[Federal Register Volume 87, Number 229 (Wednesday, November 30, 2022)]
[Proposed Rules]
[Pages 73516-73527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25752]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

42 CFR Part 10

[Docket No. 2021-0004]
RIN 0906-AB28


340B Drug Pricing Program; Administrative Dispute Resolution

AGENCY: Health Resources and Services Administration (HRSA), Department 
of Health and Human Services (HHS).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Health Resources and Services Administration implements 
section 340B of the Public Health Service (PHS) Act, which is referred 
to as the ``340B Drug Pricing Program'' or the ``340B Program.'' This 
notice of proposed rulemaking (NPRM) proposes to revise the current 
340B administrative dispute resolution (ADR) final rule (Dec. 14, 2020) 
with a new process and solicits comment on the proposal.

DATES: Written comments and related material to this proposed rule must 
be received on or before January 30, 2023.

ADDRESSES: You may submit written comments electronically by the 
following method: Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions on the website for 
submitting comments. Include the HHS Docket No. ``HRSA-2021-000X'' in 
your comments. All comments received will be posted without change to 
https://www.regulations.gov. Please do not include any personally 
identifiable or confidential business information you do not want 
publicly disclosed.

FOR FURTHER INFORMATION CONTACT: Michelle Herzog, Deputy Director, 
Office of Pharmacy Affairs, HRSA, 5600 Fishers Lane, Mail Stop 08W12, 
Rockville, MD 20857; email: [email protected]; telephone: 301-594-4353.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

    Section 340B of the PHS Act entitled ``Limitation on Prices of 
Drugs Purchased by Covered Entities,'' was created under section 602 of 
Public Law 102-585, the ``Veterans Health Care Act of 1992,'' and 
codified at 42 U.S.C. 256b. The 340B Program is intended to enable 
covered entities ``to stretch scarce Federal resources as far as 
possible, reaching more eligible patients and providing more 
comprehensive services.'' H.R. Rep. No. 102-384(II), at 12 (1992). The 
Secretary of Health and Human Services (Secretary) delegated the 
authority to establish and administer the 340B Program to the HRSA 
Administrator. The Office of Pharmacy Affairs (OPA), within HRSA, 
oversees the 340B Program. Eligible covered entity types are defined in 
Section 340B(a)(4) of the PHS Act, as amended. Section 340B(a)(1) of 
the PHS Act instructs HHS to enter into pharmaceutical pricing 
agreements (PPAs) with manufacturers of covered outpatient drugs. Under 
section 1927(a)(5)(A) of the Social Security Act, a manufacturer must 
enter into an agreement with the Secretary that complies with section 
340B of the PHS Act ``[i]n order for payment to be available under 
section 1903(a) or under part B of title XVIII of the Social Security 
Act for covered outpatient drugs of a manufacturer.'' When a drug 
manufacturer signs a PPA, it agrees that the prices charged for covered 
outpatient drugs to covered entities will not exceed statutorily 
defined 340B ceiling prices. Those prices are based on quarterly 
pricing reports that manufacturers must provide to the Secretary 
through the Centers for Medicare & Medicaid Services (CMS).
    Section 7102 of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by section 2302 of the Health Care and 
Education Reconciliation Act (Pub. L. 111-152), jointly referred to as 
the ``Affordable Care Act,'' added section 340B(d)(3) to the PHS Act, 
which requires the Secretary to promulgate regulations establishing and 
implementing a binding ADR process for certain disputes arising under 
the 340B Program. Under the 340B statute, the purpose of the ADR 
process is to resolve (1) claims by covered entities that they have 
been overcharged for covered outpatient drugs by manufacturers and (2) 
claims by manufacturers, after a manufacturer has conducted an audit as 
authorized by section 340B(a)(5)(C) of the PHS Act, that a covered 
entity has violated the prohibition on diversion or duplicate 
discounts.
    The ADR process is an administrative process designed to assist 
covered entities and manufacturers in resolving disputes regarding 
overcharging, duplicate discounts, or diversion, as outlined in 
statute. The 340B ADR process should be reserved for the above-stated 
statutory areas where the 340B ADR Panel can apply 340B law and policy 
to the case-specific factual circumstances at issue in a dispute.
    Historically, HHS has encouraged manufacturers and covered entities 
to work with each other to attempt to resolve disputes in good faith. 
HHS recognizes that most disputes that occur between individual parties 
are resolved in a timely manner without needing HRSA's involvement. The 
ADR process is not intended to replace these good faith efforts and 
should be considered only when good faith efforts to resolve disputes 
have been exhausted and failed.
    In 2010, HHS issued an advanced notice of proposed rulemaking that 
requested comments on the development of an ADR process (75 FR 57233, 
Sept. 20, 2010). HHS received 14

[[Page 73517]]

comments. In 2016, HHS issued a notice of proposed rulemaking and 
received 30 non-duplicative comments. On December 14, 2020, HHS issued 
a final rule (85 FR 80632, Dec. 14, 2020, herein referred to as the 
2020 final rule), which was codified at 42 CFR 10.20 through 10.24. 
HRSA began implementing the 2020 final rule when it became effective on 
January 13, 2021, by accepting claims and establishing the ADR process. 
However, as outlined in the Justification for proposing to revise the 
ADR process established by the 2020 final rule section below, HRSA has 
encountered policy and operational challenges with implementation of 
the 2020 final rule. Therefore, HHS is proposing to revise the ADR 
process set forth in the 2020 final rule and is soliciting comment on 
this new approach. HHS proposes that the ADR process set forth in this 
NPRM, if finalized, would revise the ADR process established by the 
2020 final rule.
    HHS proposes that upon finalization of this NPRM, any claims that 
are in process and have been submitted pursuant to the 2020 final rule 
would be automatically transferred to the new process under this 
proposed rule. HHS is soliciting comment on this proposal, including 
whether extensions should be granted for pending claims, or whether 
pending claims should instead be resubmitted by the party that filed 
the claim to OPA.

II. Discussion of Proposed Rule

Justification for Proposing To Revise the ADR Process Established by 
the 2020 Final Rule

