[Federal Register Volume 75, Number 181 (Monday, September 20, 2010)]
[Proposed Rules]
[Pages 57233-57235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-23460]

[[Page 57233]]



42 CFR Chapter I

340B Drug Pricing Program Administrative Dispute Resolution 

AGENCY: Health Resources and Services Administration, HHS.

ACTION: Advance notice of proposed rulemaking and request for comments.


SUMMARY: Section 602 of Public Law 102-585, the ``Veterans Health Care 
Act of 1992'' enacted Section 340B of the Public Health Service Act 
(PHSA). Section 340B implements a drug pricing program by which 
manufacturers who sell covered outpatient drugs to particular covered 
entities listed in the statute must agree to charge a price that will 
not exceed the amount determined under a statutory formula. Section 
7102 of the Patient Protection and Affordable Care Act (Affordable Care 
Act) (Pub. L. 111-148) requires the Secretary of Health and Human 
Services (HHS) to promulgate regulations to establish and implement an 
administrative dispute resolution process for the 340B Drug Pricing 
Program (340B Program). (PHSA Section 340B(a)(5)(D) advises the 
Secretary on the sanctions available should a covered entity be found 
to be in violation of (a)(5)(A) or (a)(5)(B). The ANPRM does not 
currently refer to HRSA's plan on how it will resolve any decision made 
through the new Administrative Dispute Resolution Process and the 
sanctions in current law). These regulations will address a number of 
issues that have the potential to impact stakeholders. Accordingly, the 
Health Resources and Services Administration is issuing an advance 
notice of proposed rulemaking (ANPRM) to solicit public comment on 
multiple issues regarding implementation of these regulations. These 
comments will be used, as appropriate, to help draft a proposed rule 
that will be published in the Federal Register for public comments.

DATES: Submit electronic or written comments by November 19, 2010.

ADDRESSES: Comments in response to this ANPRM should be marked 
``Comments on Administrative Dispute Resolution Process'' and sent to 
Ms. Dorcas Ann Taylor, Public Health Analyst, Office of Pharmacy 
Affairs (OPA), Health Systems Bureau (HSB), Health Resources and 
Services Administration (HRSA), 5600 Fishers Lane, Parklawn Building, 
Room 10C-03, Rockville, MD 20857. Comments may also be e-mailed to: 
[email protected]

FOR FURTHER INFORMATION CONTACT: CDR Krista Pedley, Director, Office of 
Pharmacy Affairs (OPA), Healthcare Services Bureau (HSB), Health 
Resources Services Administration (HRSA), 5600 Fishers Lane, Parklawn 
Building, Room 10C-03, Rockville, MD 20857.


