340B Drug Pricing Program; Administrative Dispute Resolution Regulation, 80632-80646 [2020-27440]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 85, Number 240 (Monday, December 14, 2020)]
[Rules and Regulations]
[Pages 80632-80646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27440]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

42 CFR Part 10

RIN 0906-AB26


340B Drug Pricing Program; Administrative Dispute Resolution 
Regulation

AGENCY: Health Resources and Services Administration, HHS.

ACTION: Final rule.

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SUMMARY: The Health Resources and Services Administration (HRSA) 
implements section 340B of the Public Health Service Act (PHSA), which 
is referred to as the ``340B Drug Pricing Program'' or the ``340B 
Program.'' This final rule will apply to all drug manufacturers and 
covered entities that participate in the 340B Program. The final rule 
sets forth the requirements and procedures for the 340B Program's 
administrative dispute resolution (ADR) process.

DATES: This final rule is effective January 13, 2021.

FOR FURTHER INFORMATION CONTACT: RADM Krista Pedley, Director, OPA, 
HRSA, 5600 Fishers Lane, Mail Stop 13N182, Rockville, MD 20857, or by 
telephone at 301-594-4353.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 602 of Public Law 102-585, the ``Veterans Health Care Act 
of 1992,'' enacted section 340B of the PHSA entitled ``Limitation on 
Prices of Drugs Purchased by Covered Entities,'' which was codified at 
42 U.S.C. 256b. The 340B Program permits 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 Administrator of HRSA. Eligible covered entity 
types are defined in section 340B(a)(4) of the PHSA, as amended. 
Section 340B(a)(1) of the PHSA 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 PHSA ``[i]n order for payment to 
be available under section 1903(a) or under part B of title XVIII for 
covered outpatient drugs of a manufacturer.'' When a drug

[[Page 80633]]

manufacturer signs a PPA, it agrees that the prices charged for covered 
outpatient drugs to covered entities will not exceed 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 PHSA, 
which requires the Secretary to promulgate regulations establishing and 
implementing a binding ADR process for certain disputes arising under 
the 340B Program. 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 PHSA, 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. To resolve these disputes, a panel charged 
with resolving the dispute may find it necessary to resolve related 
issues such as whether someone is a ``patient'' or whether a pharmacy 
is part of a ``covered entity.'' Historically, HHS has encouraged 
manufacturers and covered entities to work with each other to attempt 
to resolve disputes in good faith. The ADR process is not intended to 
replace these good faith efforts, but should be considered as a last 
resort in the event good faith efforts to resolve disputes have failed. 
In addition, covered entities and manufacturers should carefully 
evaluate whether the ADR process is appropriate for minor claims given 
the investment of the time and resources required of the parties 
involved and the government.
    In 2010, HHS issued an advanced notice of proposed rulemaking 
(ANPRM) that requested comments on the development of an ADR process 
(75 FR 57233, Sept. 20, 2010). HHS received 14 comments. In 2016, HHS 
issued a Notice of Proposed Rulemaking (NPRM) and received 31 comments. 
The NPRM was removed from the HHS Regulatory Agenda in accordance with 
a January 20, 2017, memorandum from the Assistant to the President and 
Chief of Staff, titled ``Regulatory Freeze Pending Review,'' \1\ which 
had the effect of pausing action on the proposed rule. The Secretary, 
however, did not formally withdraw the NPRM, but rather left it open as 
a viable option. HHS considered the comments received on the NPRM in 
the development of this final rule. This final rule will replace the 
340B Program's guidelines on the informal dispute resolution process 
developed to resolve disputes between covered entities and 
manufacturers, which were published on December 12, 1996 (61 FR 65406). 
Finally, we note that in order to fairly, efficiently, and 
expeditiously resolve claims pursuant to the ADR process described in 
this final rule, the Secretary hereby delegates to each 340B ADR Panel, 
constituted from members of the 340B Administrative Dispute Resolution 
Board, the authority to make final agency decisions as set forth under 
42 U.S.C. 256b(d)(3)(C) and codified in 42 CFR part 10, as amended by 
this final rule.
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    \1\ See https://www.whitehouse.gov/presidential-actions/memorandum-heads-executive-departments-agencies/.
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II. Summary of Proposed Provisions and Analysis and Responses to Public 
Comments

    Part 10 of title 42 of the Code of Federal Regulations has been 
amended to incorporate the ADR process, which is described below in 
conjunction with comments received to each such section.