    HHS is soliciting comment on its proposal to revise the current ADR 
process by modifying the regulations issued under the 2020 final rule. 
The 2020 final rule poses policy and operational challenges that are 
described in this section. First, HHS is proposing that the 340B ADR 
process be revised to be more accessible, administratively feasible and 
timely. The 340B statute at section 340B(d)(3)(B)(ii) of the PHS Act, 
requires the establishment of deadlines and procedures that ensure that 
claims are resolved fairly, efficiently, and expeditiously. This ADR 
process should be a more expeditious and less formal process for 
parties to resolve disputes. An ADR process governed by the Federal 
Rules of Evidence (FRE) and Civil Procedure (FRCP), as envisioned in 
the 2020 final rule, does not advance these goals. For example, 
potential petitioners, many of whom are safety net providers in under-
resourced communities, may lack the resources to access ADR even if it 
would be in their best interest to do so. In addition, reliance on the 
FRE and FRCP could create unnecessary delays in what is intended to be 
a timely decision-making process. Finally, it is challenging to assign 
ADR Panel members with expertise in the FRE or FRCP. In implementing 
the 2020 final rule, HRSA received questions from stakeholders about 
the formality of the ADR process and the legal requirements under the 
FRCP for submitting a petition and accompanying documents, e.g., 
whether the filings submitted must conform to the FRCP, which added to 
the complexity and difficulty of the ADR process.
    HHS is proposing an ADR process that is designed to assist covered 
entities and manufacturers in resolving disputes regarding 
overcharging, duplicate discounts, or diversion, as set forth in the 
340B statute. HHS recognizes that many covered entities are small, 
community-based organizations with limited means and for the ADR 
process to be workable, it needs to be accessible. These covered 
entities may not have the financial resources to hire an attorney to 
navigate the complex FRCP and FRE requirements and engage in a lengthy, 
trial-like process, as envisioned in the 2020 final rule. The 340B 
statute does not compel such a process. The 2020 final rule also 
institutes a minimum threshold of $25,000 or where the equitable relief 
sought will likely have a value of more than $25,000 to be met before 
the petition could be filed. HHS believes that flexibility should be 
maintained with respect to the amount of damages and is therefore not 
proposing a minimum threshold for accessing the ADR process. However, 
covered entities and manufacturers should carefully evaluate whether 
the ADR process is appropriate for minor or de minimis claims given the 
time and resource investment required of the parties involved. After 
deliberate consideration of these issues, HHS is proposing a more 
accessible process where stakeholders have equal access to the ADR 
process and can easily understand and participate in it without 
expenditure of significant resources or legal expertise. HRSA is 
seeking comments on whether to retain the existing minimum threshold, 
eliminate the minimum threshold altogether, or set a new minimum 
threshold for submitting a claim to ensure a fair, efficient, and 
expeditious process.
    Second, the 2020 final rule states that the Secretary of HHS shall 
establish a 340B ADR Board that consists of at least six members 
appointed by the Secretary with equal numbers from HRSA, CMS, and the 
HHS Office of the General Counsel (OGC). It also requires the HRSA 
Administrator to select three members from the ADR Board to form a 340B 
ADR Panel and that each 340B ADR Panel include one ex-officio, non-
voting member (appointed by the Secretary) from OPA to assist the 340B 
ADR Panel. The 2020 final rule states that HRSA and CMS ADR Board 
members must have relevant expertise and experience in drug pricing or 
drug distribution and that the OGC ADR Board members must have 
expertise and experience in handling complex litigation.
    While the 340B Program is related to drug pricing and drug 
distribution, it is a distinct program that requires knowledge of the 
340B statute and specific 340B Program operations. Therefore, HHS is 
proposing that the 340B ADR Panel members should have specific 
knowledge of the authorizing statute and the operational processes of 
the 340B Program (e.g., registration and program integrity efforts). 
Consequently, HHS is proposing an ADR process and Panel in which 340B 
subject matter experts from OPA will resolve matters that proceed 
through the ADR process. Moreover, decisions by subject matter experts 
from OPA are less likely to conflict with current 340B policy. All 
members on the 340B ADR Panel will undergo an additional screening 
prior to reviewing a specific claim to ensure that the 340B ADR Panel 
member was not involved in previous agency actions (including previous 
340B ADR Panel decisions) concerning the specific issue of the ADR 
claim as it relates to the specific covered entity or manufacturer 
involved.
    Third, this NPRM proposes that prior to initiating the ADR process, 
parties must undertake good-faith efforts to resolve the disputed 
issues. Historically, HRSA has encouraged parties to work in good faith 
and covered entities and manufacturers have not had significant numbers 
of disputes due to the success of these good-faith-resolution efforts.
    Other 340B Program administrative improvements have narrowed the 
areas where parties had, in the past, disagreed over 340B Program 
issues. For example, HRSA released the pricing component of the 340B 
Office of Pharmacy Affairs Information System (340B OPAIS) in February 
2019, which, for the first time, provided 340B ceiling prices to 
authorized covered entity users. Implementation of that system has 
provided the necessary transparency to decrease disputes specific to 
the 340B ceiling price and its calculation. Outside of an issue 
involving some

[[Page 73518]]

manufacturers placing restrictions on certain covered entities use of 
contract pharmacies, OPA has only received three covered entity 
overcharge complaints since making 340B ceiling prices available to 
covered entities through 340B OPAIS.
    Of additional note, prior to the 2020 final rule, stakeholders were 
able to utilize an informal dispute resolution process to resolve 
disputes between covered entities and manufacturers (61 FR 65406, Dec. 
12, 1996) (``1996 guidelines''). There have been only four informal 
dispute resolution requests since the publication of the 1996 
guidelines. Of the four informal dispute resolution requests received, 
two were terminated by HRSA due to non-participation by one of the 
parties, another was dismissed due to lack of sufficient evidence, and 
the last was terminated because the parties disputed each other's 
attempts of good faith resolution. The relatively small number may also 
be attributed to the parties' successful attempts to resolve issues in 
good faith. With this very small number of past informal disputes, the 
increased transparency in 340B pricing data, and HRSA's encouragement 
that parties work to resolve issues in good faith, HHS is proposing an 
ADR process more closely aligned with the process that was established 
in the 1996 guidelines, and less trial-like and resource-intensive--for 
both the participants and HHS--than that established in the 2020 final 
rule.
    Also, in the time since Congress enacted the 340B ADR statutory 
provision, HRSA implemented its extensive audit program in 2012, which 
ensures that participating covered entities and manufacturers are able 
to demonstrate compliance with all 340B Program requirements. On 
average, HRSA conducts 200 covered entity audits each fiscal year 
including child/associate sites and contract pharmacies associated with 
the covered entities, and issues findings in three areas: eligibility, 
diversion, and duplicate discounts. These findings vary in terms of 
severity--from covered entities not having the correct information in 
the 340B OPAIS to the diversion of 340B drugs to individuals who are 
not patients of the covered entity. HRSA conducts approximately five 
manufacturer audits each year and makes findings related to 
manufacturers charging above the 340B statutorily required ceiling 
price and manufacturers not reporting the required 340B pricing data to 
HRSA. All audit results are posted in summary form on the 340B Program 
website.\1\ Since the establishment of HRSA audits of covered entities 
and manufacturers, HRSA has been able to identify 340B compliance 
concerns that would have previously been disputed. In addition to the 
extensive audit program, HRSA has also developed a comprehensive 
program integrity strategy to ensure compliance among all stakeholders 
participating in the 340B Program. These activities include quarterly 
checks of 340B Program eligibility, a self-disclosure and allegation 
process which involves communication between OPA and the stakeholders 
regarding the compliance issue, and spot checks of supporting 
eligibility documentation including contracts with state and local 
governments and contract pharmacy agreements.
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    \1\ See: https://www.hrsa.gov/opa/program-integrity/index.html.
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    Further, manufacturers are required to audit a covered entity prior 
to filing an ADR claim pursuant to section 340B(d)(3)(B)(iv) of the PHS 
Act. Over the last 3 years, two manufacturers have requested to audit 
covered entities. In both instances, HRSA approved the audits and 
received final audit reports from the manufacturers. The historical 
infrequency of manufacturer audit requests along with the requirement 
that manufacturers audit covered entities prior to filing an ADR claim 
suggests that the number of manufacturer ADR claims will be low, but 
HHS welcomes comment on its assessment.
    HRSA's impartial facilitation of good faith resolution efforts have 
allowed parties to take advantage of opportunities for open 
communication to better understand each other's positions and come to 
an agreement, without need for formal intervention by HRSA (e.g., 
through a HRSA targeted audit).
    Fourth, the ADR process should be reserved for those disputes set 
forth in the statutory ADR provision (overcharge, diversion, or 
duplicate discount). For example, a manufacturer that audited a covered 
entity may report its findings of alleged duplicate discounts 
identified by specific purchasing patterns over a period of time. The 
covered entity may disagree with the audit assessment of purchases. In 
this example, the matter would be best resolved through the ADR process 
as it involves an alleged duplicate discount violation.
    This NPRM aligns with the statutory provisions by outlining the 
specific types of claims that can be brought forth through the ADR 
process--claims for overcharge, diversion or duplicate discounts. HHS 
is soliciting comment on whether there may be appropriate claims 
limitations to ensure that ADR is limited to the specific statutory 
areas (diversion, duplicate discounts and overcharges).
    HHS is also proposing as part of the ADR process that if the ADR 
Panel determines that a specific issue in a claim is the same as or 
similar to an issue that is pending in Federal court, the ADR Panel 
will suspend review of the claim until such time the issue is no longer 
pending in Federal court. HHS welcomes comments on its proposal to 
suspend ADR review of claims that involve issues pending in Federal 
court.
    Fifth, HHS believes that there should be an opportunity for 
dissatisfied parties to seek reconsideration of the 340B ADR Panel's 
decision by HRSA. Several comments received on the 2016 NPRM requested 
an appeals process be made available to all parties. This NPRM proposes 
an appeals or reconsideration process option that would be made 
available to either party. Under the 2020 final rule and under this 
proposal, the Secretary has the inherent authority to review and 
reverse or alter the 340B ADR Panel's decision. Discretionary review by 
the Secretary would similarly apply to any reconsideration decision 
upon finalization of this NPRM. The final agency decision will be 
binding upon the parties involved in the dispute, unless invalidated by 
an order of a Federal court.
    Therefore, based on these concerns with the 2020 final rule, HHS is 
proposing in this NPRM to (1) establish a more accessible ADR process 
that is reflective of an administrative process rather than a trial-
like proceeding; (2) revise the structure of the 340B ADR Panel so that 
it is comprised of 340B Program subject-matter experts; (3) ensure that 
the parties have worked in good faith before proceeding through the ADR 
process; (4) more closely align the ADR process with the provisions set 
forth in the 340B statute (diversion, duplicate discounts, and 
overcharges); and (5) include a reconsideration process for parties 
dissatisfied with a 340B ADR Panel's decision. HHS is seeking comments 
on all components of the NPRM, and whether HHS should consider specific 
alternatives.