I. Background

    The Affordable Care Act introduces a number of changes to the 340B 
Program. The Affordable Care Act creates several new categories of 
eligibility for participation and provides a number of tools for 
improvement in compliance by manufacturers and covered entities. Among 
the tools is the creation of an administrative dispute resolution 
process for the resolution of claims by covered entities and 
manufacturers. Section 7102(a) of the Affordable Care Act requires the 
HHS Secretary to establish and implement an administrative process 
through regulations for resolution of (1) claims by covered entities 
that they have been overcharged for drugs purchased through the 340B 
Program; and (2) claims by manufacturers, after the conduct of audit as 
authorized by section 340B(a)(5)(C) of the PHSA, of violations of the 
prohibition of duplicate discounts or rebates and/or the prohibition on 
resale of drugs purchased under the 340B Program. As amended by the 
Affordable Care Act, section 340B(d)(3)(B) of the PHSA requires the 
Secretary to promulgate regulations that shall:
    (i) Designate or establish a decision making official or decision-
making body within the Department of Health and Human Services to be 
responsible for reviewing and finally resolving claims by covered 
entities that they have been charged prices for covered outpatient 
drugs in excess of the ceiling price described in subsection (a)(1), 
and claims by manufacturers that violations of subsection (a)(5)(A) or 
(a)(5)(B) have occurred;
    (ii) Establish such deadlines and procedures as may be necessary to 
ensure that claims shall be resolved fairly, efficiently, and 
    (iii) Establish procedures by which a covered entity may discover 
and obtain such information and documents from manufacturers and third 
parties as may be relevant to demonstrate the merits of a claim that 
charges for a manufacturer's product have exceeded the applicable 
ceiling price under this section, and may submit such documents and 
information to the administrative official or body responsible for 
adjudicating such claim;
    (iv) Require that a manufacturer conduct an audit of a covered 
entity pursuant to subsection (a)(5)(C) as a prerequisite to initiating 
administrative dispute resolution proceedings against a covered entity;
    (v) Permit the official or body designated under clause (i), at the 
request of a manufacturer or manufacturers, to consolidate claims 
brought by more than one manufacturer against the same covered entity 
where, in the judgment of such official or body, consolidation is 
appropriate and consistent with the goals of fairness and economy of 
resources; and
    (vi) Include provisions and procedures to permit multiple covered 
entities to jointly assert claims of overcharges by the same 
manufacturer for the same drug or drugs in one administrative 
proceeding, and permit such claims to be asserted on behalf of covered 
entities by associations or organizations representing the interests of 
such covered entities and of which the covered entities are members.
    The 340B Program creates relationships between not only drug 
manufacturers and covered entities, but also involves, among others, 
wholesalers, group purchasing organizations, pharmacies, and state 
Medicaid agencies. Any change to the 340B Program has the potential to 
alter these relationships. The regulations mandated by the Affordable 
Care Act will be the first regulations for the 340B Program. Prior to 
enactment of the Affordable Care Act, the Health Resources and Services 
Administration (HRSA) did not have a required administrative dispute 
resolution process. The creation of a required administrative dispute 
resolution process presents a number of issues in the context of the 
340B Program that have the potential to affect a large number of 
interrelated entities. Given these issues, HRSA is issuing this ANPRM 
to gather comments prior to committing to a particular regulatory path.
    The use of audits and dispute resolution in the 340B program has 
limited precedent. On December 12, 1996, the Secretary of HHS published 
the Manufacturer Audit Guidelines and Dispute Resolution Process for 
the 340B Program (61 FR 65406). That notice provided auditing 
guidelines to permit the manufacturer of a covered outpatient drug to 
audit the records of a covered entity directly pertaining to the 
covered entity's compliance with the requirements of section 
340B(a)(5)(A) and (B) of the PHSA as to drugs purchased from the 
manufacturer. Section 340B(a)(5)(C) of the PHSA states

[[Page 57234]]

the Secretary shall establish guidelines relating to the number, scope 
and duration of the audits and these audits must be conducted in 
accordance with guidelines established by the Secretary. Further, the 
notice provided guidelines for disputes that may arise between covered 
entities and participating manufacturers regarding implementation of 
the provisions of section 340B. To resolve these disputes in an 
expeditious manner, HRSA developed a voluntary dispute resolution 

II. Request for Comments

    The purpose of this document is to obtain information and public 
comment on how to efficiently and effectively implement the 
requirements to create an administrative dispute resolution process for 
the 340B Program authorized by Section 7102 of the Affordable Care Act. 
Although HRSA has identified several issues and areas where HRSA 
believes comment would be particularly helpful, comments may be 
submitted on any issues directly relevant to the implementation of the 
specified requirements.
    Areas for which HRSA is expressly seeking comment include: (1) 
Administrative Procedures; (2) Existing Models; (3) Threshold 
Requirements; (4) Hearings; (5) Decision-making Official or Body; (6) 
Appropriate Appeals Procedures; (7) Deadlines; (8) Discovery 
Procedures; (9) Manufacturer Audits; (10) Consolidation of Manufacturer 
Claims; (11) Covered Entity Consolidation of Claims; (12) Claims by 
Organizations Representing Covered Entities; and (13) Integration of 
Dispute Resolutions with Other Provisions in the Affordable Care Act.

(1) Administrative Procedures

    HRSA is seeking general comments regarding the administrative 
procedures associated with alternative dispute resolution. Systems must 
be put in place that address how and when to initiate the dispute 
resolution process, what level of evidence must be presented, who can 
be a party to a dispute, how dispute resolution requests will be 
processed, timelines, what type of notice is required for proposed 
determinations, and what involvement and notice should be given third 
parties and the public.

