HHS finalizes rule to set up dispute resolution process for 340B program

Drugs and money
A new rule finalized by the Department of Health and Human Services could weigh in on several drugmakers' moves to restrict sales of drugs discounted under the 340B program to contract pharmacies. (Getty/LIgorko)

The Department of Health and Human Services (HHS) finalized a long-awaited rule that sets up a process to resolve disputes surrounding the controversial 340B drug discount program.

The final rule, released Thursday by the Health Resources and Services Administration, which oversees 340B, comes as several drugmakers have restricted access to drugs discounted under the program. The rule could weigh in on the center of the feud: contract pharmacies.

The Affordable Care Act called on HHS to install the administrative dispute resolution process for 340B when it was passed in 2010. However, HHS never finalized the regulation but did propose it back in 2016. That proposed rule was pulled in 2017.

The process will resolve claims by safety net hospitals and other entities in the 340B program that a drug company overcharged them. It also allows drug companies to appeal if a covered entity violated a part of the program such as getting duplicative discounts.

The desire to avoid duplicate discounts is behind a growing movement among several drugmakers to restrict sales of 340B drugs to contract pharmacies, which are third-party entities that dispense drugs for the 340B entities.

RELATED: Bipartisan group of Senate, House lawmakers press HHS to quash drug companies' 340B moves

Most 340B covered entities, which include safety net hospitals and community health centers, employ a contract pharmacy, but drugmakers charge that the discounts don’t trickle down to benefit patients. Drug companies agree to offer discounts under the program in exchange for participation in Medicaid and Medicare.

Eli Lilly and AstraZeneca announced earlier this year they will restrict sales of 340B discounted drugs to contract pharmacies.

Novartis announced in October it would not provide drugs discounted under 340B to contract pharmacies more than 40 miles away from the covered entity. Merck and Sanofi have asked 340B contract pharmacies to provide claims data to ensure they are not providing duplicate discounts for both 340B and Medicaid.

Provider groups have charged the moves are a clear violation of the federal 340B statute and that the discounts are vital to safety net providers operating on thin margins and struggling to combat the COVID-19 pandemic.

A group of community health centers sued HHS earlier this year to compel the agency to finalize the dispute resolution process.

The rule hints that the new dispute process could weigh in on the contract pharmacy feud.

The rule said that a panel could find it “necessary to resolve related issues such as whether someone is a ‘patient’ or whether a pharmacy is part of a ‘covered entity.’”

The rule adds that the dispute process should only be used as a last resort.

But 340B advocates worry that the rule isn't a timely solution to reverse the moves from the drug manufacturers. 

"These manufacturer actions are a clear violation of the 340B statute, and HHS has the authority—and the responsibility—to block them immediately and order recourse for affected hospitals," said Maureen Testoni, president and CEO of the advocacy group 340B Health, in a statement.

The final rule comes more than a week after the Centers for Medicare & Medicaid Services finalized a 22.4% cut to the program’s payments as part of a hospital payment rule.