United States: Summary Of The "340B Drug Pricing Administrative Dispute Resolution" Proposed Rule

Last Updated: August 24 2016
Article by Ross Margulies and Christian Springer

Overview & Analysis

On August 12, 2016, the Health Resources and Services Administration (HRSA) published a proposed rule entitled "340B Drug Pricing Program; Administrative Dispute Resolution" (Proposed Rule). The Proposed Rule follows the Advanced Notice of Proposed Rulemaking (APRM) issued by HRSA on September 20, 2010 and aims to establish requirements and procedures for the 340B Program's administrative dispute resolution (ADR) process. Interested parties may submit written comments on or before October 11, 2016.

The Proposed Rule, if finalized, will replace the 340B Program's 1996 guidelines on the informal dispute resolution process published on December 12, 1996. Unlike the prior guidelines, which were never codified, the Proposed Rule expressly aims to codify the 340B ADR process into new regulations at 42 CFR Part 10. In doing so, the Proposed Rule would create a separate decision-making body tasked exclusively with adjudicating disputes between manufacturers and covered entities. The Proposed Rule would also establish actual mechanisms governing how aggrieved parties may seek relief, although there appears to remain many details to hash out. Notwithstanding, the changes are arguably improvements over the previous voluntary and dated dispute resolution program.

The Proposed Rule does not treat covered entities and manufacturers equally, however. Although the Proposed Rule would allow both covered entities and manufacturers to consolidate claims against an opposing party, only associations and organizations on behalf of covered entities, but not manufacturers, may consolidate their claims. HHS justifies its position on the grounds that the statutory authority implementing the 340B ADR process explicitly permits consolidated claims by organizations or associations on behalf of covered entities, yet is silent with respect to manufacturers. HHS does not provide a rationale as to why the statute's silence on this point necessarily means that the consolidation of claims by organizations and associations on behalf of manufacturers is inconsistent with the 340B ADR process.

Additionally, the Proposed Rule conditions the ability of multiple manufacturers to consolidate their claims against a single covered entity upon a determination that consolidation is consistent with the "goals of fairness and economy of resources." Although HHS correctly identifies these conditions as stemming from the statutory language itself, it does not offer any details of what constitutes fairness and economy of resources.

The Proposed Rule's Response to Comments Submitted In Response to the APRM

Generally, the Proposed Rule fails to incorporate many of the manufacturer comments submitted in response to the APRM. In comments, PhRMA expressed a hope that the 340B ADR process would extend to disputes beyond diversion, duplicate discounts, and overchargining, considering how the government price metrics for drugs are interrelated and how a change in one component can spill over to other areas. The Proposed Rule did not propose extending the scope of the 340B ADR Process. Additionally, PhRMA commented that the ADR process should remain confidential, but HHS has proposed to publish claims that went through the 340B ADR process on the HRSA website in its discretion. PhRMA also requested an option to request a formal ALJ hearing, but the Proposed Rule does not adopt such an option.

Moreover, both BIO and PhRMA expressed concern that the ADR model proposed by HHS was inadequate and both organizations submitted comments recommending specific ADR models that HHS should consider. The Proposed Rule did not explicitly address these recommendations and appears to maintain intact the previous ADR model. Furthermore, the Proposed Rule was largely silent on many of the specific comments relating to threshold requirements, applicable burden of proofs, and discovery procedures.

On the other hand, the Proposed Rule seems to indicate that covered entities cannot dispute the manufacturer data underlying the 340B Discount Program calculation, in accordance with manufacturer comments. Rather, challenges by covered entities will be limited to a showing that they were unlawfully charged over the 340B ceiling price. That said, it will be vitally important that manufacturers use the comment period as an opportunity to work with HHS to outline the scope of discovery and ensure that pricing data remains confidential. The proposed composition of the 340B ADR Panel also aligns with commenters' recommendations that a single decision-making entity with 340B Program expertise oversee the ADR process.