(2) Existing Models

    HRSA is seeking comments regarding what aspects of other existing 
models for administrative dispute resolution can be adapted to the 340B 
Program. HRSA is aware of several examples of administrative dispute 
resolution both within and outside of the Department. Certain aspects 
of these other processes can provide useful insight as HRSA implements 
the 340B Program administrative dispute resolution authority.
    One of the most useful existing models is the current dispute 
resolution guidelines for the 340B Program outlined at 61 FR 65406 
(Dec. 12, 1996) (can also be found on the OPA Web site at ftp://ftp.hrsa.gov/bphc/pdf/opa/FR12121996.htm). The current dispute 
resolution guidelines contain a voluntary process for the resolution of 
disputes between manufacturers and covered entities concerning 
compliance with the 340B Program. The current guidelines outline the 
types of disputes covered; steps the parties must take before bringing 
a dispute; the review process; and the assessment of penalties. While 
the current process has been underutilized (because it was a voluntary 
process), it does address many issues specific to creating a dispute 
resolution process for the 340B Program. HRSA would be interested in 
receiving comments about what aspects of the current process could be 
adapted for the new administrative dispute resolution process.

(3) Threshold Requirements

    HRSA is contemplating using a standard for bringing claims 
analogous to that utilized under the current informal dispute 
resolution guidelines (61 FR 65406). These guidelines state: ``The 
party requesting the review may not rely only upon allegations but is 
required to set forth specific facts showing that there is a genuine 
and substantial issue of material fact in dispute that requires a 
review. The request for review shall include a clear description of the 
dispute, shall identify all the issues in the dispute, and shall 
contain a full statement of the party's position with respect to such 
issue(s) and the pertinent facts and reasons in support of the party's 
position. In addition to the required statement, the party shall 
provide copies of any documents supporting its claim and evidence that 
a good faith effort was made to resolve the dispute.''
    Generally, HRSA would expect that the party initiating the dispute 
to make a showing that it has more than mere allegations and to also 
demonstrate that it has made a good faith effort to settle the dispute 
before involving the Department. In the case of covered entities, the 
dispute must involve a claim of manufacturer overcharge. HRSA may 
consider claims of overcharge to include direct and indirect evidence 
of a violation, such as cases where refusal to sell at the 340B price 
has led to the purchase of the covered outpatient drug outside of the 
340B Program. In the case of manufacturers, the dispute must involve a 
claim of a violation of subsections 340B(a)(5)(A) or (a)(5)(B) of the 
PHSA. Manufacturers' claims can only be brought after the conduct of 
audits as authorized by subsection (a)(5)(C). Therefore, HRSA would 
expect that manufacturers would present direct evidence of a covered 
entity's alleged violations of either 340B(a)(5)(A) or (a)(5)(B).
    HRSA is seeking comments on the feasibility of applying this 
construct to the new statutorily created administrative dispute 
resolution process.

(4) Hearings

    HRSA expects that the alternative dispute resolution process would 
involve some type of hearing. The hearing could be either conducted 
through an exchange of documents, in-person, or by web access. HRSA is 
inviting comments on the manner in which such a hearing should be 
structured. HRSA is considering a large number of issues involved in 
creating a fair and efficient hearing process, including, but not 
limited to: Ex parte contacts; rehearing conferences; subpoenas; form, 
filing and service of papers; motions; sanctions; burden of proof; 
evidence; and post-hearing briefs.

(5) Decision-making Official or Body

    HRSA expects to designate or establish a decision-making official 
or body from within the Department. HRSA welcomes comments as to 
whether the same or different decision-makers should decide the 
sufficiency to state a claim and to make a final determination on a 
claim. HRSA also invites comments on whether the decision-making 
official or body should be within HRSA, within OPA, or come from other 
parts of the Department.

(6) Appropriate Appeals Procedures

    HRSA expects to establish an appeals process applicable to a final 
administrative determination rendered by the decision-making body or 
official. In addition to comments regarding existing models and the 
applicability of the Administrative Procedures Act, HRSA is requesting 
public comment on the procedures related to this new 340B dispute 
resolution process.