III. Summary of the Proposed Regulations

    The proposed revisions to 42 CFR part 10 are described according to 
the applicable section of the regulations. This NPRM proposes to add 
and revise the definitions of ``Administrative Dispute Resolution Panel 
(340B ADR Panel),'' ``Administrative Dispute

[[Page 73519]]

Resolution Process,'' ``claim,'' ``consolidated claim,'' ``joint 
claim,'' and ``Office of Pharmacy Affairs'' at Sec.  10.3 as set forth 
below. HHS proposes to revise the language in subpart C as set forth 
below.

Section 10.3 Definitions

    HHS is proposing to add and revise the following definitions: 
``Administrative Dispute Resolution Panel (340B ADR Panel),'' 
``Administrative Dispute Resolution Process,'' ``claim,'' 
``consolidated claim,'' ``joint claim,'' and ``Office of Pharmacy 
Affairs.''
Subpart C--Administrative Dispute Resolution

Section 10.20 340B Administrative Dispute Resolution Panel

(a) Members of the 340B ADR Panel
    As required by section 340B(d)(3)(B)(i) of the PHS Act, regulations 
promulgated by the Secretary shall designate or establish a decision-
making official or body within HHS to review and make a decision for 
claims filed by covered entities and manufacturers. HHS proposes to 
revise the composition of the decision-making body (referred to as the 
``340B ADR Panel'' or ``Panel'') that will review and resolve such 
claims.
    In this section, HHS is proposing that the Secretary appoint a 
roster of eligible individuals (Roster), consisting of OPA staff, to 
serve on the 340B ADR Panels. The Roster will include no less than 10 
staff from OPA. The OPA Director, or designee, shall select at least 
three members from the Roster to form a 340B ADR Panel to facilitate 
the review and resolution of an ADR claim. The OPA Director would have 
the authority to ensure that the Panel is operating in accordance with 
this proposed rule, including through the selection of the Panel 
members and the removal of Panel members for reasons including but not 
limited to conflicts of interest as described in paragraph (b) or 
pursuant to instructions from the Secretary in accordance with the 
Secretary's authority to remove 340B ADR Panel or Roster members at 
will.
    Subject matter experts in the 340B Program are best suited to 
resolve issues for covered entity and manufacturer claims, in a manner 
similar to the process that OPA uses when it conducts program 
compliance audits of covered entities and manufacturers. OPA staff are 
knowledgeable of 340B Program operations and oversight. They have years 
of subject matter expertise on the complex matters that may arise as 
part of dispute resolution. OPA also has experience in conducting 
audits and has a robust audit program of both covered entities and 
manufacturers that focuses on many of the challenges facing 
stakeholders in implementing 340B Program policy. OPA has already 
instituted processes to help parties resolve issues (many of which are 
resolved in good faith or are errors/misunderstandings). For example, 
the 340B Program has existing processes and reporting when a covered 
entity asserts a 340B price is unavailable. OPA has the capability and 
experience to initiate a dialogue between covered entities and 
manufacturers to resolve such matters and has done so successfully on 
many occasions. OPA's access to appropriate stakeholder contact 
information and awareness of 340B drug distribution plans have 
facilitated resolutions to certain drug product access concerns. These 
examples illustrate that OPA has the requisite expertise to administer 
and staff the 340B ADR Panels to ensure alignment, consistency, and 
transparency in ADR decisions, and understands the impact of these 
decisions on the 340B Program as a whole, and the 340B Program audits, 
as well as other program integrity initiatives.
    HHS is soliciting specific comments on the proposed size and 
composition of the 340B ADR Panel, including the proposal to maintain 
the 340B ADR Panel within OPA or whether staff from other components of 
HRSA or HHS more generally should serve as members of the Panel.
(b) Conflicts of Interest
    The ADR process assists covered entities and manufacturers in 
resolving disputes specifically related to overcharging, duplicate 
discounts, or diversion as outlined in section 340B(d)(3) of the PHS 
Act. Neither HHS, HRSA, nor OPA are parties to the ADR process, but 
rather help facilitate the process between covered entities and 
manufacturers. HHS is proposing that OPA staff serve on the 340B ADR 
Panel to review and make decisions on claims that are brought forth 
through the ADR process. HHS is also proposing that the OPA Director 
will ensure that each 340B ADR Panel member is screened prior to 
reviewing a claim and that there are no conflicts of interest between 
the parties involved in the dispute and the 340B ADR Panel member. As 
background, HRSA employs an ongoing, rigorous ethics clearance process 
for OPA staff to ensure that there are no conflicts of interest between 
staff and 340B stakeholders. OPA employees undergo an annual ethics 
clearance process in accordance with the U.S. Office of Government 
Ethics policies applicable to Federal employees. As part of this annual 
clearance, OPA staff are assessed in the following areas: if they have 
a (1) financial interest in a covered entity or a manufacturer 
participating in the 340B Program; (2) family or close relation who is 
either employed by or otherwise involved with a covered entity or a 
manufacturer participating in the 340B Program; (3) current or former 
business or employment relationship to a covered entity or manufacturer 
participating in the Program. If a potential conflict arises, OPA staff 
must immediately inform their supervisors and disclose any potential 
issues. In this case, depending on the circumstances, the staff member 
may be removed from the ADR Panel. However, to ensure fairness and 
objectivity in the ADR process, this NPRM proposes that each OPA 340B 
ADR Panel member also undergo additional screening prior to reviewing a 
specific claim and will not be allowed to review the claim if any 
conflicts of interest exist. In addition, this NPRM proposes that 
dedicated OPA staff members will have specific ADR duties as part of 
their job functions, including being part of the 340B ADR Panel that 
makes decisions on an ADR claim.
    The staff with ADR duties in their job functions will also be 
screened prior to being assigned to a 340B ADR Panel to ensure that 
they have not been involved in prior 340B Program oversight work 
related to the parties involved, including previous 340B ADR Panel 
decisions concerning the ADR claim as it relates to the specific 
covered entity or manufacturer involved. For example, if an OPA staff 
member were involved in reviewing or approving an audit work plan for a 
specific manufacturer that is part of an ADR claim, then that staff 
member would not serve on that 340B ADR Panel. This would not, however, 
preclude an OPA staff member from serving on the 340B ADR Panel when 
the covered entities or manufacturers were parties in a prior ADR 
decision. HHS solicits comments on this aspect of the proposed process 
and will consider other proposals to ensure that the 340B ADR Panel 
members are fair and objective.
    In addition, HHS proposes that OPA staff members serving on a 340B 
ADR Panel may be removed by the OPA Director for reasons including but 
not limited to conflicts of interest. For example, if it is determined 
prior to or during the course of a Panel member's review of a claim 
that there is a conflict of interest, as described in paragraph (b), 
with respect to that claim, the Panel member would be removed from the

[[Page 73520]]

Panel and replaced by another OPA staff member from the Roster of 
eligible individuals.
(c) Secretarial Removal Power
    The Secretary retains the authority to remove an individual from 
the Roster of persons appointed to sit on a 340B ADR Panel at any time, 
such that the individual may no longer serve on any 340B ADR Panel. In 
addition to the ability to remove an individual from the Roster, the 
Secretary may also remove a panelist from a particular 340B ADR Panel 
at any time.
(d) Duties of the 340B ADR Panel
    HHS is proposing that the role of the 340B ADR Panel is to 
independently review and apply 340B law and policy to the case-specific 
factual circumstances at issue in an overcharge, diversion, or 
duplicate discount dispute. In this proposed rule, once OPA determines 
a claim meets the requirements set forth in Sec.  10.21(b) and forwards 
the claim to the 340B ADR Panel, the Panel will review and evaluate all 
documentation submitted by the party initiating the claim. The 340B ADR 
Panel may request additional information or clarification from any 
party involved in the claim during the review and evaluation process. 
The 340B ADR Panel will also facilitate the review of covered entity 
requests for information and documents from manufacturers and third 
parties as outlined in Sec.  10.22 of this proposed rule. If the 340B 
ADR Panel finds that either party does not fully respond to a request 
for information or documents from OPA or the 340B ADR Panel, HHS 
proposes that the 340B ADR Panel may draw an adverse inference and make 
a decision on the claim based on the information submitted in the claim 
package that moved forward for review.
    HHS also proposes that the 340B ADR Panel would conduct a review of 
the documents submitted by the parties and evaluate claims based on the 
information received (including from any associations or organizations, 
or legal counsel representing the parties) unless, at the 340B ADR 
Panel's discretion, the nature of the claim necessitates that a meeting 
with the parties be held. In addition, the 340B ADR Panel may consult 
with, as appropriate or necessary, other staff within OPA, other HHS 
offices, other Federal agencies, or with outside parties to the extent 
additional information is needed.
    The 340B ADR Panel will issue a decision on the claim in accordance 
with Sec.  10.23. HHS proposes that the 340B ADR Panel's decision must 
represent the decision of a majority of the Panel members.

