HHS’ Long-Awaited 340B Alternative Dispute Resolution Rule Is Finalized

In a move long anticipated by 340B Program participants, the Department of Health and Human Services (HHS) recently published its finalized 340B Administrative Dispute Resolution (ADR) rule, establishing formal processes for resolving certain types of disputes between 340B covered entities and drug manufacturers. 340B Program observers are cautiously optimistic that the ADR process will serve as a less time and resource-intensive alternative to formal litigation, while also imbuing the Health Resources and Services Administration (HRSA) Office of Pharmacy Affairs (OPA) with at least some authority to enforce its interpretation of the 340B statute. The final rule is substantially similar (although not identical) to the proposed version released back in 2022. At a high level, the ADR process can be used by (1) covered entities alleging that a manufacturer may have overcharged for covered outpatient drugs, or (2) manufacturers of 340B drugs alleging, after a manufacturer-conducted audit of a covered entity, that a covered entity may have violated the prohibitions against duplicate discounts or diversion.

Perhaps most notably, the finalized ADR process will permit covered entities to directly challenge ongoing manufacturer policies restricting 340B pricing availability via contract pharmacy arrangements, a move simultaneously celebrated by covered entities and heavily criticized by manufacturers. In a significant departure from the proposed rule, the final ADR rule now permits the consideration of disputes even if the disputed issue is currently being litigated in a federal court. Additionally, covered entities may use the ADR process to resolve allegations that a manufacturer is overcharging for drugs in the context of limiting 340B pricing availability to that covered entity. Read together, these provisions effectively open the door for covered entities to bring challenges to manufacturer contact pharmacy restrictions via the ADR process.

Other key aspects of the finalized ADR process include:

• Directing a panel of Health Resources and Services Administration Office of Pharmacy Affairs subject matter experts (referred to as the “ADR Panel”) to review the covered entity or manufacturer dispute and issue a decision;
• Requiring disputes to be filed within three (3) years of the date of the alleged violation, and requiring the disputing party to support such filings with supporting documentation and proof of prior good faith efforts to resolve the issues with the opposing party;
• Setting forth additional timeframes for document submission and exchange between the parties;
• Setting timeframes that the ADR Panel must follow, including providing a decision within one (1) year from the date of receiving a complete claim;
• Allowing Medicaid duplicate discount disputes tied to Medicaid FFS and Medicaid MCO claims to be considered by the ADR Panel; and
• Permitting a party to initiate a reconsideration request after the ADR Panel has issued its decision.

The rule takes effect sixty (60) days from the date of publishing, making it effective on June 18, 2024.

Covered entities seeking to submit a dispute should carefully review the final rule, paying close attention the filing and timeframe requirements contained in the rule.

If you or your entity is interested in submitting a dispute to the ADR Panel once this final rule takes effect or would like to further discuss the impact of this final rule, please reach out to your Quarles attorney or:

• Richard B. Davis: (414) 277-5844 / richard.davis@quarles.com
• Brenda Maloney Shafer: (602) 229-5774 / brenda.shafer@quarles.com
• Michael French: (312) 715-5261 / michael.french@quarles.com
• Madison Hartman: (317) 399-2883 / madison.hartman@quarles.com