(7) Deadlines

    HRSA invites comments on whether claims should be time barred and 
the standards applicable for maximum

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timeframes to bring a claim. HRSA invites comments on deadlines for 
responses to submissions by the participants, the government and 
deciding body or official and the consequences of failure to meet a 
particular deadline.

(8) Discovery Procedures

    HRSA is requesting input on the process used for discovery of 
information from participating manufacturers and covered entities. HRSA 
will need to determine the scope of documents (information, reports, 
answers, records, accounts, papers, documentary evidence, etc.) and 
interrogatories eligible for discovery. HRSA will also need to 
determine under what circumstances (irrelevancy, privileged 
information, unduly burdensome, etc.) protective orders should be 
utilized. Procedures to ensure the confidentiality of information 
discovered will also need to be developed. Finally, a determination 
will need to be made as to the power to compel discovery from third 
parties given that OPA has limited direct regulatory authority through 
the 340B Program over entities and individuals outside of 340B 
participating drug manufacturers and covered entities.

(9) Manufacturer Audits

    The administrative dispute resolution requirements of the 
Affordable Care Act set forth that manufacturers must conduct an audit 
of a covered entity prior to bringing a claim. HRSA currently has 
guidelines regarding the requirements for initiating an audit (61 FR 
65406). However, over the history of the 340B Program manufacturers 
have rarely utilized the process in the guidelines to conduct an audit. 
HRSA invites comments on whether it is appropriate or necessary to 
modify the guidelines concerning audits prior to implementing the 
administrative dispute resolution regulation or whether the current 
final guidelines are sufficient.

(10) Consolidation of Manufacturer Claims

    HRSA is required to create a process for consideration of whether 
requests by a manufacturer or manufacturers to consolidate claims by 
more than one manufacturer against the same covered entity are 
``appropriate and consistent with the goals of fairness and economy of 
resources.'' HRSA seeks comments on how to create this process, the 
evidence to be considered, timing of requests to join in a consolidated 
claim, and the interests to be weighed.

(11) Covered Entity Consolidation of Claims

    Similar to the consolidation of manufacturer claims, HRSA is 
required to create a process for consideration of requests for 
consolidation of particular covered entity claims. HRSA invites comment 
on whether the standard for manufacturers and covered entities should 
differ and whether there should be a presumption of allowing such 
consolidation of claims absent a finding that consolidation would be 
inconsistent with the goals of fairness and economy of resources.

(12) Claims by Organizations Representing Covered Entities

    The legislation provides for claims by organizations representing 
entities. HRSA is interested in input on when a third party can bring 
claims on behalf of member covered entities in the context of a binding 
formal dispute resolution process and how to ensure that the group in 
fact represents the interests of the covered entities. In order to 
ensure that such organizations actually represent the interests of 
covered entities, HRSA is contemplating that prior to seeking to file a 
claim on behalf of covered entities, such groups must have a signed 
agreement with the covered entities. The agreement would indicate that 
the organization is authorized to bring a claim on behalf of the 
covered entities; the precise nature of the claim; that the covered 
entities agree to participate in good faith and abide by discovery 
procedures; and that the covered entities agree to be bound by any 
decision of the decision-making official or body. HRSA contemplates a 
decision-making official or body having the authority to not allow 
claims that would result in unfairness or a substantial waste of 

(13) Integration of Dispute Resolutions With Other Provisions in the 
Affordable Care Act

    In addition to the compliance tools already available to HRSA, such 
as audits and alternative dispute resolution, the Affordable Care Act 
provides HRSA with many additional tools to monitor compliance. These 
additional tools include establishing procedures to verify the accuracy 
of ceiling prices; creating processes for manufacturers to refund 
overcharges; selective auditing of manufacturers; annual 
recertification of covered entities; and providing access to ceiling 
price information. The use of the new administrative dispute resolution 
authority must be used in conjunction with these other compliance tools 
to ensure its most effective use. HRSA invites comments concerning the 
relationship between administrative dispute resolution and other 
oversight mechanisms.
    While these thirteen areas were identified for comment, we welcome 
comments on any other issues that stakeholders believe are key to 
implementing an effective alternate dispute resolution process.

    Dated: September 14, 2010.
Mary K. Wakefield,
[FR Doc. 2010-23460 Filed 9-17-10; 8:45 am]