The U.S. Health Resources and Services Administration (HRSA) yesterday asked the White House to review and approve a 340B administrative dispute resolution (ADR) proposed regulation for publication in the Federal Register.
The proposed rule’s purpose is unknown. HRSA published a 340B ADR final rule in December 2020 and it took effect in January. HRSA might be revising the final rule to address concerns raised about its legality.
Four known ADR petitions have been filed against drug manufacturer AstraZeneca, one against Lilly, and one against Sanofi, all in connection with the manufacturers’ denials of 340B pricing when covered entities use contract pharmacies.
Pharmaceutical Research and Manufacturers of America (PhRMA), Lilly, and Sanofi are each challenging the 340B ADR final rule’s legality and/or constitutionality.
In March, a federal district judge granted Lilly’s motion for a preliminary injunction shielding it from ADR proceedings brought against it by the National Association of Community Health Centers (NACHC). The judge said Lilly would likely win its argument that HRSA violated the Administrative Procedure Act (APA) in promulgating the ADR final rule.
“Plaintiffs have shown a likelihood of establishing that their procedural right to advance notice and comment was violated, depriving them of the protections afforded to them under the APA,” the judge said. “The only impact an award of preliminary injunctive relief will have on the covered entities will be to delay their ability to pursue an ADR petition against Lilly until a procedurally valid rule is promulgated, which we assume HHS will want to undertake expeditiously in order to reduce or alleviate any harm from further delay.”
Late last month, the judge ruled partially in Lilly’s favor and partially in HRSA’s favor on Lilly’s other claims in its 340B contract pharmacy lawsuit. She said she would rule on the lawfulness of the ADR process at a later date.
A few days later, a different federal judge in Sanofi’s 340B contract pharmacy lawsuit upheld the ADR final rule’s legality. NACHC has filed an ADR petition against Sanofi.
All briefs have been filed in PhRMA’s lawsuit challenging the ADR process. The parties are waiting for the judge to schedule arguments.
The Nov. 18 regulatory review notice on the White House Office of Management and Budget (OMB) website provides no details about why HRSA’s proposed rule is needed and what it would do.
In response to questions about the proposed rule’s purpose and content, HRSA said: “The Office of Management and Budget (OMB) has accepted for review the 340B Drug Pricing Program’s Administrative Dispute Resolution (ADR) notice of proposed rulemaking (NPRM). Following OMB’s deliberations, the NPRM will be published in the Federal Register with an opportunity for public comment period. HRSA encourages all stakeholders to provide input at that time.”
Questions have been raised about whether a U.S. Supreme Court split decision in June involving administrative law judges who hear patent disputes might force HRSA to revise its ADR rule. In September, former U.S. Health and Human Services Department (HHS) General Counsel Robert Charrow said the ADR rule needed “one slight tinker” to bring it in accordance with the Supreme Court decision. Charrow said that, per the high court ruling, HHS should make 340B ADR decisions reviewable by an HHS principal officer nominated by the President and confirmed by the Senate.
A few days later, though, the U.S. Justice Department said in a brief in PhRMA’s ADR lawsuit that no change was needed because the HHS secretary, who is a principal officer, already has discretion to review 340B ADR decisions and remove ADR board members at will.