Section 10.21 Claims

(a) Claims Permitted
    Section 7102 of the Affordable Care Act added section 340B(d)(3) to 
the PHS Act. It instructs the Secretary to establish and implement a 
binding ADR process to resolve certain claims of 340B Program statutory 
violations. Section 340B(d)(3)(A) of the PHS Act specifies that the ADR 
process is to be used to resolve: (1) claims by covered entities that 
they have been overcharged by manufacturers for drugs purchased under 
this section and (2) claims by manufacturers, after a manufacturer has 
conducted an audit of a covered entity, as authorized by section 
340B(a)(5)(C) of the PHS Act, that a covered entity has violated the 
prohibitions against duplicate discounts and diversion (sections 
340B(a)(5)(A) and (B) of the PHS Act). This NPRM proposes aligning 
claims to those outlined in the 340B statute and is also proposing that 
the harm alleged (overcharge, diversion, duplicate discount) be 
specific to the parties identified in the claim. HHS believes that the 
role of the 340B ADR Panel is to independently review and apply 340B 
law and policy to the case-specific factual circumstances at issue in 
an overcharge, diversion, or duplicate discount dispute. OPA will 
review each claim to ensure the claim meets the filing requirements set 
forth in the rule and as outlined in Sec.  10.21(b) prior to forwarding 
the claim to the 340B ADR Panel.
(b) Requirements for Filing a Claim
    HHS proposes that a covered entity and a manufacturer meet certain 
requirements for filing a claim. These proposed requirements will 
ensure that a claim of the type specified in section 340B(d)(3)(A) of 
the PHS Act is the subject of the dispute.
    The claims will be submitted through a secure electronic mechanism 
to safeguard confidential and proprietary information. HHS will provide 
additional detail as to the mechanism for submitting claims in future 
sub-regulatory guidance.
    HHS is proposing that covered entities and manufacturers file a 
written claim, based on the facts available, to OPA within 3 years of 
the alleged specified violation and that any claim not filed within 3 
years shall be time barred. The proposed requirement that a claim be 
filed within 3 years is consistent with the record retention 
expectations for the 340B Program and would ensure that covered 
entities and manufacturers have access to relevant records needed to 
review and respond to claims. This proposal would ensure that documents 
are submitted with each claim to verify that the alleged violation is 
not time barred. HHS requests public comment concerning the 3-year 
limitation on claims submission. HHS is proposing that while there is 
no minimum threshold to submit a claim through the ADR process, parties 
should carefully consider whether the ADR process is appropriate for de 
minimis claims given the time, resources, and investment needed to 
undertake ADR.
    HHS is also proposing that all files, documents, or records 
associated with the specified claim that are the subject of the dispute 
must be maintained by the covered entity and/or manufacturer until the 
final agency decision is issued.

Covered Entity Claims

    In Sec.  10.21(b)(2), HHS proposes that to be eligible for the ADR 
process, each claim filed by a covered entity must provide the basis 
for the covered entity's belief that it has been overcharged by a 
manufacturer, along with any such documentation as may be requested by 
OPA to evaluate the accuracy of the claim. Such documentation may 
include, but is not limited to: (1) a 340B purchasing account invoice 
which shows the purchase price by national drug code, less any taxes 
and fees; (2) the 340B ceiling price for the drug during the quarter(s) 
corresponding to the time period(s) of the claim; (3) documentation by 
the manufacturer or wholesaler of the attempts made to purchase the 
drug via a 340B account at the ceiling price, which resulted in the 
instance of alleged overcharging; (4) documentation and correspondence 
with HRSA regarding the alleged overcharge, including price 
unavailability forms or other correspondence; and (5) an estimate of 
monetary damages. HHS believes that these documents are readily 
available to a covered entity in the usual course of business and 
should not be overly burdensome to produce; however, HHS requests 
comment on the feasibility of producing the documentation as proposed. 
HHS is also proposing to require the covered entity, at the time of 
filing, to provide OPA with a written summary of attempts to work in 
good faith to resolve the instance of overcharging with the 
manufacturer at issue. An example of documented good faith efforts 
could include attempts to enter into discussion to resolve disputes or 
communication records between the covered entity and the manufacturer. 
HHS is seeking comment on what other types of documentation would 
indicate

[[Page 73521]]

good faith effort and whether a threshold for attempts at communication 
should be established.

Manufacturer Claims

    In Sec.  10.21(b)(3), HHS proposes that to be eligible for the 340B 
ADR process, each claim filed by a manufacturer must include documents 
sufficient to support a manufacturer's claim that a covered entity has 
violated the prohibition on diversion and/or duplicate discount, along 
with any such documentation as may be requested by OPA to evaluate the 
accuracy of the claim. Such documentation shall include but is not 
limited to: (1) a final audit report which indicates that the 
manufacturer audited the covered entity for compliance with the 
prohibition on diversion (section 340B(a)(5)(B) of the PHS Act) and/or 
duplicate discounts (section 340B(a)(5)(A) of the PHS Act); (2) any 
communication with the State Medicaid agency indicating rebates claimed 
(for duplicate discount violations only); (3) the covered entity's 
written response to the manufacturer's audit finding(s); and (4) an 
estimate of monetary damages. HHS is proposing to require the 
manufacturer, at the time of filing, to submit a written summary of 
attempts to work in good faith to resolve the claim with the covered 
entity. An example of documented good faith efforts could include 
attempts to enter into discussion to resolve disputes prior to an audit 
of a covered entity, along with attempts as part of the covered entity 
response to any findings. It could also include evidence of 
communication between the covered entity and the manufacturer. HHS is 
seeking comments on what other types of evidence would constitute the 
parties working in good faith and whether a threshold for attempts at 
communication should be established.
(c) Combining Claims
    HHS proposes that, if requested, covered entities or manufacturers 
may be permitted to combine individual claims. Section 
340B(d)(3)(B)(vi) of the PHS Act permits ``multiple covered entities to 
jointly assert claims of overcharges by the same manufacturer for the 
same drug or drugs in one administrative proceeding...'' For covered 
entity joint claims, HHS proposes that the claim must list each covered 
entity and its 340B IDs and include documentation as described in 
paragraph (b)(2) and/or information from each individual covered entity 
demonstrating that each covered entity meets all of the requirements 
for filing an ADR claim. Additionally, a letter requesting the 
combining of claims must also accompany the claim at the time of filing 
and must document that each covered entity consents to the combination 
of the claim, including signatures of the individuals representing each 
covered entity.
    Pursuant to section 340B(d)(3)(B)(vi) of the PHS Act, joint claims 
are also permitted on behalf of covered entities by associations or 
organizations representing their interests. Therefore, this NPRM 
proposes that the covered entities represented in the claim must be 
members of the association or the organization representing them and 
that each individual covered entity listed in the claim must meet the 
requirements listed in paragraph (b) for filing a claim with OPA.
    The proposed joint claim must assert overcharging by a single 
manufacturer for the same drug(s), and the organization or association 
will be responsible for filing the claim. HHS also proposes requiring 
that a letter requesting the combining of claims must accompany the 
claim and must include documentation that each covered entity consents 
to the organization or association asserting a claim on its behalf, 
including signatures of individuals representing each covered entity 
and a point of contact for the covered entity. HHS is also proposing 
that covered entities will not be permitted to file claims against 
multiple manufacturers in a single ADR proceeding. In other words, 
covered entities are only permitted to file a claim (individual or 
joint) against a single manufacturer for the same drug(s) in a single 
ADR proceeding.
    Section 340B(d)(3)(B)(v) of the PHS Act permits the consolidation 
of claims brought by more than one manufacturer against the same 
covered entity if consolidation is consistent with the statutory goals 
of fairness and economy of resources. This NPRM proposes that the claim 
must list each manufacturer and include documentation as described in 
paragraph (b)(3), and/or information from each manufacturer 
demonstrating that each individual manufacturer meets the requirements 
listed in paragraph (b) for filing an ADR claim. HHS also proposes that 
a letter requesting consolidation of claims must be submitted with the 
claim and must document that each manufacturer consents to the 
consolidation of the claims, including signatures of the individuals 
representing the manufacturers and a single point of contact for the 
claim being filed on behalf of the consolidated group. The statutory 
authority for implementing the 340B ADR process does not permit 
consolidated claims on behalf of manufacturers by associations or 
organizations representing their interests. Therefore, HHS is not 
proposing this option in this NPRM.
    As required by the 340B statute, HHS is proposing an ADR process 
that allows more than one manufacturer to consolidate claims against 
the same covered entity. With regard to the consolidation of claims by 
manufacturers against the same covered entity, HHS is proposing that 
the 340B ADR Panel will determine whether such consolidation is 
appropriate and consistent with the goals of fairness and economy of 
resources.
(d) Deadlines and Procedures for Filing a Claim
    HHS proposes that covered entities and manufacturers can file a 
claim with OPA, or any successor office assigned to administer the 340B 
Program, demonstrating that they satisfy the requirements described in 
paragraph (b). The OPA staff conducting the initial review of a claim 
will not be appointed to serve on a 340B ADR Panel reviewing that 
specific claim. OPA will contact the initiating party once the claim 
has been received. OPA will conduct an initial review of the claim and 
may request additional information. If additional information is 
requested, the initiating party filing the claim will have 20 business 
days from receipt of the request to respond. If the initiating party 
does not respond to the request for additional information within the 
time period specified or request an extension, the claim will not move 
forward to the 340B ADR Panel for review. OPA will determine whether a 
claim will be forwarded to the 340B ADR Panel for review in accordance 
with paragraph (b). In the event that a claim does not move forward for 
review, HHS is proposing that all parties listed on the claim will 
receive information from HRSA regarding the reason(s) why the claim did 
not move forward.
    OPA will review all information submitted as part of the claim to 
verify that the requirements for filing a claim have been met and will 
provide written notification to the initiating party that the claim is 
complete. HHS is proposing that once the claim is deemed complete, OPA 
will also provide written notification to the opposing party that the 
claim was submitted to OPA and that they will have 30 business days to 
provide OPA with a response. This written notification will be provided 
to the opposing party before the claim moves forward to the 340B ADR 
Panel. As part of this written notification, OPA will provide a copy of 
the claim and additional instructions regarding the

