HHS Proposes 340B Dispute Resolution Process

From its inception the 340B program has been the subject of disputes between drug manufacturers and their safety-net hospital customers.  On August 12 HHS proposed an administrative process for resolving those disputes.

Established in 1992, the 340B program requires manufacturers to enter into pharmaceutical pricing agreements (PPAs) with HHS if they participate in the Medicaid Drug Rebate Program.  PPAs limit the price manufacturers can charge hospitals for covered outpatient drugs.  The point of the program is to give hospitals a discount for drugs used to treat Medicaid patients—but not for non-Medicaid patients.

That’s where the disputes come in.  Hospitals complain that manufacturers don’t give them the required discount on some of their purchases.  Manufacturers complain that hospitals use the discounted drugs for non-Medicaid patients or get double discounts.

The Affordable Care Act (ACA) requires HHS to set up an administrative dispute resolution (ADR) program for these disputes.  Now, six years after enactment of the ACA, HHS has announced a proposed program.  The proposed 340B ADR Panel would consist of three members chosen for each dispute from a roster of federal employees (e.g., CMS or VA employees), plus one ex officio, nonvoting member from the Office of Pharmacy Affairs.

Parties would have three years to file a claim with the 340B ADR Panel.  After briefing and argument, the panel would issue a draft letter to the parties, who would have 20 days to respond.  The panel would then issue a final letter, which would also go to the Healthcare Systems Bureau (HSB) of the Health Resources & Services Administration (HRSA) for any applicable sanctions or enforcement actions.  That letter would be final and binding unless invalidated by a court.

The text of the proposed process can be found at https://federal register.gov/a/2016-18969.  Comments on the proposed process are due by October 11.

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