HRSA issues 340B Program final rule modifying administrative dispute resolution process

Previously, Hogan Lovells issued client alerts on the 2016 ADR proposed rule, the 2020 ADR final rule, and the 2022 proposed rule.

We have prepared two blacklines: The first (online here) shows the Final Rule provisions marked against those of the 2022 proposed rule. The second (online here) shows how the Final Rule modifies existing regulations.

Why Is HRSA Making These Changes? It Says Access to the ADR Process

HRSA’s stated goal in finalizing changes to the ADR process is to improve accessibility, administrative feasibility, and timeliness. HRSA purports to accomplish this by making the process less trial-like and more administrative in nature. For example, the Final Rule shifts the ADR process away from the use of the Federal Rules of Evidence and Civil Procedure, as HRSA believes these more formal and complex rules could have been creating unnecessary delays and preventing potential petitioners from accessing ADR. Overall, HRSA seeks to create a process that all entities can access without regard to their ability to retain counsel or engage in a lengthy trial. HRSA also asserts that the processes that existed under the 2020 ADR final rule were more likely to have been a barrier to covered entities accessing the ADR process than to manufacturers. Finally, HRSA discourages covered entities and manufacturers from using the ADR process to pursue “minor or de minimis claims given the time and resource investment required of the parties involved,” while at the same time removing the current processes’ $25,000 minimum threshold for an ADR claim.

Key Topics and Changes

• General and Process Rules

  • Proposed rule: HRSA proposed that most of the filing rules from the existing ADR process would remain in place, except HRSA proposed to eliminate the applicability of the Federal Rules of Civil Procedure and Evidence.

  • What changed?: No change. Finalized as proposed.

• Good Faith Efforts to Resolve a Claim

  • Proposed rule: HRSA proposed to require the filing party to submit a written summary of attempts to work in good faith to resolve the claim with the other party. The current process has no such requirement.

  • What changed?: No change. Finalized as proposed.

• Claims Eligible for ADR Process

  • Proposed rule: HRSA proposed that all claims must be specific to the parties identified in the claims, and, consistent with the existing ADR process, clarified that the ADR process would be reserved for disputes laid out in the statutory ADR provision (overcharge, diversion, and duplicate discounts).

  • What changed?: HRSA affirmed the scope of the ADR process as proposed with certain clarifications:

    • Overcharge: HRSA further reaffirmed that an overcharge claim may include “claims that a manufacturer has limited the covered entity’s ability to purchase covered outpatient drugs at or below the 340B ceiling price.”
    • Diversion: HRSA clarified that diversion includes use of a 340B priced drug in the inpatient setting.
    • Covered entity eligibility: HRSA clarified that, while the eligibility of a covered entity is generally outside the scope of the ADR process, if resolution of a diversion claim depends on the claimant’s eligibility, the claimant’s eligibility may be considered in the ADR process.
    • Duplicate discounts and Medicaid Managed Care Organization utilization: HRSA clarified that Medicaid managed care claims may be subject to the ADR process if related to a duplicate discount dispute.

• Minimum Threshold for ADR Claim

  • Proposed rule: HRSA proposed to entirely eliminate the jurisdictional threshold of $25,000 that exists in the current process.

  • What changed?: No change. Finalized as proposed.

• Initial Claim Review for Completeness

  • Proposed rule: HRSA proposed to revise the existing ADR process to provide that OPA will initially review submitted claims for completeness only and request additional information as needed. OPA staff reviewing the initial claim could not be appointed to the 340B ADR panel. This would be a change from the current ADR process where claims are sent directly to the ADR panel.

  • What changed?: HRSA clarified that the initial claim review will include an evaluation of whether a claim overlaps with a consolidated claim or joint claim, in which case OPA will contact the parties to ask that they resolve the discrepancy. Consistent with the 2020 Final Rule, consolidated claims are those “resulting from combining multiple manufacturers’ claims against the same covered entity,” and joint claims are those “resulting from combining multiple covered entities claims (or claims from their membership organizations or associations) against the same manufacturer for the same drug or drugs.”

• ADR Panel Composed Entirely of OPA Staff

• • Proposed rule: HRSA proposed to limit the composition of the ADR panel to OPA subject matter experts. Under the 2020 Final Rule, ADR members are made up of equal numbers of individuals from HRSA, the Centers for Medicare & Medicaid Services, and the Department of Health and Human Services (HHS) Office of the General Counsel. 

  • What changed?: No change. Finalized as proposed.