Summary of Major Provisions

Purpose of the 340B ADR Process

In the Proposed Rule, the Department of Health and Human Services (HHS) describes the purpose of the ADR process as being the resolution of "(1) claims by covered entities that they have been overcharged for covered outpatient drugs by manufacturers, and (2) claims by manufacturers, after a manufacturer has conducted an audit...that a covered entity has violated the prohibition on diversion to ineligible patients or duplicate discounts." HRSA states that the 340B ADR process is not intended to be a trial-like proceeding with the formal review of evidence and procedure, but rather an administrative process designed to facilitate efficient resolution to disputes.

The 340B ADR Panel

HRSA proposes to establish a decision-making body, entitled the "340B ADR Panel," to review and resolve claims in the 340B ADR Process. The proposed Panel would include three members alternating from claim to claim, and one ex-officio, non-voting member to facilitate the review and resolution of claims within a reasonable time frame. The three panel members will be selected from a "roster" of eligible individuals whom are (1) employees from the Center for Medicare and Medicaid (CMS) or the Department of Veteran Affairs and, (2) have demonstrated expertise or familiarity with the 340B Program. The ADR panel will not be compensated.

For each filed claim that is reviewed, individuals of the three-member 340B ADR Panel with expertise or familiarity with the appropriate aspects of the 340B Program will be assigned to oversee the dispute. Individuals serving on a 340B ADR Panel may be removed for cause and replaced with another individual from the 340B ADR Panel roster. HHS also proposes to screen 340B ADR Panel members before reviewing a claim in order to ensure there are no conflicts of interest present. HHS intends to describe the specific screening procedures in future guidance.

Duties of the 340B ADR Panel

HHS proposes that the 340B Panel will consider all documentation provided by the parties but will review claims in a session closed to the parties involved and their legal representatives. HHS proposes that the 340B ADR Panel may consult with subject matter experts within the Office of Pharmacy Affairs (OPA) regarding 340B program requirements while reviewing a claim. The 340B ADR Panel's final decision must represent the decision of a majority of the Panel members.

Requirements for Filing A Claim

HHS proposes that a claim must be written and submitted to the Healthcare Systems Bureau (HSB) within 3 years of the date of the sale (or payment) at issue. Any claim not filed within 3 years will be time barred. HHS asserts that 3 years is consistent with the record retention expectations for the 340B program and will ensure that the parties have access to the relevant records.

Once a claim has been submitted to HSB and the opposing party notified, any file, document, or record associated with the claim must be maintained by the parties until the 340B ADR Panel renders a final decision.

Covered Entity Claims

HHS proposes that a covered entity's claim must contain sufficient documentation to show that the covered entity was overcharged by the manufacturer, including any additional documentation requested by HSB in evaluating the veracity of the claim. HHS believes that the required documentation is readily available to a covered entity through the usual course of business, but it does seek comment on the feasibility or production of the documentation as proposed. Additionally, HHS asserts that it may request a covered entity to produce a written summary of attempts to work in good faith with the manufacturer to resolve the dispute.

HHS also noted that it continues to develop a system to verify the ceiling price of a 340B drug, but until such a system is developed, it will ensure the 340B ADR Panel has access to the 340B drug ceiling price data. Covered entities will also be able to access the ceiling price information through this system.

Manufacturer Claims

HHS proposes that a manufacturer's claim must contain sufficient documentation to show that the covered entity has violated the prohibition on diversion and/or duplicate discount, along with any additional information requested by HSB to evaluate the veracity of the claim. HHS similarly asserted that it may request a manufacturer to submit a written summary of its attempts to work in good faith with the covered entity to resolve the dispute.

Consolidation of Claims

HHS proposes that, upon request, covered entities or manufacturers may consolidate their individual claims. In the instance where multiple covered entities jointly assert claims of overcharges by the same manufacturer, HHS proposes that the claim must list each covered entity and include documentation from each covered entity demonstrating that covered entity meets all of the requirements for filing a claim with HHS. Accompanying this, HHS also proposes to require a letter requesting the consolidation of claims and it must document that each covered entity consents to the consolidation.

