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340B Insight provides members and supporters of 340B Health with timely updates and discussions about the 340B drug pricing program. The podcast helps listeners stay current with and learn more about 340B to help them serve their patients and communities and remain compliant. We publish new episodes twice a month, with news reports and in-depth interviews with leading health care practitioners, policy and legal experts, public policymakers, and our expert staff.
Speaker 1 (00:04):
Welcome to 340B Insight, from 340B Health.
David Glendinning (00:11):
Hello from Washington DC and welcome back to 340B Insight, the podcast about the 340B Drug Pricing Program. I'm your host, David Glendenning with 340B Health.
(00:22):
Our guest for this episode is Jason Reddish with Powers Pyles Sutter & Verville. Jason focuses his work for Powers Law on 340B legal and compliance issues facing providers, pharmacies, and other stakeholders. So we thought he'd be a good person to speak with about the 340B Administrative Dispute Resolution process. Congress first authorized the ADR in 2010, but it is a much more recent federal rule that will be putting the process into full operation for the first time. We want to speak with Jason about what entities need to know about the ADR as it finally gets off the ground. But first let's take a minute to cover some of the latest about 340B.
(01:18):
340B Health is out with a new study on the types of patients who are seeking care at 340B hospitals. The study looks at Medicare Part D data to find out more about the patients seeking self-administered medications at 340B DSH hospitals compared to those going to non-340B hospitals or doctor's offices. They found these 340B hospital patients are more likely to have low incomes, be disabled, or identify as Black or Hispanic.
(01:47):
In a statement, 340B Health President and CEO Maureen Testoni said the new report "is the latest to demonstrate how 340B hospitals are consistently caring for patients in need. By looking at data from individual patients being treated, instead of making assumptions based on geographic location, the study confirms 340B hospitals' commitment to access for underserved populations." Please visit the show notes to find links to the full report and to an infographic summarizing the top findings.
(02:29):
And now for our feature interview with Jason Reddish with Powers Law. The ADR process is fast becoming a reality for the 340B community, and covered entities need to know about it. I recently spoke with Jason to find out more about how the government is establishing a mechanism for entities to bring complaints against drug companies and vice versa. Now here's that conversation.
(02:53):
I am speaking with Jason Reddish, who is a principal with Powers Pyles Sutter & Verville, Powers Law for short. Jason, I know you're a fixture at 340B Coalition conferences. So I'm happy to have you on the show today. Welcome to 340B Insight.
Jason Reddish (03:10):
Thanks. It's a pleasure to be here.
David Glendinning (03:12):
And the way he policy issue we're here to discuss today is the 340B Administrative Dispute Resolution process, or ADR for short. So please start by telling us a little bit about how the ADR came about.
Jason Reddish (03:28):
Sure. And this is something that spent a long time in the oven. When Congress passed the Affordable Care Act back in March of 2010, they included a provision that required HRSA to establish an Administrative Dispute Resolution process to resolve certain types of disputes between covered entities and manufacturers. And Congress said that they had to establish that process within 180 days, so by September of 2010.
(03:53):
2020 rolls around, there's still no ADR process in place. Manufacturers start imposing restrictions on contract pharmacy purchases. And some covered entities realize that the Administrative Dispute Resolution process might be a more efficient way to challenge those policies. And they actually filed suit against HRSA, saying, "You were required to put this in place back in 2010. You haven't yet." HRSA responded to those suits and they did actually issue a rule in late 2020. They actually never heard a complaint under that rule, and pretty quickly realized that there were some problems with the way it was set up. It was set up under duress. And they signaled back in 2022 that they were going to revise the process and issue a new rule. And that rule did finally come out in April and will be in effect on June 18th of this year.
David Glendinning (04:43):
Wow. So clearly this is a long time coming from its original genesis in Congress more than a decade ago. Briefly, how is the ADR process intended to work?
Jason Reddish (04:56):
So the process is intended to allow a panel of government officials to essentially arbitrate disputes between covered entities and manufacturers. And the process is limited to only certain types of disputes. So covered entities can bring essentially complaints over manufacturer overcharging. And manufacturers can bring complaints against covered entities relating to allegations of diversion or duplicate discounts, but manufacturers have to have audited the covered entity before they can bring the complaint.
(05:29):
And the idea is that the panel will collect evidence from both sides, they will hear the evidence, and then they'll issue a binding decision on the parties that will hopefully resolve the dispute and create some fidelity so the parties can move forward.