[[Page 73522]]

ADR process, including timelines and information on how to submit their 
response as described in paragraph (e). At such time, OPA will also 
notify the initiating party that their claim is deemed complete and 
meets the requirements of paragraph (b).
    In addition, HHS proposes that the claim will be forwarded to the 
340B ADR Panel for review after OPA receives the opposing party's 
response. OPA would provide additional information on the 340B ADR 
process to both the initiating and opposing parties at that time, 
including contact information for requested follow-up communications.
    HHS proposes that if the claim does not move forward for review by 
the 340B ADR Panel, OPA will send written notice to both parties 
briefly stating the basis for the decision and will advise the party 
that they may revise and refile the claim if the party has new 
information to support the alleged statutory violation.
(e) Responding to a Submitted Claim
    HHS proposes that once the parties have been notified by OPA that 
the claim has met the requirements in paragraph (b) and the claim does 
not otherwise prevent OPA from moving it forward to the 340B ADR Panel 
for review as described in paragraph (d), the opposing party will have 
30 business days to submit a written response to the allegation to OPA. 
The opposing party may submit a request for an extension of the initial 
30 days and OPA will make a determination to approve or disapprove such 
request and notify both parties. Once the opposing party's response has 
been received, OPA will provide a copy to the initiating party and will 
notify both parties that the claim has moved forward for review by the 
340B ADR Panel. If the opposing party does not provide a response or 
otherwise elects not to participate in the 340B ADR process, OPA will 
forward the information included as part of the initiating party's 
claim and the 340B ADR Panel will render its decision after review of 
the information submitted in the initial claim. Subsequent requests for 
information regarding the claim would be made by the 340B ADR Panel as 
appropriate, and the 340B ADR Panel will consider the information 
gathered during the ADR process and may request additional information 
from the parties.

Section 10.22 Covered Entity Information and Document Requests

    Pursuant to section 340B(d)(3)(B)(iii) of the PHS Act, regulations 
promulgated by the Secretary for the 340B ADR process will establish 
procedures by which a covered entity may discover or obtain information 
and documents from manufacturers and third parties relevant to a claim 
that the covered entity has been overcharged by the manufacturer. This 
NPRM proposes that such covered entity information requests be 
facilitated by the 340B ADR Panel. HHS proposes that, to request 
information or documents necessary to support its claim from an 
opposing party, a covered entity must submit a written request to the 
340B ADR Panel no later than 20 business days after the entity was 
notified by OPA that the claim has moved forward for the 340B ADR 
Panel's review. The 340B ADR Panel will review the information/document 
request to ensure that it is reasonable, relevant, and within the scope 
of the asserted claim. The 340B ADR Panel will notify the covered 
entity in writing if any request is deemed reasonable and within the 
scope of the asserted claim and permit the covered entity to submit a 
revised information/document request, if it is not.
    In this section, HHS proposes that the 340B ADR Panel will consider 
relevant factors, such as the scope of the information/document 
request, whether there are consolidated claims, or the involvement of 
one or more third parties in distributing drugs on behalf of the 
manufacturer and that once reviewed, the 340B ADR Panel will submit the 
information/document request to the manufacturer, which must respond 
within 20 business days.
    HHS also proposes that the manufacturer must fully respond in 
writing to the information/document request and submit its response to 
the 340B ADR Panel by the stated deadline and that the manufacturer is 
responsible for obtaining relevant information/documents from 
wholesalers or other third parties with which it contracts for sales or 
distribution of its drugs to covered entities. HHS proposes that if a 
manufacturer anticipates it will not be able to respond fully by the 
deadline, the manufacturer may request one extension in writing within 
15 business days. The extension request that is submitted to the 340B 
ADR Panel must include any available information or documents, the 
reason why the deadline is not feasible, and outline a proposed 
timeline for fully responding to the information/document request. The 
340B ADR Panel will review the extension request and notify both the 
manufacturer and the covered entity in writing as to whether the 
request for an extension is granted and the date of the new deadline, 
if any.
    HHS proposes that if the 340B ADR Panel finds that a manufacturer 
has failed to respond or fully respond to a covered entity information/
document request, the 340B ADR Panel may draw an adverse inference, and 
proceed with facts that have already been established in the 
proceeding. Such adverse inference could include holding facts to have 
been established in the proceeding or precluding a party from 
contesting a particular issue. HHS invites specific comment on this 
issue.

Section 10.23 340B ADR Panel Decision Process

    In Sec.  10.23, HHS proposes that the 340B ADR Panel will conduct 
an initial review of the claim to determine if the specific issue that 
would be brought forth in a claim is the same as or similar to an issue 
that is pending Federal court. If this determination is made, the 340B 
ADR Panel will suspend review of the claim until such time the issue is 
no longer pending in Federal court.
    If suspending review of the claim is not appropriate, the 340B ADR 
Panel would review the documents submitted by the parties and determine 
if there is adequate support to conclude that an overcharge, diversion, 
or a duplicate discount has occurred in the specific case at issue. In 
alignment with the statute at section 340B(d)(3)(B)(ii) of the PHS Act, 
the 340B ADR Panel will seek to ensure that its review and decision of 
the claim is conducted in a fair, efficient and expeditious manner. The 
timeline for the review is wholly dependent on the complexity of each 
claim submitted through the ADR Process.
    After review of the claim, the 340B ADR Panel would prepare a 
decision letter, which includes the 340B ADR Panel's findings regarding 
the alleged violation. HHS is proposing that the 340B ADR Panel's 
decision letter be submitted to all parties in the dispute and the OPA 
Director. HHS is also proposing, as described in Sec.  10.24, that 
either party may, within 20 business days of the receipt of the 340B 
ADR Panel's decision letter, initiate a reconsideration of the 340B ADR 
Panel's decision. While the 340B ADR Panel decision would conclude the 
340B ADR Panel process, either party may, at its sole discretion, 
request reconsideration as described in Sec.  10.24.
    If HRSA does not receive a reconsideration request from either 
party within 20 business days of the issuance of the 340B ADR Panel's 
decision letter, or the HRSA Administrator has not initiated a 
reconsideration request as described in Sec.  10.24, the 340B ADR 
Panel's decision will serve as the final agency decision

[[Page 73523]]

letter and will be binding upon the parties involved in the dispute, 
unless invalidated by order of a Federal court. The 340B ADR Panel 
decision would bind only the specific parties to the dispute. In 
addition, in accordance with section 340B(d)(3)(C) of the PHS Act, any 
dissatisfied party may also seek judicial review of the final agency 
decision.
    Once the parties involved have been notified of the final agency 
decision, the OPA Director will consider whether to take enforcement 
action or ensure corrective action, to the extent allowed under the 
340B statute. For example, if the 340B ADR Panel finds that a covered 
entity has violated the prohibition against diversion, the OPA Director 
may require, as a sanction, that the covered entity repay the affected 
manufacturer. If the 340B ADR Panel finds that a manufacturer 
overcharged a covered entity, the OPA Director may require as a 
sanction that the manufacturer refund or issue a credit to the affected 
covered entity.