General Comments

    Comments received during the comment period addressed general 
issues. We have summarized those comments and have provided a response 
below.
    Comment: Commenters recommend that, before HRSA develops the ADR 
process, HRSA should establish foundational guidance on key issues, as 
the conditions for creating such a process are not in place. 
Specifically, commenters suggest that HRSA reform its guidelines 
regarding manufacturer audits of covered entities as they are outdated 
and do not allow for a functioning ADR process; develop manufacturer 
refund procedures for cases where 340B ceiling prices change due to 
restated Medicaid rebate metrics; finalize the process for calculating 
340B ceiling prices and imposing civil monetary penalties; and finalize 
the 340B mega-guidance.
    Response: HHS finalized the 340B Drug Pricing Program Ceiling Price 
and Manufacturer Civil Monetary Penalties (CMP) Regulation on January 
5, 2017 (82 FR 1211). That regulation addressed the calculation of the 
340B ceiling price, and imposition of CMPs on manufacturers who 
knowingly and intentionally overcharge a covered entity. Neither 
updated manufacturer audit guidelines nor the finalization of the 340B 
mega-guidance is needed to finalize the ADR process. The 340B statute 
empowers the 340B ADR Panel reviewing a claim, as set forth in this 
final rule, to determine when there have been statutory violations 
concerning overcharges, diversion, and duplicate discounts.
    Comment: Several commenters urge HRSA to adopt those conventions 
for ascertaining deadlines that are commonly used by other 
administrative bodies and courts. Commenters suggested that HRSA should 
use calendar days for deadlines rather than business days as 
misunderstandings about correct deadlines and due dates can be avoided 
if HRSA were to adopt these commonly used conventions.
    Response: HHS agrees with these comments. The ADR process will be 
governed, to the extent applicable, by the Federal Rules of Civil 
Procedure and Federal Rules of Evidence, unless the parties agree 
otherwise and the 340B ADR Panel concurs. Rule 6 of the Federal Rules 
of Civil Procedure sets out the rules for computing any time period 
specified in the Rules and that Rule will govern time computation under 
this regulation.
    Comment: Commenters urge HRSA to clarify what would constitute a de 
minimis claim given the investment of time and resources required of 
the parties involved. Commenters argue that while the parties may be 
able to assess what would constitute a reasonable materiality threshold 
that would warrant pursuing the ADR process, having a standardized 
threshold could ensure a more uniform and judicious use of the ADR 
process. Commenters recommend that covered entities could use a 
threshold of 5 percent of total 340B savings for establishing a de 
minimis claim.
    Response: HHS agrees that some disputes may be too small to warrant 
the expenditure necessary to conduct a hearing on the matter. 
Recognizing that petitioners can file jointly as warranted and that 
claims can be aggregated or consolidated, we do not believe that 
setting a jurisdictional threshold, whexwhex ere money damages are 
sought, should adversely affect any covered entity or manufacturer. We 
believe that an appropriate threshold for a claim or claims for money 
damages should be $25,000; where equitable relief is sought, however, 
there will be no threshold for past damages provided

[[Page 80634]]

that the relief sought will be the equivalent of $25,000 in the twelve 
months following the 340B ADR Panel's decision. HHS is finalizing the 
jurisdictional threshold for filing a claim in paragraph (b) of Sec.  
10.21.