David Glendinning (05:41):
You mentioned earlier the final HRSA rule that just came out in the past few weeks. So I assume for now that's sort of the source of truth when it comes to the ADR. Are there details, provisions, in that final rule that covered entities might see as improvements to the process?
Jason Reddish (05:58):
I think so. One of the main questions about the rule was what actually constituted an overcharge? If an overcharge was only when you purchased a drug at a higher price than you thought the ceiling price would be, that's a relatively limited tool. If an overcharge could be any situation where you think you're entitled to the 340B price and you don't receive it, then that's a much more useful tool. And in the final rule, HRSA signaled that they would be open to considering the latter situation, where you want to buy a drug at a 340B price and it won't be sold to you.
(06:32):
Other improvements include an internal policy that developed after the first final rule came out where HRSA did not want to hear cases if the same subject matter was pending in litigation in federal court. And they moved off of that. They said, "No, actually we will hear issues, even if they're still pending in courts."
(06:52):
And then there are some other improvements. The composition of the panel will now be only Office of Pharmacy Affairs personnel. They had included CMS, or Office of the General Counsel, folks. And there was some concern that they may not have the background on 340B or they may have conflicts of interest in the case of Medicaid rebates. There was a removal of required reliance on the federal rules of civil procedure and federal evidence rules, which made the process less accessible to safety net providers because you generally need to have specialized legal knowledge to know how to apply and navigate through the federal rules of civil procedure.
(07:30):
And they also removed the barrier to entry. There was a threshold that you had to exceed before you could bring a claim. HRSA recognized that covered entities may be harmed without hitting that threshold and that it made more sense to allow them to bring claims without having a strict dollar amount that they had to hit.
David Glendinning (07:48):
Okay. So it sounds like some wins for the covered entities there, at least when we're looking at what may have changed between how this process was originally proposed and where it is now.
(07:58):
On the flip side, are there additional changes that entities wanted that are not in this final rule that just came out?
Jason Reddish (08:06):
Yes, it's definitely still not perfect. The main criticism I think is timing. The panel can still take up to a year to issue a decision. And from the covered entity perspective, if you're not getting access to a drug that you think you should be legally entitled to have access to, and you're unable to deliver that drug to patients who can't afford it, or otherwise can't help your patients access it, a year is a very long time to wait for help. It's kind of like going to the principal and saying, "This guy's punching me in the face," and they let him keep punching you in the face for a year while you figure out if he has to stop or not. So a year is a long time.
(08:42):
The other concern is that the panels aren't required to publish their full findings. And as a lawyer, one of the things that you really rely on is precedent. If I know the government will handle a certain set of facts in a certain way, I can advise clients and they can plan accordingly. And they can know if I do it this way, I'm probably going to be fine. If I do it this way, no one's really said yet. When they don't provide their reasoning, it can be really difficult to understand why the government reached the decision that it reached, and that can make it hard to understand how that decision applies to other similar or less similar factual situations.
(09:15):
It also makes it harder for those of us advising the regulated community to hold the government to consistent logic. If there's a possibility that they can change their mind and we don't know, it makes it more difficult to understand how you get from point A to point B.
(09:30):
And then the third issue that's really I think caused some waves in the 340B community is a comment in the final rule declining to clarify that the Administrative Dispute Resolution process does not apply to Medicaid-managed care duplicate discounts. And without going into great detail, the Affordable Care Act also created managed care rebates. There were no rebates on managed care drugs like there were for fee for service drugs prior to the Affordable Care Act. But when the Affordable Care Act did expand that program to managed care drugs, they included a provision that said, "If a drug's purchased at 340B pricing and billed to a managed care organization, Medicaid managed care, there's no rebate." And that takes it out of the 340B program duplicate discount prohibition, which only applies to drugs that are subject to the payment of a rebate.
(10:18):
And that's been long understood. CMS has said multiple times multiple different ways that this is the state's responsibility to not seek a rebate for these drugs. And it was strange to see HRSA say in this final rule that they don't intend for managed care rebates to be basically off limits in this process. And we don't know exactly what that means. We don't know if that means that they would expect a covered entity to repay on those types of rebates, or if they would just allow the manufacturer to engage in fact finding. But we see it as outside of the federal government's purview.
David Glendinning (10:50):
All right. So not a perfect final rule. Perhaps a work in progress, this process. Now that HRSA has put out this rule and a final process is in place, what should covered entities know about it?
