340B Program: HRSA Issues Dispute Resolution Proposed Rule

The NPRM addresses the establishment of an ADR process for two types of disputes: (1) covered entity claims that a manufacturer has overcharged for a 340B covered outpatient drug, and (2) manufacturer claims, following a manufacturer audit of a covered entity, that the entity has violated either the duplicate discount prohibition or the prohibition on reselling or transferring 340B drugs to any person that is not a "patient" of the covered entity (sometimes referred to as the prohibition against "diversion").

Background

In 1996, HRSA published a voluntary process for resolving certain disputes between manufacturers and covered entities in the 340B program. The process set forth in the 1996 notice was viewed by many manufacturers as potentially burdensome, as it required "specific facts showing that there is a genuine and substantial issue of material fact in dispute that requires a review" in order to trigger the process. As part of the Patient Protection and Affordable Care Act, as amended (ACA), Congress directed the Secretary of Health and Human Services (HHS) to promulgate ADR regulations in 2010 to resolve the two categories of claims listed in the previous paragraph. The statute directed HHS to:

1. establish a decision-making body within HHS to review these claims;
2. establish deadlines and procedures for the ADR process;
3. establish a process by which covered entities can obtain supporting information for their claims;
4. require manufacturers to conduct audits of covered entities before submitting claims to the ADR process;
5. permit the decision-making body to consolidate claims brought by more than one manufacturer; and
6. adopt procedures to allow covered entities to pursue claims jointly against manufacturers.

Although HRSA issued an Advanced Notice of Proposed Rulemaking and request for comments (ANPRM) on September 20, 2010, this ADR NPRM represents HRSA's first attempt to formally regulate the dispute resolution process between manufacturers and covered entities. The 2010 ANPRM requested comments on the possible ADR process, including comments on: (i) the informal dispute resolution process established as part of HRSA's 1996 Manufacturer Audit Guidelines and Dispute Resolution Process; (ii) whether a threshold or materiality requirement should be adopted before a covered entity or manufacturer can bring a claim under the ADR process; and (iii) the adoption of a hearing process.

The ADR Process

The NPRM defines the ADR process as a means of resolving disputes concerning the two categories of claims. The ADR Panel (the 340B ADR Panel or the Panel) would be the decision making body that reviews claims and issues a binding decision under the ADR Process. The NPRM would establish the following ADR process at 42 C.F.R. part 10:

• The 340B ADR Panel would consist of one member of HRSA's Office of Pharmacy Affairs (OPA) staff and three members from a list of "eligible individuals" to review claims brought by covered entities and manufacturers. The list or roster of eligible individuals is not defined in the NPRM. HRSA will screen members for conflicts of interest, alternate the members of the Panel for different claims, and remove members for cause where needed.

• Claims would need to be filed, in writing, within three years of the date of the alleged violation, and both covered entities and manufacturers would have to provide sufficient documentation to demonstrate their claim and maintain all documentation related to the claim until the Panel issues a final agency decision letter. HRSA states that, for manufacturers, "[s]uch documentation may include: (1) A final audit report which indicates that the manufacturer audited the covered entity for compliance with the prohibition on diversion ... and/or duplicate discounts ... and (2) the covered entity's written response to the manufacturer's audit finding(s)." "Sufficient" documentation is arguably a lower bar to triggering the ADR process than was the "specific facts" threshold established in 1996. The Panel would be charged with reviewing each claim, in a separate session from the parties, and requesting additional information from the parties or consulting with OPA as necessary before issuing a decision. According to the NPRM preamble, the 340B ADR Panel would have access to ceiling price data through HHS.

• Joint claims by two or more covered entities could be brought against a manufacturer if each covered entity involved consents. An association would be able file a claim on a covered entity's behalf if the covered entity is a member of the association and all covered entities involved consent and otherwise meet the timeline and supporting documentation requirements for filing a claim.

• Joint claims by two or more manufacturers could be brought against a covered entity if each manufacturer could have brought a claim against the covered entity, meets the timeline and documentation requirements for filing a claim, and consents to the joint filing. The 340B ADR Panel must make a determination that the manufacturers' consolidation is "appropriate and consistent with the goals of fairness and economy of resources" for it to proceed. (Such determination is not required for joint claims by covered entities.) Associations or organizations may not file claims on a manufacturer's behalf (unlike with respect to covered entities).

• Notice to the party subject to the complaint would be required within three business days of filing and documentation of the notice would need to be submitted to HRSA. HRSA would review the information filed and notify the parties within twenty business days of whether the claim is being forwarded to the 340B ADR Panel for review. A party would be able resubmit a claim that has been rejected only if new information about the alleged violation were to become available.

• The response by the subject of the complaint, where HRSA does forward a claim to the 340B ADR Panel, would be due within twenty business days. If the party does not respond, the Panel would proceed based on the information submitted by the party filing the claim.

• Discovery by covered entities would be permissible. Covered entities would be able request, in writing, additional information from a manufacturer through the 340B ADR Panel once a claim has been accepted. The 340B ADR Panel would have to review these requests and reject them if they are beyond the scope of the claim. The covered entity would be able to revise and resubmit its request. The Panel would forward approved requests to manufacturers for review, and manufacturers would have to respond in writing within fifteen days of receipt. The manufacturer would be able to request an extension if necessary. There is no equivalent process in the NPRM for a manufacturer to request information from a covered entity.

• The decision-making timeline is somewhat unclear. The 340B ADR Panel would review the information submitted by the parties and circulate a draft agency decision letter for the parties' review. The parties would have twenty business days to respond to the draft agency decision letter. The Panel would review the responses and issue a final agency decision letter, representing a majority-decision of the Panel, which then would be sent to all parties and to HRSA for enforcement action. The NPRM preamble notes that HRSA may also apply sanctions in response to a letter, if appropriate, including requiring a covered entity to repay a manufacturer for violations of the diversion prohibition. The NPRM does not impose any timelines on the 340B ADR Panel for reviewing a claim. The NPRM also does not discuss appeals or what information, if any, HRSA plans on posting publically about a final agency decision letter.

Regulatory Impact Statement

HRSA takes the position that the NPRM is not "economically significant" because it would not have an economic impact of US$100 million or more. Specifically, the NPRM states that the regulation would not have a significant impact on small drug manufacturers or small health care providers, would not have "federalism implications," would not exceed the US$155 million threshold in the Unfunded Mandates Act, and would not have a significant impact on the existing recordkeeping burden for manufacturers and covered entities.