Subpart C--Administrative Dispute Resolution

Sec.  10.20 Administrative Dispute Resolution Panel
    In the proposed rule, HHS sought to establish a decision-making 
body to review and resolve claims in an unbiased and fair manner, 
ensure fairness and objectiveness by avoiding conflicts of interest, 
and set forth the duties of the panel. In this final rule, HHS is 
finalizing that proposal with some modifications. In this final rule, 
the Secretary shall establish a 340B Administrative Dispute Resolution 
Board (Board) consisting of at least six members appointed by the 
Secretary with equal numbers from the Health Resources and Service 
Administration (HRSA), the Centers for Medicare & Medicaid Services 
(CMS), and the HHS Office of the General Counsel (OGC). Administrative 
Dispute Resolution Panels (340B ADR Panel) of three Board members shall 
be selected by the HRSA Administrator to review claims and, pursuant to 
authority expressly delegated through this rule by the Secretary, make 
precedential and binding final agency decisions regarding claims filed 
by covered entities and manufacturers. HRSA and CMS Board members shall 
have relevant expertise and experience in drug pricing or drug 
distribution. OGC Board members shall have expertise and experience in 
handling complex litigation.
    (a) Members of the 340B ADR Panel.
    HHS proposed that HRSA select a 340B ADR Panel to include three 
members, chosen from a roster of eligible individuals, and one ex-
officio, non-voting member chosen from the staff of the HRSA Office of 
Pharmacy Affairs (OPA) to facilitate the review and resolution of 
claims within a reasonable timeframe. HHS is modifying that proposal. 
In this final rule, the HRSA Administrator is empowered to select and 
convene three-member 340B ADR Panels, constituted from the above-
referenced Board, with one member from HRSA, CMS, and OGC with relevant 
expertise to review claims and make final agency decisions. HHS 
proposed that individuals serving on a 340B ADR Panel may be removed 
for cause. HHS is finalizing that proposal. In this final rule, if 
there is a conflict of interest, as described in paragraph (b), with 
respect to a claim, the 340B ADR Panel member will be removed from the 
340B ADR Panel and replaced by another individual from the Board.
    Finally, HHS solicited specific comments on the proposed size and 
composition of the 340B ADR Panel, in particular whether the 340B ADR 
Panel should be comprised of a set number of voting members to maintain 
consistency and transparency across each claim that is reviewed, 
whether HHS should retain the flexibility to appoint a requisite number 
of voting members based on the complexity of the claim and other 
factors, and whether the 340B ADR Panel should include at least one OPA 
staff member as a voting member or whether the inclusion of an OPA 
staff member as an ex-officio, non-voting member would be sufficient to 
ensure adherence to 340B policies and procedures.
    HHS received comments related to the composition of the 340B ADR 
Panel and after consideration of the comments received, HHS has 
determined that each 340B ADR Panel must include one attorney from OGC 
with complex litigation expertise, along with one member from HRSA and 
one member CMS, each with drug pricing, drug distribution, and other 
relevant 340B expertise. A non-voting, ex-officio member from OPA will 
assist each three-member 340B ADR Panel.
    Comment: Some commenters suggest that given that the 340B ADR Panel 
will likely review claims submitted by manufacturers that involve 
audits conducted of covered entities, the 340B ADR Panel members should 
also have demonstrated expertise or familiarity with the Government 
Audit Standards and expertise or familiarity with the 340B Program, in 
order to properly assess the quality of the audit conducted.
    Response: HHS believes the requirements set forth in the final rule 
allow for 340B ADR Panels with a wide breadth of experience that will 
ensure an equitable review and fair outcome. In addition, each 340B ADR 
Panel will include a non-voting member of OPA who would bring 
additional 340B Program expertise to the ADR proceedings.
    Comment: Several commenters support the 340B ADR Panel's 
composition as proposed, specifically with respect to limiting the 340B 
ADR Panel to three members to maintain consistency and transparency 
across each claim reviewed while asserting that a rotation of members 
will lead to conflicting decisions and inconsistency in dispute 
decisions. Some commenters recommend that the final rule establish a 
fixed pool of seven potential 340B ADR Panel members who would serve on 
the pool for a defined term. In addition, the commenters explain that 
340B ADR Panel members would not develop expertise in the details of 
340B policies if they only occasionally served on the 340B ADR Panel.
    Response: HHS disagrees that appointing a permanent board rather 
than alternating individuals is the best course. The United States 
Courts of Appeals operate in panels of three and intra-circuit splits 
are rare. We are concerned that a single permanent panel may be unable 
to fairly, efficiently, and expeditiously hear and resolve cases.
    Comment: Commenters support the inclusion of at least one OPA staff 
member as an ex-officio, non-voting member to ensure adherence to 340B 
policies and procedures. However, other commenters argue that OPA staff 
cannot be impartial due to their day-to-day involvement with the 340B 
Program. These commenters argue that even a non-voting member would 
exercise too much influence over the voting members, particularly if 
the voting members serve only part-time on the 340B ADR Panel.
    Response: HHS appreciates the comments outlining both support and 
concern with OPA's participation in the process. HHS believes that 
participation of an OPA staff member as a non-voting, ex officio member 
is beneficial to the 340B ADR Panel to allow for quick and efficient 
responses to questions regarding the 340B statute, regulations, and 
policy and that an OPA staff member would not exercise undue influence 
over the three voting members. The OPA staff member or members, as the 
case may be, will be appointed by the Secretary to serve as a non-
voting, ex officio member or members. See Federal Election Comm'n v. 
NRA Political Victory Fund, 6 F.3d 821 (D.C. Cir. 1993), cert. 
dismissed for want of jurisdiction, 513 U.S. 88 (1994).
    Comment: Commenters opposing OPA staff being involved or 
participating on the 340B ADR Panel suggest that HRSA designate HHS 
Administrative Law Judges (ALJs) to decide 340B disputes. They argue 
that ALJs would be in the best position to resolve 340B disputes as 
ALJs have training to decide administrative law issues correctly, and 
using an ALJ would ensure an objective evaluation of each dispute by 
separating the dispute resolution function from HRSA's day-to-day 
activities and duties.
    Response: The involvement of an OPA staff member as a non-voting, 
ex officio has been addressed above. HHS disagrees that ALJ's are best 
positioned to resolve 340B disputes. The