Jason Reddish (11:03):
So the bottom line is that the rule creates both an offensive tool for covered entities to use to bring complaints about manufacturers to the government and to create a process for those to be resolved. But it can also be used against covered entities.
(11:18):
And the good news is the process was designed by Congress to be frankly a little more favorable to covered entities than it is to manufacturers. Covered entities can combine claims, which means if you have other similarly situated covered entities, if it's a industry-wide policy that's affecting you, you could bring that claim through an association or through a group of covered entities. Whereas if a manufacturer has an issue, they have to actually conduct an audit of the covered entity before they can initiate the ADR process.
(11:46):
So the defensive strategy begins if you are the subject of a manufacturer audit. Once that audit has occurred, it's possible for a manufacturer to dispute one of the findings and actually pull you into Administrative Dispute Resolution.
(12:01):
On the offensive side, if you are unable to access 340B pricing, you may want to consider using the ADR process, either as your yourself if it only applies to you, or gathering others that are in the same boat and seeing if there's a consolidated approach that might be more efficient.
(12:19):
No matter what path you take, both sides have to have a good faith attempt at resolution prior to turning to ADR. So really neither side is going to be surprised by an ADR complaint showing up in their inbox. It's going to follow a series of events. For manufacturers, audit, good faith resolution, hit a stalemate, then they can file an ADR petition. For covered entities, you'll have had some kind of good faith attempt to resolve the issue with manufacturers. Presumably that didn't work. And then you file the ADR complaint. So nobody should be getting these out of the blue. There should at least be some lead up to them.
David Glendinning (12:55):
What about hospitals that might be on the receiving end of a complaint? What do they need to be aware of?
Jason Reddish (13:01):
So the first thing is you probably have to respond. The final rule addresses the idea that someone might not respond to an ADR filing. And while they decided that there wouldn't be any adverse inference if you don't respond, the ADR panel's going to render its decision with or without you. So if you have any sort of evidence you could provide or argument you could make in your favor, it's going to be in your best interest to do it.
(13:26):
If you don't respond, the ADR panel's only going to hear one half of the story and they're still going to issue a decision, and that decision is still going to be binding upon you and it's going to be much more difficult to challenge that decision if you didn't participate in the process leading up to it.
(13:40):
I think most entities are probably going to want to involve an attorney if you are pulled into the ADR process. You probably will already have involved one if you are in a manufacturer audit that has adverse findings to begin with. But an attorney can help you with the history of what HRSA has said about different diversion and duplicate discount matters over the years, whether it's been consistent, whether HRSA's kind of wobbled a little bit and said different things at different times. But you probably want access to that. And 340B Health, of course, is a great resource in that respect too. They are a repository of everything HRSA has said and done for the last 30 years.
(14:15):
So if you are on the receiving end of a complaint, obviously you need to take it seriously. You're almost certainly going to want to participate, and you're almost certainly going to want to confer with industry experts who can tell you the background that may not be lingering on the internet anymore about how some of these policies came to be.
David Glendinning (14:33):
Yeah, long history there. There seem to have been fits and starts with the ADR process so far, but we can assume it's only a matter of time before some parties are able to take a complaint to its conclusion.
(14:44):
So what will happen when one of these panels at the end of the day issues a decision?
Jason Reddish (14:50):
I do think going to have decisions come relatively soon because complaints that were filed under the old rule are going to be automatically transitioned into the new rule. So there were some languishing complaints that will presumably be the first complaints heard by the ADR panel, unless the parties that brought them decide to drop them for whatever reason.
(15:09):
But the process will be that HRSA will review the evidence. They'll conduct a hearing of some sort. I'm assuming those are probably going to be mostly remote. I don't think they're going to have a live, opposing parties in the same room, hearing for these. HRSA will issue its decision. And that decision is binding, but there is an opportunity to have it by the HRSA administrator. So any decision from the ADR panel goes up a level inside HRSA for the HRSA administrator to review. They could overturn the decision if they think the evidence warrants overturning it, or they could finalize it.
(15:43):
If the HRSA administrator finalizes a decision, the only recourse from there is federal court. And in general, federal courts will review administrative agency actions and will overturn them if they're not constitutional and not in accordance with the law, arbitrary and capricious, and there are a couple other standards. So if you're unhappy with the HRSA administrator decision, your next option would be to file a complaint in federal court. Not against the manufacturer if the covered entity is unhappy, and if you're the manufacturer that's unhappy, you're not filing it against the covered entity. You're filing it against HRSA, saying that the decision they reached is not consistent with the law, arbitrary and capricious, or otherwise invalid.
