Stakeholders Weigh in on Forthcoming 340B Dispute Resolution Rule

Health care providers are pleased that the 10-year wait for a binding 340B administrative dispute resolution system is almost over. But they say it’s not the forum for addressing drug manufacturers’ denials of 340B pricing for drugs dispensed by contract pharmacies. | Source: Shutterstock

Stakeholders Weigh in on HRSA’s Forthcoming 340B Dispute Resolution Rule

Federal health care grantees in the 340B drug discount program are pleased but wary about federal health officials’ disclosure yesterday that, after a 10-year wait, rules for a binding 340B administrative dispute resolution (ADR) system are on their way. 340B hospitals say even if the rules create a system they can back, the mechanism won’t resolve their concerns about pharmaceutical manufacturer denials of 340B pricing on drugs shipped to contract pharmacies. Drug manufacturers are keeping mum until the final rule is released. Health care lawyers say although the way the government is finalizing the rule is questionable, the rule probably could stand up in court.

As we reported yesterday (breaking the news on Twitter), the U.S. Health Resources and Services Administration (HRSA) on Nov. 17 sent the White House Office of Management and Budget (OMB) a final rule to implement a decade-old congressional directive to create a binding 340B ADR process to replace the 340B program’s voluntary system. Groups representing 340B health centers and HIV/AIDS clinics have sued U.S. Health and Human Services (HHS) Secretary Alex Azar and his department over their failure to stop drug manufacturers’ recent denials of 340B pricing. One of the types of relief they want is a federal court order requiring Azar to promulgate the 340B binding ADR final rule.

Ryan White Clinics for 340B Access (RWC-340B), one of the two groups suing HRSA, said, until it sees HRSA’s final rule, it cannot address how the rule will affect its lawsuit. “Generally speaking though, we’re pleased the administration is planning to issue the rule even though it is 10 years overdue and arriving too late,” RWC-340B said.

The National Association of Community Health Centers (NACHC), the other group suing HRSA, said, “Although we are encouraged to see the agency acting—as it validates our lawsuit and the urgent need for a remedy—we do not agree that simply reviving a highly-criticized proposed rule withdrawn several years ago will suffice to cure the significant harm caused by drug manufacturers’ brazen refusal to make 340B drugs available to [federally qualified health centers] FQHCs.”

NACHC said it would, “as always, welcome the opportunity to work with the agency through the full rulemaking process to fulfill the statutory command to establish a dispute resolution process that is fair, efficient, expeditious, and equipped to address recent developments.”

Hospital group 340B Health told its members in a Nov. 18 email that it thinks the Trump administration will tell covered entities to use the new dispute resolution system to challenge manufacturer refusals to provide 340B pricing on drugs shipped to contract pharmacies. “We continue to assert that these refusals are a clear violation of the 340B statute that the administration must block immediately,” the group said.

340B Health said that, even though the rule as proposed in 2016 “was largely favorable to covered entities,” binding dispute resolution is not the way to resolve the dispute over 340B pricing for contract pharmacy drugs. It said, “Even if an ADR panel were to issue a favorable ruling against a drug company that is refusing 340B pricing on contract pharmacy drugs, the process would take a considerable amount of time. All the while, the affected covered entities would be losing significant amounts of money through a lack of access to statutory 340B savings.”

The American Hospital Association said, “We won’t be commenting until we see the final rule.”

Pharmaceutical Research and Manufacturers of America (PhRMA) said, “We’ll of course review the rule if/when it is released.”

In 2016, in response to HRSA’s proposed rule, PhRMA said, “the foundations that must shape a sound ADR system are not yet in place.” It said HRSA first needed to

  • address “critical problems” with its 340B program guidelines for manufacturer audits of covered entities

  • finalize rules on refunds for 340B overcharges, on the calculation of 340B ceiling prices, and on manufacturer civil monetary penalties for knowing and intentional overcharges (HRSA did so in January 2017)

  • finalize its then-proposed 340B program omnibus guidance, in particular, guidelines defining the term “patient” for 340B purposes and guidelines on duplicate discount and diversion violations (the Trump administration withdrew the 340B mega-guidance in January 2017).

