courts,” it said.

Finally, PhRMA said the proposed rule “does not meaningfully address, or even acknowledge, that the current rule is being challenged in multiple lawsuits in the federal courts, including in active litigation filed by PhRMA and in separate suits filed by certain pharmaceutical manufacturers.”

“We are concerned that HRSA is continuing to implement the flawed ADR process under the current rule, which we believe is unconstitutional, contrary to law, and arbitrary and capricious,” it said. “We therefore urge HRSA to suspend any currently pending ADR proceedings as the agency revisits and reconsiders its 340B ADR rulemaking.” PhRMA also urged HRSA to dismiss all pending ADR claims “upon issuance of a final rule, and claimants should be required to refile claims if they wish to initiate new ADR proceedings.”

Biotechnology Innovation Organization told HRSA that “there continue to be substantive, unaddressed issues in the larger context of 340B program integrity that have a significantly undermining effect on the ADR process, e.g. lack of enforcement of a clear patient definition and the long-standing manufacturer audit guidelines which have not been updated since 1996.”

“Certain fundamental issues such as patient definition and the prohibition against diversion … must first be resolved before they are addressed within the ADR process,” BIO said. “Use and reform of the ADR process are not appropriate amid pending litigation on critical topics, such as the contract pharmacy and the definition of patient.”

“If HHS intends to move forward with promulgation of a new ADR process, we suggest a new proposed rule with comment period be issued after consideration of comments to this proposed rule,” BIO said. “That way, stakeholders will have the opportunity to meaningfully consider and comment on critical issues. As it stands now, the NPRM is not only flawed with respect to several proposals, but overall lacks sufficient detail and remains overly vague on key points, depriving stakeholders of full opportunity to respond.”

BIO said, “HHS must enforce and, if necessary, strengthen its guidance to covered entities that diversion and duplicate discounts are strictly prohibited in claims processed through Medicaid managed care.”

“Specifically, HHS should enforce these statutory prohibitions, including in a manner that requires transparency through the provision of detailed claims-level data to manufacturers and third-party vendors,” it said. “We believe that having this data may reduce the need to raise claims through the ADR process.”

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