Section 10.24 340B ADR Panel Decision Reconsideration Process

    HHS is proposing that after a decision has been issued by a 340B 
ADR Panel, if either the initiating party or the opposing party is 
dissatisfied with the decision, they may request administrative 
reconsideration of the claim if the requirements for obtaining a 
reconsideration are met. The HRSA Administrator also has the discretion 
to initiate a reconsideration if no request is received by the parties. 
HHS is proposing that the reconsideration be conducted by the HRSA 
Administrator, or designee, as their review will be independent of the 
340B ADR Panel's decision.
    HHS is proposing that the party requesting a reconsideration must 
submit its request in writing to both the other party involved in the 
claim and to the HRSA Administrator within 20 business days of 
receiving the 340B ADR Panel's decision. The request for 
reconsideration must include a copy of the 340B ADR Panel's decision 
letter, and the burden lies with the party filing the reconsideration 
to submit written documentation indicating why a reconsideration is 
warranted. New information may not be submitted as part of the 
reconsideration process in order to remain consistent with the facts 
that were reviewed by the 340B ADR Panel in determining the final 
agency decision. HHS proposes that parties be entitled to 
reconsideration of their claim upon demonstration that the 340B ADR 
Panel decision may have been inaccurate or flawed. HHS invites comments 
on its proposal regarding the scope of the reconsideration process.
    HHS is proposing that the HRSA Administrator review the 340B ADR 
Panel decision, consult with HHS personnel, as necessary, and review 
any information indicating that a reconsideration is warranted based on 
inaccurate or flawed information.
    Under the NPRM, the HRSA Administrator makes a determination of a 
reconsideration by issuing a decision that provides the basis for the 
new determination or dismissing the reconsideration. The HRSA 
Administrator will review the reconsideration in a fair, efficient, and 
expeditious manner; however, the timeline for making a decision can 
vary due to the complexity of each case. HRSA will work with the 
parties involved to ensure that they are updated about the process. The 
HRSA Administrator's reconsideration decision would be considered the 
final agency decision.

IV. Statutory and Regulatory Requirements

A. Regulatory Impact Analysis

    HHS has examined the effects of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 8, 2011), the Regulatory Flexibility Act (September 19, 
1980, Pub. L. 96-354), the Unfunded Mandates Reform Act of 1995 (Pub. 
L. 104-4), and Executive Order 13132 on Federalism (August 4, 1999).

B. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 is supplemental to and reaffirms the principles, 
structures, and definitions governing regulatory review as established 
in Executive Order 12866, emphasizing the importance of quantifying 
both costs and benefits, of reducing costs, harmonizing rules, and 
promoting flexibility. Section 3(f) of Executive Order 12866 defines a 
``significant regulatory action'' as an action that is likely to result 
in a rule: (1) having an annual effect on the economy of $100 million 
or more in any one year, or adversely and materially affecting a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or state, local, or tribal governments or 
communities (also referred to as ``economically significant''); (2) 
creating a serious inconsistency or otherwise interfering with an 
action taken or planned by another agency; (3) materially altering the 
budgetary impacts of entitlement grants, user fees, or loan programs or 
the rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive order. A 
regulatory impact analysis must be prepared for major rules with 
economically significant effects ($100 million or more in any one 
year), and a ``significant'' regulatory action is subject to review by 
the Office of Management and Budget (OMB).
    This NPRM is not likely to have an economic impact of $100 million 
or more in any one year; therefore, it has not been designated an 
``economically significant'' rule under section 3(f)(1) of Executive 
Order 12866. This NPRM would modify the framework for HHS to resolve 
certain disputed claims regarding manufacturers overcharging covered 
entities and disputed claims of diversion and duplicate discounts by 
covered entities audited by manufacturers under the 340B Program. HHS 
does not anticipate the modification of the ADR process to result in 
significant economic impact. This is consistent with a similar 
determination in the 2020 final rule that ``HHS does not anticipate the 
introduction of an ADR process to result in significant economic 
impacts.''

C. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) and the 
Small Business Regulatory Enforcement and Fairness Act of 1996, which 
amended the RFA, require HHS to analyze options for regulatory relief 
of small businesses. If a rule has a significant economic effect on a 
substantial number of small entities, HHS must specifically consider 
the economic effect of the rule on small entities and analyze 
regulatory options that could lessen the impact of the rule. HHS will 
use a RFA threshold of at least a three percent impact on at least five 
percent of small entities.
    This NPRM proposes requirements that would affect drug 
manufacturers (North American Industry Classification System code 
325412: Pharmaceutical Preparation Manufacturing). The small business 
size standard for drug manufacturers is 750 employees.

[[Page 73524]]

Approximately 700 drug manufacturers participate in the 340B Program. 
While it is possible to estimate the impact of this NPRM on the 
industry as a whole, the data necessary to project changes for specific 
manufacturers or groups of manufacturers is not available, as HRSA does 
not collect the information necessary to assess the size of an 
individual manufacturer that participates in the 340B Program. This 
NPRM would also affect health care providers. For purposes of the RFA, 
HHS considers all health care providers to be small entities either by 
virtue of meeting the Small Business Administration (SBA) size standard 
for a small business, or for being a nonprofit organization that is not 
dominant in its market. The current SBA size standard for health care 
providers ranges from annual receipts of $7 million to $35.5 million. 
As of April 1, 2022, 13,730 covered entities participate in the 340B 
Program.
    This NPRM would modify the administrative mechanism to review 
claims by manufacturers that covered entities have violated certain 
statutory obligations and claims by covered entities alleging 
overcharges for 340B covered outpatient drugs by manufacturers. This 
proposed ADR process would require submission of documents that 
manufacturers and covered entities are already required to maintain as 
part of their participation in the 340B Program. HHS expects that this 
documentation would be readily available prior to submitting a claim. 
Therefore, the collection of this information would not result in an 
economic impact or create additional administrative burden on these 
businesses.
    HHS believes the proposed ADR process would provide a less 
burdensome option for resolving claims that would be more streamlined 
and less trial-like in nature than the 2020 final rule. This NPRM 
provides an option to join or consolidate claims by similar situated 
entities, and covered entities may have claims asserted on their behalf 
by associations or organizations which could reduce costs. HHS has 
determined, and the Secretary certifies, that this NPRM would not have 
a significant economic impact on a substantial number of small health 
care providers or a significant impact on the operations of a 
substantial number of small manufacturers; therefore, HHS is not 
preparing an analysis of impact for the purposes of the RFA. HHS 
estimates that the economic impact on the less than 5 percent of small 
entities and small manufacturers participating in the 340B Program 
would be minimal and less than a 3 percent economic burden and 
therefore does not meet the RFA threshold of 3 percent. HHS welcomes 
comments concerning the impact of this proposed rule on small 
manufacturers and small health care providers.

D. Unfunded Mandates Reform Act of 1995

    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and Tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year.'' In 2021, that threshold is approximately 
$158 million. HHS does not expect this NPRM to exceed the threshold.

E. Executive Order 13132--Federalism

    HHS has reviewed this NPRM in accordance with Executive Order 13132 
regarding federalism and has determined that it does not have 
``federalism implications.'' This proposed rule would not ``have 
substantial direct effects on the States, or on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government.'' 
This NPRM, if implemented, would not adversely affect the following 
family elements: family safety, family stability, marital commitment; 
parental rights in the education, nurture, and supervision of their 
children; family functioning, disposable income, or poverty; or the 
behavior and personal responsibility of youth, as determined under 
section 654(c) of the Treasury and General Government Appropriations 
Act of 1999. HHS invites additional comments on the impact of this 
proposed rule in this area.

F. Collection of Information

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires 
that OMB approve all collections of information by a Federal agency 
from the public before they can be implemented. This proposed rule 
would not impact the current reporting and recordkeeping burden for 
manufacturers or covered entities under the 340B Program. HHS believes 
that the 340B ADR process is exempt from Paperwork Reduction Act 
requirements as it provides the mechanism and procedures for an 
administrative action or investigation involving an agency against 
specific individuals or entities, pursuant to 44 U.S.C. 3518(c). In 
addition, participants in the 340B Program are already required to 
maintain the necessary records to submit an ADR claim. Comments are 
welcome on the accuracy of this statement.

