On December 14, 2020, HRSA established a long overdue Administrative Dispute Resolution (ADR) process that allows covered entities and drug manufacturers to bring claims against each other related to the 340B Drug Pricing Program (340B Program). The ADR process will allow covered entities and drug manufacturers to formally request agency review of alleged 340B violations.
The ADR process will begin amid contentious disputes about the scope and future of the 340B Program. In recent months, multiple drug manufacturers have taken unilateral action to curtail the availability of 340B pricing dispensed through a covered entity’s contracted pharmacies. HRSA, the agency responsible for overseeing the 340B Program, has not yet issued a final opinion on those actions. Members of Congress have urged HRSA to take enforcement action against the manufacturers for violations of the Public Health Services Act. Covered entities and their trade associations have sued HRSA to compel the agency to take action. (See Ryan White Clinics for 340B Access et al v. Azar et al, 1:20cv2906 (U.S. District Court for the District of Columbia); National Association of Community Health Centers v. Azar et al, 1:20cv3032 (U.S. District Court for the District of Columbia).) The courts hearing these suits will now need to decide how the finalization of the ADR process impacts the litigation.
While there are open questions about what, if any, judicial guidance or Congressional action will be forthcoming, the ADR process creates a new opportunity for covered entities and drug manufacturers to formally request agency review of alleged 340B Program violations. Covered entities may submit claims alleging overcharges for drugs eligible for 340B pricing, including disputes about the calculation of a manufacturer’s 340B ceiling price. Drug manufacturers may submit claims against covered entities for alleged violations of 340B Program requirements, such as the diversion of 340B drugs or the prohibition on duplicate discounts.
Claims may be submitted by sending a written petition for relief to HRSA and to the General Counsel or senior official of the opposing party at its principal place of business. Claims must be submitted within 3 years of the date the alleged violation occurred, and must seek damages or equitable relief (such as an injunction) with a 12-month value of more than $25,000. The written petition must meet the standards in the Federal Rules of Civil Procedure and include documentation sufficient to support its claim.
Covered entities may also jointly file claims against a single drug manufacturer or may utilize trade associations to file claims on behalf of members of the association. This flexibility may make it easier for covered entities to work together to challenge a drug manufacturer’s actions that impact multiple covered entities. Consolidation of claims may be requested by covered entities or drug manufacturers.
ADR claims will be heard by a panel selected from a new, six-member ADR Board comprised of two members from the Health Resources and Services Administration (HRSA), two members from the Centers for Medicare and Medicaid Services (CMS), and two members from the Health and Human Services Office of General Counsel (OGC). For each accepted claim, the HRSA Administrator will select a three-member Panel from the ADR Board, including one member from each of the represented HHS divisions. In addition, a non-voting representative of HRSA’s Office of Pharmacy Affairs (OPA), which has primary oversight over the 340B Program, will assist the Panel.
The Panel is granted broad discretion to determine the proper course for the ADR proceeding, which may include opportunities for evidentiary hearings, discovery, or to supplement written filings with oral advocacy. The Panel may request additional information or evidence and consult with OPA or the parties regarding their claims.
Importantly, the decisions of a majority of the Panel will be precedential and binding on the parties unless invalidated by a court of competent jurisdiction. The decisions will constitute the final agency decision, meaning no further agency review will be available, allowing the parties to appeal for review of the decision to a federal court.
The new ADR process represents the start of a new era for the 340B Program, as the decisions of the ADR Panel will create precedents likely to define and reshape the program. Covered entities, their trade associations, and drug manufacturers should carefully watch the filings with the ADR Panel and begin preparing for combat in this new arena.