HHS also proposes to permit consolidated claims on behalf of covered entities by organizations or associations representing the interests of the covered entities so long as the covered entities are members of the association or organization, and each covered entity meets the requirements for filing a claim with HSB. The proposed consolidated claim must assert overcharging by the same manufacturer for the same drug(s). HHS also proposes requiring that a letter requesting consolidation accompany the claim, and that each covered entity must document their consent to the organization or association to act on its behalf.

The consolidation of claims will also be permitted at the request of two or more manufacturers against the same covered entity if consolidation "is consistent with the statutory goals of fairness and economy of resources." The same documentation requirements applicable to the consolidation of claims by covered entities is also applicable to manufacturers. However, HHS has declined to permit consolidated claims by associations or organizations on behalf of manufacturers, asserting that such an option is not contemplated by the statutory authority for implementing the 340B ADR process.

Deadlines and Procedures for Filing A Claim

HHS proposes that parties must file a claim with HSB demonstrating that they satisfy the requirements described in subsection (b) and that the filing party send a written notice to the opposing party within three business days of submitting the claim. This written notice must include a summary of the documentation submitted relating to the claim. The filing party must submit confirmation of the opposing party's receipt or acknowledgement of the notice within 3 business days.

If additional information is requested by HSB before accepting the claim for review by the 340B ADR Panel, the filing party will have twenty business days of receipt of the request to respond. Review by the 340B ADR Panel will not commence until the filing party responds to the request for additional information. Additionally, review will not commence if the alleged violation occurred more than three years before the date of filing of the claim.

HSB will make a determination of whether all requirements for submitting a claim are met and will notify all parties in writing within 20 business days after receiving the completed claim. In the event that the claim does not move forward to review by the 340B ADR Panel, HSB will identify the basis for its decision and will advise the party that it may revise and refile the claim if there is new information to support the alleged violation.

Responding to a Submitted Claim

The opposing party will have 20 business days to submit a written response to the allegation to the 340B ADR Panel and filing party. If an opposing party does not respond to a request for information or elects not to participate in the 340B ADR process, the 340B ADR Panel will make a decision on the claim based on the information submitted before it.

Information Requests by Covered Entities

HHS proposes that the 340B ADR Panel will facilitate information requests made by a covered entity alleging it was overcharged by a manufacturer. The covered entity must submit a written request for information to the Panel no later than twenty business days after it is notified that the Panel will review its claim. The 340B ADR Panel will evaluate the request to ensure that it is reasonable and within the scope of the asserted claim. The Panel will then submit the request to the manufacturer, which must respond within twenty days.

The manufacturer is responsible for obtaining the relevant information from wholesalers or other third parties that may facilitate sales or distribution of its drugs to covered entities. If the manufacturer anticipates not being able to fully respond within the set deadline, the manufacturer will be allowed to request one extension in writing within 15 days. The extension request must explain why the deadline is not feasible, and outline a proposed timeline for compiling a full response. The Panel will grant or deny the extension request. If a manufacturer makes no response at all, the Panel will render a decision based on the information in the claim package that moved forward for review.

Final Agency Decision

HHS proposes a process whereby the 340B ADR Panel will send a draft decision to all parties involved, which will then have 20 business days to respond to the Panel. After the Panel reviews the submitted comments to the draft decision, it will prepare and issue a final agency decision letter to all parties. This final decision letter may incorporate rebuttals from the parties that were considered by the Panel. This final decision letter will conclude the administrative resolution process and the final decision letter will serve as the basis for HSB to take enforcement action or apply sanctions, as appropriate. The Panel's final decision letter will be binding upon the parties involved, unless invalidated by a court order of competent jurisdiction.

HHS also proposes to retain the discretion to publish a summary of the claims that have gone through the 340B ADR process on the HRSA website, including the names of the parties and the nature of the 340B ADR Panel's findings. HHS anticipates issuing future sub-regulatory guidance on this issue.

To view Foley Hoag's Medicaid and the Law blog please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
12 Oct 2018, Other, Boston, United States

The New England Electricity Restructuring Roundtable has been meeting bimonthly since 1995 to discuss current topics related to important changes in the electric power industry in Massachusetts and throughout New England.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions