October 21, 2021

Recently, HRSA verbally confirmed that it has assigned Administrative Dispute Resolution (ADR) panelists, a key development to move a handful of pending ADR complaints forward. Those complaints contain allegations that drug manufacturers violated the 340B statute by restricting access to 340B pricing in contract pharmacies. The panel assignment is good news for Covered Entities (CEs) because ADR will likely be a valuable process to recoup the significant lost 340B opportunities stemming from recent manufacturer restrictions. The ADR process permits causes of action for “monetary damages or equitable relief” occurring up to three years prior to the complaint. 42 C.F.R. § 10.21. Below are actions that CEs should consider taking now to preserve their rights and seek damages.

Polsinelli’s 340B team is actively involved in 340B ADR matters and is closely monitoring these encouraging developments. We are also monitoring and advising on recent 340B litigation developments that may impact CE rights, including litigation surrounding the validity of the ADR Final Rule discussed below. The ADR process is currently stayed as to manufacturer Eli Lilly, and decisions impacting the process as it relates to other manufacturers are expected soon. During this period of litigation, CEs should not stop evaluating and their options and taking action to protect their rights. 

Overview of ADR Implementation History

In January 2021, HRSA published its Final Rule implementing the 340B ADR process for CEs and manufacturers. The long-awaited 340B ADR process establishes a formal forum for stakeholders to bring claims for violations of certain sections of the 340B statute. CEs may file claims related to manufacturer overcharges or limitations of a CE’s ability to purchase 340B drugs set forth by manufacturers. However, due to the several lawsuits filed by manufacturers against HRSA related to the ADR Final Rule, HRSA accepted the complaints, but did not review them. HRSA’s recent assignment of ADR panels signals that although litigation continues surrounding the ADR process, HRSA now intends to move forward with reviewing ADR complaints.

Polsinelli has already prepared several CE ADR complaints for submission. Based on this recent development, we anticipate that other CEs will consider the utility of the 340B ADR process and recognize that it can be a vehicle to stay ahead of the curve. If it remains available, we believe ADR will serve as a valuable resource to prove and recover 340B damages. Stakeholders should not wait for a favorable determination in the ongoing litigation before acting, as it could be several years before the litigation concludes, and we expect the outcome of that litigation to remain focused on the individual parties to the lawsuits. In the meantime, CEs need to preserve their rights with the three-year time bar in the 340B ADR Final Rule in mind.

Finally, the recent manufacturer 340B pricing restrictions create unique circumstances and arguments regarding damages / refunds. It is conceivable that the 340B ADR process will be the only tool available to engage HRSA to resolve claims for damages.

Covered Entity Action Items

  1. Analyze drug purchasing and accumulation data to confirm locations and drugs impacted by 340B price restrictions.
  2. Request that contract pharmacies and/or third-party administrators develop a mechanism to track and report lost opportunity caused by manufacturer 340B pricing restrictions.
  3. Assess the financial impact both historically and on a go-forward basis, as the ADR process includes a three-year time bar.
  4. Document communications with manufacturers and continued denials.
  5. Produce data and documents to include in an ADR complaint.