Because the Trump administration withdrew HRSA’s 2016 ADR proposed rule, some have questioned whether the administration is violating federal administrative procedure by now publishing an ADR final rule. The same question is being asked about the administration’s forthcoming final rule to ban drug company rebates to Medicare Part D plans sponsors, Medicare managed care organizations (MCOs), or their pharmacy benefit managers (PBMs), and replace them with drug company price reductions for Part D and Medicaid managed care beneficiaries. The administration proposed a rebate-to-price reduction rule in February 2019, withdrew it in July 2019, and is now on the verge of publishing a final rule. OMB cleared the rule for publication yesterday.

We asked health care attorneys whether HRSA’s 340B ADR final rule is on firm or shaky ground procedurally. The consensus is that it if the final rule addresses or incorporates comments received on the 2016 proposed rule, HRSA probably can argue persuasively that the rule is procedurally sound. Nevertheless, the rule could still be subject to legal challenge, the experts said.

The Biden administration also could suspend implementation of the ADR rule and/or withdraw it.

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Manufacturer Changes to 340B Are Leaving Uninsured Patients Out in the Cold

LilaRx Can Help Fill the Gap

Michael Burkhold, Chief Executive Officer, Equiscript

Recent actions by drug manufacturers are dramatically limiting patients’ access to lifesaving, low-cost 340B drugs.

Established channels for accessing discounted medications via contract pharmacies have been dismantled almost overnight with little regard to patients and safety net providers that rely on inexpensive 340B medications in order to serve their patients.

Covered entities are now in what appears to be an impossible spot at just the wrong time. Nonetheless, more drug manufacturers look to be piling on with ill-conceived restrictive policies that will immediately hurt poor, disenfranchised Americans already suffering through an unprecedented economic downturn.

How can a covered entity serve their entire uninsured patient base with only a few pharmacies?

Equiscript has a solution. LilaRx is the most comprehensive, easy to use 340B-based nationwide medication assistance program designed specifically to pass 340B savings to uninsured and low-income patients. It is a streamlined way for providers to get lifesaving medications into the hands of some of their most at-risk patients regardless of how far they live from a pharmacy. 

LilaRx utilizes the national reach of our home-delivery pharmacy partners like Truepill to send patients their medication right to their homes, eliminating common barriers like lack of access to transportation.

LilaRx also acts as a bookkeeper. Covered entities can access the data they need to show exactly how the 340B program assists their most vulnerable patients and how their program is directly helping folks in their community gain access to affordable medications.

The 340B program is a critical tool for healthcare providers and must be preserved to continue providing necessary care to vulnerable populations. Watch our video to see if you think we can help your patients.

For questions or more information, please contact or visit

Update: Lilly’s 340B Contract Pharmacy Policy Exception

On Tuesday we reported on drug manufacturer Eli Lilly and Co.’s exception to its ban on 340B pricing for drugs dispensed by contract pharmacies. Under the exception, Lilly says it will let covered entities that do not have an in-house pharmacy designate a contract pharmacy location. 340B Report learned that, if an entity does not have an in-house outpatient or retail pharmacy, that alone does not mean it qualifies for the exception. If any of an entity’s pharmacies are registered in the federal 340B program database, 340B OPAIS, as ship-to sites for 340B-purchased drugs, Lilly says it doesn’t qualify.

A health system pharmacy executive who read our Nov. 17 article told us that the system has a hospital with no pharmacies set up as a shipping address in 340B OPAIS, but even so, Lilly denied the hospital permission to designate a contract pharmacy. Lilly told the system it based the denial on Lilly records showing a purchase history at the 340B price with a shipping address matching the hospital address.

The health system has asked Lilly to clarify its basis for its decision.

Having trouble designating a contract pharmacy under Lilly’s policy? Let us know. Send us an email at

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Update: Alexander and Walden’s Call for Input on 340B

Congress should require 340B contract pharmacies to charge uninsured and indigent patients no more than the discounted 340B price for their prescriptions, prescription drug market expert and pharmaceutical industry consultant Adam Fein recently told U.S. Sen. Lamar Alexander (R-Tenn.) and Rep. Greg Walden (R-Ore.) in response for their call for ideas on how to improve the 340B program.

Fein also told the two lawmakers, both of whom are retiring in January, that Congress should:

  • require that contract pharmacy fees be based on fair market value standards

  • revise hospital eligibility for the 340B program to create a clearer patient definition

  • limit the number and geographic scope of contract pharmacy arrangements

  • require greater transparency into profits generated by 340B contract pharmacies

  • require contract pharmacies to identify 340B prescriptions at the time of adjudication.

Fein said the 340B program’s “good intentions have been overwhelmed by middlemen that pocket discounts while forcing patients, employers, and the Medicare program to pay more for prescription drugs. The unmanaged and unregulated growth of contract pharmacies is also causing significant channel distortions within the U.S. pharmaceutical distribution and reimbursement system.”

“Our healthcare system has changed a lot in the 28 years since the 340B program was introduced,” Fein wrote. “The program needs to be modernized so that it benefits seniors and other patients—while supporting the genuine safety-net services of healthcare providers.”

The deadline for submissions to Alexander, the outgoing chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Walden, the outgoing ranking Republican on the House Energy and Commerce Committee was Oct. 30.

What Alexander and Walden intend to do with Fein and other stakeholders’ input remains unknown. They have been silent about their project since the Oct. 30 deadline passed, and have not introduced legislation or released a discussion draft. When they asked for the comments, they said Congress and 340B stakeholders “must be open to updating 340B so that it best serves our seniors and most vulnerable patients, while also protecting the valuable services offered by health care providers, hospitals, and clinics. Program changes are needed and long overdue.”

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Manufacturer Posts Limited Distribution Notice for 340B Entities

The manufacturer of Sprix, a non-narcotic nasal spray used to relieve moderate to severe pain, has posted a limited distribution notice to 340B covered entities on the U.S. Office of Pharmacy Affairs (OPA) website.

Prasco Laboratories said Sprix will be available solely through home-delivery specialty pharmacy DivvyDose to ensure “high-qualify supportive care” and “optimal therapeutic adherence.” (CNBC reports that DivvyDose, which delivers pre-sorted pill packs to patients with multiple chronic conditions, was bought by insurer UnitedHealth Group in late September.)

Prasco said 340B covered entities could buy Sprix from DivvyDose at the 340B price if they have a contract pharmacy relationship with DivvyDose. The pharmacy will dispense the nasal spray directly to the patient, bill the patient’s insurance, and remit the difference between the reimbursement and the 340B ceiling price to the entity, Prasco said.

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Sen. Grassley Tests Positive for COVID-19

U.S. Sen. Finance Committee Chair Chuck Grassley (R-Iowa) announced Tuesday on Twitter he has tested positive for the virus that causes COVID-19. Grassley, 87, arguably has been the senator most engaged in 340B program policy for nearly two decades. Over the years, he has examined covered entity and drug manufacturer compliance with 340B program requirements and chain drug stores’ participation in 340B as contract pharmacies. 

Beginning in 2012, Grassley led a highly publicized investigation into what he believed was abuse of the program by hospitals and contract pharmacies. The pharmaceutical industry was very pleased with these efforts while 340B hospitals pushed back strongly.

“I’ll be following my doctors’ orders/CDC guidelines & continue to quarantine,” Grassley tweeted. “I’m feeling good + will keep up on my work for the ppl of Iowa from home. I appreciate everyone’s well wishes + prayers &look fwd to resuming my normal schedule soon.”

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