    Dated: November 21, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.

List of Subjects in 42 CFR Part 10

    Biologics, Business and industry, Diseases, Drugs, Health, Health 
care, Health facilities, Hospitals, 340B Drug Pricing Program.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services proposes to amend 42 CFR part 10 as follows:

PART 10--340B DRUG PRICING PROGRAM

0
1. The authority citation for part 10 continues to read as follows:

    Authority:  Sec. 340B of the Public Health Service Act (42 
U.S.C. 256b) (PHSA), as amended.

0
2. Amend Sec.  10.3 by revising the definitions for Administrative 
Dispute Resolution (ADR) Process, Administrative Dispute Resolution 
Panel (340B ADR Panel), Claim, Consolidated claim, and Joint claim and 
adding the definition for Office of Pharmacy Affairs (OPA), in 
alphabetical order, to read as follows:


Sec.  10.3  Definitions.

* * * * *
    Administrative Dispute Resolution (ADR) Process means a process 
used to resolve the following types of claims, including any issues 
that assist the 340B ADR Panel in resolving such claims:
    (1) Claims by covered entities that may have been overcharged for 
covered outpatient drugs purchased from manufacturers; and
    (2) Claims by manufacturers of 340B drugs, after a manufacturer has 
conducted an audit of a covered entity (pursuant to section 
340B(a)(5)(C) of the Public Health Service Act (PHS Act)), that a 
covered entity may have violated the prohibitions against duplicate 
discounts or diversion.
    Administrative Dispute Resolution Panel (340B ADR Panel) means a 
decision-making body within the Health Resources and Services 
Administration's Office of Pharmacy Affairs that reviews and makes 
decisions for claims brought under the ADR Process.
* * * * *

[[Page 73525]]

    Claim means a written allegation filed by or on behalf of a covered 
entity or by a manufacturer for resolution under the ADR Process.
* * * * *
    Consolidated claim means a claim resulting from combining multiple 
manufacturers' claims against the same covered entity.
* * * * *
    Joint claim means a claim resulting from combining multiple covered 
entities' claims (or claims from their membership organizations' or 
associations') against the same manufacturer for the same drug or 
drugs.
* * * * *
    Office of Pharmacy Affairs (OPA) means the office, or any successor 
office, assigned to administer the 340B Program within the Health 
Resources and Services Administration that oversees the 340B Program.
* * * * *
0
3. Revise subpart C to read as follows:

Subpart C--Administrative Dispute Resolution

Sec.
10.20 Administrative Dispute Resolution Panel.
10.21 Claims.
10.22 Covered entity information and document requests.
10.23 340B ADR Panel decision process.
10.24 340B ADR Panel decision reconsideration process.

    Authority:  Sec. 340B of the Public Health Service Act (42 
U.S.C. 256b) (PHSA), as amended.


Sec.  10.20  340B Administrative Dispute Resolution Panel.

    The Secretary shall appoint a roster of eligible individuals 
(Roster) consisting of staff within OPA, to serve on a 340B ADR Panel, 
as defined in Sec.  10.3. The OPA Director, or the OPA Director's 
designee, shall select at least three members from the Roster to form a 
340B ADR Panel to review and make decisions regarding one or more 
claims filed by covered entities or manufacturers.
    (a) Members of the 340B ADR Panel. (1) The OPA Director shall:
    (i) Select at least three members for each 340B ADR Panel from the 
Roster of appointed staff;
    (ii) Have the authority to remove an individual from the 340B ADR 
Panel and replace such individual; and
    (iii) Select replacement 340B ADR Panel members should an 
individual resign from the panel or otherwise be unable to complete 
their duties.
    (2) No member of the 340B ADR Panel may have a conflict of 
interest, as defined in paragraph (b) of this section.
    (b) Conflicts of interest. (1) All members appointed by the 
Secretary to the Roster of individuals eligible to be appointed to a 
340B ADR Panel will be screened for conflicts of interest prior to 
reviewing a claim. In determining whether a conflict exists, the 
Department of Health and Human Services (HHS) will consider financial 
interest(s), current or former business or employment relationship(s), 
or other involvement of a prospective panel member or close family 
member who is either employed by or otherwise has a business 
relationship with an involved party, subsidiary of an involved party, 
or particular claim(s) expected to be presented to the prospective 
panel member. HHS has sole discretion to determine whether a conflict 
of interest exists.
    (2) All members on the 340B ADR Panel will undergo an additional 
screening prior to reviewing a specific claim to ensure that the 340B 
ADR Panel member was not involved in previous agency actions, including 
previous 340B ADR Panel decisions, concerning the specific issue of the 
ADR claim as it relates to the specific covered entity or manufacturer 
involved.
    (c) Secretarial removal power. The Secretary may remove any 
individual from the Roster of 340B ADR Panelists for any reason, 
including from any 340B ADR Panel to which the individual has already 
been assigned.
    (d) Duties of the 340B ADR Panel. The 340B ADR Panel will:
    (1) Review and evaluate claims, including consolidated and joint 
claims, and documents and information submitted by covered entities and 
manufacturers;
    (2) Review and may request additional documentation, information, 
or clarification of an issue from any or all parties to make a decision 
(if the 340B ADR Panel finds that a party has failed to respond or 
fully respond to an information request, the 340B ADR Panel may draw an 
adverse inference, and proceed with facts that the 340B ADR Panel 
determines have been established in the proceeding);
    (3) Evaluate claims based on information received, unless, at the 
340B ADR Panel's discretion, the nature of the claim necessitates that 
a meeting with the parties be held;
    (4) At its discretion, consult with others, including staff within 
OPA, other HHS offices, and other Federal agencies while reviewing a 
claim; and
    (5) Make decisions on each claim.


Sec.  10.21  Claims.

    (a) Claims permitted. All claims must be specific to the parties 
identified in the claims and are limited to the following:
    (1) Claims by a covered entity that it has been overcharged by a 
manufacturer for a covered outpatient drug; and
    (2) Claims by a manufacturer, after it has conducted an audit of a 
covered entity pursuant to section 340B(a)(5)(C) of the PHS Act, that 
the covered entity has violated section 340B(a)(5)(A) of the PHS Act, 
regarding the prohibition of duplicate discounts, or section 
340B(a)(5)(B) of the PHS Act, regarding the prohibition of the resale 
or transfer of covered outpatient drugs to a person who is not a 
patient of the covered entity.
    (b) Requirements for filing a claim. (1) A covered entity or 
manufacturer must file a claim under this section in writing to OPA 
within 3 years of the date of the alleged violation. Any file, 
document, or record associated with the claim that is the subject of a 
dispute must be maintained by the covered entity and manufacturer until 
the date of the final agency decision.
    (2) A covered entity filing a claim described in paragraph (a)(1) 
of this section must provide the basis, including all available 
supporting documentation, for its belief that it has been overcharged 
by a manufacturer, in addition to any other documentation as may be 
requested by OPA. A covered entity claim against multiple manufacturers 
is not permitted.
    (3) A manufacturer filing a claim under paragraph (a)(2) of this 
section must provide documents sufficient to support its claim that a 
covered entity has violated the prohibition on diversion and/or 
duplicate discounts, in addition to any other documentation as may be 
requested by OPA.
    (4) A covered entity or manufacturer filing a claim must provide 
documentation of good faith efforts, including evidence of 
communication with the opposing party to resolve the matter in good 
faith prior to filing a claim.
    (c) Combining claims. (1) Two or more covered entities may jointly 
file claims of overcharges by the same manufacturer for the same drug 
or drugs if each covered entity consents to the jointly filed claim and 
meets the filing requirements.
    (i) For covered entity joint claims, the claim must list each 
covered entity, its 340B ID and include documentation as described in 
paragraph (b) of this section, which demonstrates that each covered 
entity meets all of the requirements for filing the ADR claim.

