HHS streamlines 340B dispute process to hospitals' applause, pharma's disappointment

The Biden administration has put the finishing touches on the steps entities covered under the 340B Drug Discount Program must take to resolve disputes with drug manufacturers.

The final rule, issued by the Department of Health and Human Services (HHS) and the Health Resources and Services Administration (HRSA) this week, landed to the delight of hospital groups and the frustration of the pharmaceutical industry.

A revision to the “policy and operational challenges” of the existing 340B Administrative Dispute Resolution (ADR) process outlined back in 2020, HHS said its new approach is more streamlined and accessible to 340B entities of all sizes.

“HHS believes that for the ADR process to be workable, it needs to be accessible,” the department wrote in the final rule (PDF). “HHS recognizes that many covered entities are small, community-based organizations with limited means. These covered entities may not have the financial resources to hire an attorney to navigate the complex … requirements and engage in a lengthy, trial-like process, as envisioned in the 2020 final rule.”

About a third of the country’s hospitals participate in the 340B drug discount program, which requires manufacturer discounts on most drugs administered in the outpatient setting to help safety-net providers.

The 340B ADR process aims to resolve cases in which covered entities claim they have been overcharged for outpatient drugs covered under the discount program. On the other side, the process is also used to resolve manufacturers’ claims that a covered entity violated the prohibition on diversion or duplicate discounts.

HHS’ adjustments in the final rule will make the ADR process more accessible by moving away from federal evidence and procedural rules that made the disputes “trial-like” and inaccessible, the department wrote.

Other changes require that members of the 340B ADR panel that weighs disputes be subject matter experts who were not involved in agency actions related to specific claims and that a reconsideration process be established for when either party is dissatisfied with a panel’s decision.

Further, HHS is now requiring “good faith efforts” between 340B entities and drugmakers to settle disputes before kicking off the ADR process, a one-year turnaround for decisions and more specification of what types of disputes are appropriate from the ADR process.

In a statement released Thursday afternoon, Maureen Testoni, president and CEO of 340B Health, an association representing more than 1,500 hospitals participating in the 340B program, said the group “is pleased” that the administration was in concordance with the feedback it submitted on the preceding proposed rule.

“We are particularly encouraged by the final rule clarifying that a covered entity’s ADR claims can include accusations that a drug company has limited the ability to purchase drugs at or below the 340B ceiling price and removing a proposed amendment to block ADR consideration of a claim similar to an issue pending in federal court,” she said. “HRSA’s removal of potential conflicts of interest and unnecessary legal barriers are additional positive steps that will simplify and streamline the dispute resolution process for the benefit of all participants.”

Testoni also called for the administration to “reconsider” 340B Health’s other recommendations that Medicaid managed care claims be excluded from ADR review, that the ADR panels publish their full findings and that the decision timeline be shortened to 120 days.

Chad Golder, general counsel for the American Hospital Association (AHA), similarly praised the final rule’s updates.

“The AHA is particularly pleased that the final rule makes clear that an overcharge claim includes instances where a drug company has limited a hospital’s ability to purchase 340B drugs at or below the 340B ceiling price,” he said in a statement. “This rule will help hold drug companies accountable for their rampant abuses of the 340B program and the patients it serves.”

Golder’s comments refer to the decisions of several individual drug manufacturers to implement restrictions prohibiting covered entities from contracting with third-party pharmacies. Those restrictions have led to several rulings on the policies split between the companies and other stakeholders.

Drugmakers took a starkly different tone. Nicole Longo, deputy vice president of public affairs at pharmaceutical trade group PhRMA, said in a statement that the Biden administration had ignored the program “integrity” issues it raised with the proposed rule and instead “rushed to institute a revised process that panders to 340B hospitals.” PhRMA had previously sued (PDF) HHS over the implementation of the 2020 final rule.

“Having meaningful integrity and accountability measures in place is crucial to ensuring the 340B program works properly, including lowering costs for low-income patients, but this flawed rule does the opposite and underscores the critical need for Congress to act on comprehensive changes to the 340B program,” Longo said.