(16:25):
So the risk really, and part of why the ADR process is a little concerning for covered entities, even though manufacturers have to jump through a lot of hoops to be able to use it, is that they could take some of these more, I wouldn't even say gray area items, but places where manufacturers have long complained, like infusion drugs for example. And if they can find a way to get that issue into an audit and they can find a way to get that into an ADR complaint, even if they know they're going to lose, they may have a shot to go to federal court and try to convince a federal judge that HRSA's interpretation is wrong or is based on bad law or an overexpansive reading of the law.
(17:05):
A of things have to happen for that to take place. They have to have some evidence of actual diversion or duplicate discounts to get approved for an audit in the first. They have to conduct the audit. The covered entity has to disagree with them on the audit. They have to go to the ADR process. HRSA has to find against them. They have to file a request to have the HRSA administrator look at it. They have to uphold the decision. And then they have to go to federal court.
(17:28):
But it is a pathway that didn't exist before that a manufacturer could potentially use to get some of the longstanding sticking points for manufacturers into federal court. We'd have a lot of runway before it happens. We would see it happening in slow motion. But it is a possibility now that didn't exist before.
David Glendinning (17:47):
Very interesting to know that court action is still an option after all of that shakes out.
(17:52):
Jason, this has been very informative. Any parting thoughts or advice for covered entities about the ADR?
Jason Reddish (17:59):
Yeah. I think the one challenge when you're at the outset of a new mechanism is that nobody really knows how it's going to play out. HRSA has a pretty good idea of what they think will happen. We have a decent idea of how we think HRSA thinks it will happen. But when the rubber actually hits the road, how is the hearing actually going to play out? How are they actually going to do the adversarial portion of this? And how long will it take? Will it really take a year to get these decisions? Will some decisions be fast and some decisions be slower?
(18:31):
We have a final rule. Somebody's going to use this process in the near future. And the first few pass throughs of that will be when we actually learn how it's going to play out, not just what's written in the rule, but what's kind of in between the lines on the rule and how things are actually done.
(18:46):
I think anybody who is either responding to a complaint or thinking about filing a complaint, even though the rule is set up to make it easier to enter the process or file a complaint, should probably still consult an attorney to make sure that strategically, it's still the right idea, that the goals you're trying to achieve can be achieved through the ADR, that if it's an issue that affects more than one hospital, that you're the right face for it, as opposed to an organization that wouldn't potentially draw as much attention to an individual covered entity and that can maybe pick up the needs of multiple covered entities and bring some of their experience to bear.
(19:23):
And I think in the big picture is you just need to think about your goals and you need to think about the possible ramifications of the matter, depending on how it turns out and who appeals it and where it goes from there. And you're almost certainly going to want to consult legal counsel, or at the very least 340B Health if you're a hospital, or one of your other trade organizations if you're not a hospital, to make sure that you basically are seeing around the corners.
David Glendinning (19:46):
Yes. If you hadn't said it, I would have. Always a good idea to check in with counsel.
(19:51):
So Jason, I appreciate you taking us all on this ADR journey today. I know I certainly learned a bunch about it. Thank you for being with us today.
Jason Reddish (20:00):
Well, I appreciate the opportunity. And like I said, it's always good to talk to the covered entity community and help them do the good work that they've been doing.
David Glendinning (20:09):
Our thanks again to Jason Reddish for bringing us through the long and storied history of the 340B Administrative Dispute Resolution process, and giving us a potential peek at what might be coming ahead on the ADR road.
(20:23):
Want to learn more about the ADR or other top 340B legal and compliance issues? Then be sure to register now to attend the 340B Coalition Summer Conference, occurring in the DC area July 8th to the 10th. You can sign up at 340bsummerconference.org.
(20:41):
We will be back in a few weeks with our next episode. In the meantime, as always, thanks for listening, and be well.
Speaker 1 (20:52):
Thanks for listening to 340B Insight. Subscribe and rate us on Apple Podcasts, Google Play, Spotify, or wherever you listen to podcasts. For more information, visit our website at 340bpodcast.org. You can also follow us on Twitter at 340B Health, and submit a question or idea to the show by emailing us at podcast@340bhealth.org.