[[Page 73526]]

    (ii) For covered entity joint claims, a letter requesting the 
combining of claims must accompany the claim at the time of filing and 
must document that each covered entity consents to the combining of the 
claims, including signatures of individuals representing each covered 
entity and a point of contact for each covered entity.
    (2) An association or organization may file on behalf of one or 
more covered entities representing their interests if:
    (i) Each covered entity is a member of the association or the 
organization representing it and each covered entity meets the 
requirements for filing a claim;
    (ii) The joint claim filed by the association or organization must 
assert overcharging by a single manufacturer for the same drug(s); and
    (iii) A letter requesting the combining of claims must accompany 
the claim and must include documentation evidencing that each covered 
entity consents to the organization or association asserting a claim on 
its behalf, including signatures of individuals representing each 
covered entity and a point of contact for each covered entity.
    (3) A manufacturer or manufacturers may request to consolidate 
claims brought by more than one manufacturer against the same covered 
entity if each manufacturer could individually file a claim against the 
covered entity, consents to the consolidated claim, meets the 
requirements for filing a claim, and the 340B ADR Panel determines that 
such consolidation is appropriate and consistent with the goals of 
fairness and economy of resources. Consolidated claims filed on behalf 
of manufacturers by associations or organizations representing their 
interests are not permitted.
    (d) Deadlines and procedures for filing a claim. (1) Covered 
entities and manufacturers must file claims in writing with OPA, in the 
manner set forth by OPA.
    (2) OPA will conduct an initial review of all information submitted 
by the party filing the claim and will make a determination as to 
whether the requirements in paragraph (b) of this section are met. The 
OPA staff conducting the initial review of a claim may not be appointed 
to serve on the 340B ADR Panel reviewing that specific claim.
    (3) Additional information to substantiate a claim may be submitted 
by the initiating party and may be requested by OPA. If additional 
information is requested, the initiating party will have 20 business 
days from the receipt of the request to respond. If the initiating 
party does not respond to a request for additional information within 
the specified time frame or request and receive an extension, the claim 
will not move forward to the 340B ADR Panel for review.
    (4) OPA will provide written notification to the initiating party 
that the claim is complete. Once the claim is complete, OPA will also 
provide written notification to the opposing party that the claim was 
submitted. This written notification will provide a copy of the 
initiating party's claim, and additional instructions regarding the ADR 
process, including timelines and information on how to submit their 
response in accordance with the procedures for responding to a claim as 
outlined in paragraph (e) of this section.
    (5) If OPA finds that the claim meets the requirements described in 
paragraph (b) of this section, and once OPA receives the opposing 
party's response in accordance with the procedures outlined in 
paragraph (e) of this section, additional written notification will be 
sent to both parties advising that the claim will be forwarded to the 
340B ADR Panel for review.
    (6) If OPA finds that the claim does not meet the requirements 
described in paragraph (b) of this section, written notification will 
be sent to both parties stating the reasons that the claim did not move 
forward.
    (7) For any claim that does not move forward for review by the 340B 
ADR Panel, the claim may be revised and refiled if there is new 
information to support the alleged statutory violation and the claim 
meets the criteria set forth in this section.
    (e) Responding to a submitted claim. (1) Upon receipt of 
notification that a claim is deemed complete and has met the 
requirements in paragraph (b) of this section, the opposing party in 
alleged violation will have 30 business days to submit a written 
response to OPA.
    (2) A party may submit a request for an extension of the initial 30 
days response period and OPA will make a determination to approve or 
disapprove such request and notify both parties.
    (3) OPA will provide a copy of the opposing party's response to the 
initiating party and will notify both parties that the claim has moved 
forward for review by the 340B ADR Panel.
    (4) If an opposing party does not respond or elects not to 
participate in the 340B ADR process, OPA will notify both parties that 
the claim has moved forward for review by the 340B ADR Panel and the 
340B ADR Panel will render its decision after review of the information 
submitted in the claim.


Sec.  10.22  Covered entity information and document requests.

    (a) To request information necessary to support its claim from an 
opposing party, a covered entity must submit a written request for 
additional information or documents to the 340B ADR Panel within 20 
business days of the receipt from OPA that the claim was forwarded to 
the 340B ADR Panel for review. The 340B ADR Panel will review the 
information/document request and notify the covered entity if the 
request is not reasonable, not relevant or beyond the scope of the 
claim, and will permit the covered entity to resubmit a revised request 
if necessary.
    (b) The 340B ADR Panel will transmit the covered entity's 
information/document request to the manufacturer who must respond to 
the request within 20 business days.
    (c) The manufacturer must fully respond, in writing, to an 
information/document request from the 340B ADR Panel by the response 
deadline.
    (1) A manufacturer is responsible for obtaining relevant 
information or documents from any wholesaler or other third party that 
may facilitate the sale or distribution of its drugs to covered 
entities.
    (2) If a manufacturer anticipates that it will not be able to 
respond to the information/document request by the deadline, it can 
request one extension by notifying the 340B ADR Panel in writing within 
15 business days of receipt of the request.
    (3) A request to extend the deadline must include the reason why 
the specific deadline is not feasible and must outline the proposed 
timeline for fully responding to the information/document request.
    (4) The 340B ADR Panel may approve or disapprove the request for an 
extension of time and will notify all parties in writing of its 
decision.
    (5) If the 340B ADR Panel finds that a manufacturer has failed to 
respond or fully respond to an information/document request, the 340B 
ADR Panel may draw an adverse inference and proceed with the facts that 
the 340B ADR Panel has determined have been established in the 
proceeding.


Sec.  10.23  340B ADR Panel decision process.

    (a) The 340B ADR Panel will conduct an initial review of the 
claims. If the 340B ADR Panel determines the specific issue that would 
be brought forth in a claim is the same as or similar to an issue that 
is pending in Federal court,

[[Page 73527]]

it will suspend review of the claim until such time the issue is no 
longer pending in Federal court.
    (b) If no issues are identified in the initial review of the claim 
under paragraph (a) of this section, the 340B ADR Panel will review all 
documents gathered during the ADR Process to determine if a violation 
as described in Sec.  10.21(a)(1) or (2) has occurred.
    (c) The 340B ADR Panel will prepare a decision letter based on its 
review. The 340B ADR Panel decision letter will represent the 
determination of a majority of the 340B ADR Panel members' findings 
regarding the claim and include an explanation regarding each finding. 
The 340B ADR Panel will transmit its decision letter to all parties and 
to the OPA Director.
    (d) Either party may request reconsideration of the 340B ADR Panel 
decision or the Health Resources and Service Administration (HRSA) 
Administrator may decide to initiate a reconsideration without such a 
request as described in Sec.  10.24. If the HRSA Administrator does not 
initiate the reconsideration process without a request from the 
parties, or if HRSA does not receive a reconsideration request from 
either party within 20 business days of the issuance of the 340B ADR 
Panel's decision letter, as described in Sec.  10.24, the 340B ADR 
Panel's decision letter will serve as the final agency decision and 
will be binding upon the parties involved in the dispute, unless 
invalidated by an order of a Federal court.
    (e) The OPA Director will determine any necessary corrective action 
or consider whether to take enforcement action, and the form of any 
such action, based on the final agency decision.


Sec.  10.24   340B ADR Panel decision reconsideration process.

    (a) Either party may initiate a reconsideration request, or the 
HRSA Administrator may decide to initiate the process without such a 
request.
    (b) The request for a reconsideration of the 340B ADR Panel's 
decision must be made to the HRSA Administrator within 20 business days 
of the date of the 340B ADR Panel's decision letter.
    (1) The request for reconsideration must include a copy of the 340B 
ADR Panel decision letter, and documentation indicating why a 
reconsideration is warranted.
    (2) New information may not be submitted as part of the 
reconsideration process in order to remain consistent with the facts 
that were reviewed by the 340B ADR Panel in determining their decision.
    (3) In the case of joint or consolidated claims, the requester must 
submit documentation showing consent to the reconsideration process, 
including signatures of the individuals representing each covered 
entity or manufacturer as described in Sec.  10.21(c).
    (c) The reconsideration process may be granted when a party 
demonstrates that the 340B ADR Panel decision may have been inaccurate 
or flawed.
    (d) The HRSA Administrator, or their designee, will review the 
record, including the 340B ADR Panel decision, and consult with HHS 
officials, as necessary.
    (e) The HRSA Administrator will make a determination based on the 
reconsideration request by either issuing a revised decision to be 
effective 20 business days from issuance or declining to issue a 
revised decision.
    (f) Such reconsideration decision or the 340B ADR Panel decision 
(in the event of a declination) will serve as the final agency decision 
and will be binding upon the parties involved in the dispute, unless 
invalidated by an order of a Federal court.
    (g) The OPA Director will determine any necessary corrective 
action, or consider whether to take enforcement action, and the form of 
any such action, based on the final agency decision.

[FR Doc. 2022-25752 Filed 11-29-22; 8:45 am]
BILLING CODE 4165-15-P