• Requests for Information (i.e., discovery)

  • Proposed rule: 

    • Covered entity requests for information from manufacturers and third parties: OPA proposed to revise the process for requests for information from covered entities to provide that the ADR panel will act as an intermediary and facilitate information requests. Under the current process, covered entities are permitted to request “information and documents from the manufacturers and third parties” relevant to overcharge claims and to submit such requests directly to manufacturers after the ADR panel deems the request reasonable.

    • Manufacturer requests for information from covered entities: The current process does not permit manufacturers to submit a request for information directly to the covered entity, but does allow the ADR panel to request more information from a covered entity following a request from a manufacturer. The proposed rule did not address whether a similar mechanism would be in place for manufacturers under the new ADR process.

  • What changed?: HRSA finalized its proposal to revise the process for requests for information for covered entities with the ADR panel acting as an intermediary, and clarified that, consistent with the existing ADR process, “[i]f a manufacturer believes an information request to a covered entity is necessary for the 340B ADR Panel’s review, it may make a request to the 340B ADR panel to make the request to the covered entity.”

• Suspension of ADR Process During Pendency of Related Federal Litigation

  • Proposed rule: HRSA proposed that after the ADR panel receives the claim, it would conduct a review to determine whether the claim is within its jurisdiction and if the issue is currently being litigated in federal court. In the latter case, the panel would suspend review until the matter is no longer pending in court. If the ADR panel were to proceed with reviewing the claim, it would evaluate documentation and request information as necessary.

  • What changed?: HRSA removed the proposed provision that would have suspended claims where the same or similar to an issue that is being litigated in federal court. As to this change, HRSA stated that, “[b]y allowing claims that are the same as or similar to those pending in Federal court to move through the 340B ADR process, HHS is proceeding consistent with the Astra decision and meeting its statutory mandate to establish and implement a 340B ADR process including the establishment of such deadlines and procedures to ensure that claims involving certain 340B disputes are resolved fairly, efficiently, and expeditiously.

• Precedential Value of ADR Decisions

• • Proposed rule: The current ADR regulations expressly state that ADR panel decisions are precedential. In the proposed rule, HRSA removed this language, indicating that ADR panel decisions under the new ADR process would not be precedential.

  • What changed?: HRSA did not directly address whether ADR panel decisions are or are not precedential, instead noting that the statute is silent on that topic. HRSA simply states that ADR panels “will follow the 340B statute, regulations, and all policies governing the 340B Program when reviewing and evaluating 340B ADR claims.” HRSA also noted that it will publish ADR panel final agency decisions within 120 calendar days of issuing the decision.

• Reconsideration Requests

  • Proposed rule: HRSA proposed to introduce a new provision permitting parties to initiate a reconsideration request to the HRSA Administrator within 20 business days of an ADR panel’s decision letter. The HRSA Administrator could also initiate a reconsideration if neither parties makes a request. This would be a change from the existing ADR process, which provides no reconsideration process or recourse except through judicial review.

  • What changed?: HRSA lengthened the time in which a reconsideration request can be made to 30 business days. HRSA also added new language to clarify that “[t]he [HHS] Secretary has the authority to review and reverse, alter, or uphold any 340B ADR Panel or reconsideration decision,” and that such decision “will serve as the final agency decision and will be binding upon the parties involved in the dispute, unless invalidated by an order of a Federal court.” While HRSA previously spoke of the HHS Secretary’s “inherent authority to review and reverse or alter the 340B ADR Panel’s decision” in preamble language, the Final Rule codifies this position in regulation. The Final Rule provides that a reconsideration decision by the HRSA Administrator is effective 30 business days after issuance unless the HHS Secretary makes a decision to review the decision.

• Severability
  • Proposed rule: HRSA did not propose any language on severability, nor is there a severability provision under the existing ADR regulations.
  
  
  • What changed?: HRSA added a section to the regulations stating that if any provision of the ADR regulations is found to be “invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action,” that provision will be understood to have the maximum effect permitted by law, and if found entirely invalid or unenforceable, will be severable from the remainder of the ADR regulations.

It is important that you carefully review the Final Rule in light of considerations that may be relevant to your organization. Please feel free to contact the Hogan Lovells Government Price Reporting Team if you have any questions or concerns.

Authored by Alice Valder Curran, Ken Choe, James Huang, Kathleen Peterson, Samantha D. Marshall, Mahmud Brifkani, Rianna Modi, and Gabrielle Simeck.