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Department's established cadre of ALJs to resolve disputes between the 
Department and private entities involving federal funds whether through 
grants, contracts, or under benefit programs such as Medicare. Here, 
the 340B ADR Panels are more akin to an arbitration panel focusing on 
complex commercial arrangements between private actors, where Federal 
funds may not be directly involved. In this final rule, HHS is 
establishing 340B ADR Panels, which are uniquely situated to handle the 
complexities of the 340B Program and related disputes.
    Comment: Commenters recommend that the final rule include a 
provision that allows either party to object to a particular 340B ADR 
Panel member.
    Response: HHS appreciates the comment but believes this is 
unnecessary as 340B ADR Panel members will be screened for conflicts of 
interest before reviewing a claim.
    (b) Conflicts of interest.
    To ensure fairness and objectiveness, HHS proposed that each 340B 
ADR Panel member be screened prior to reviewing a claim and not be 
allowed to conduct a review if any conflicts of interest exist. For 
example, the individual would not review a claim if he or she has a 
conflict of interest with respect to the parties involved in the claim 
or the subject matter of the claim. HHS proposed that individuals be 
screened for conflicts of interest in accordance with U.S. Office of 
Government Ethics policies and procedures applicable to Federal 
employees. Conflicts of interest may include the following: (1) 
Financial interest; (2) family or close relation to a party involved; 
and (3) current or former business or employment relation to a party. 
HHS received comments in support of the provision to review for 
conflicts of interest and is finalizing this section as proposed. Below 
is a summary of the comments received and HHS' responses.
    Comment: Several commenters agree that the 340B ADR Panel members 
should have demonstrated expertise or familiarity with the 340B 
Program. These commenters also agree that the 340B ADR Panel members be 
screened for potential conflicts of interest. Commenters suggest that 
the final rule include flexibility to expand the 340B ADR Panel beyond 
the three members to ensure expeditious review of complex 340B claims.
    Response: HHS appreciates the comments regarding the expansion of 
340B ADR Panel members; however, it does not believe adding more 
members would expedite the review process.
    (c) Duties of the 340B ADR Panel.
    HHS proposed that once the 340B ADR Panel receives a claim, the 
340B ADR Panel would consider all documentation provided by the parties 
and may request additional information or clarification from any party 
involved with the claim.
    After further consideration, HHS has determined that a 340B ADR 
Panel reviewing a claim may consult with OPA subject matter experts 
regarding 340B program requirements, may entertain motions to dismiss 
pursuant to Rule 12 of the Federal Rules of Civil Procedure, may permit 
limited discovery, as necessary, may entertain motions for summary 
judgment (see Fed. R. Civ.P. 56), and may hold evidentiary hearings as 
necessary. The 340B ADR Panel's final agency decision must represent 
the decision of a majority of the 340B ADR Panel members, but need not 
be unanimous. The 340B ADR Panel's final agency decision shall be 
precedential and binding on the parties to the claim. HHS did not 
receive any comments related to the duties of the 340B ADR Panel. This 
final rule provides the 340B ADR Panel significant discretion in 
determining relevant material to consider and the manner to conduct its 
evaluation.
    As with typical administrative hearings, the petitioner in an ADR 
proceeding would bear the burden of persuasion by a preponderance of 
the evidence. See Administrative Procedure Act, 5 U.S.C. 556(d) (``the 
proponent of a rule or order shall have the burden of proof.''); 
Director, OWCP v. Greenwich Collieries, 512 U.S. 267 (1994).
Sec.  10.21 Claims
    (a) Initiating an action. In the NPRM, HHS proposed deadlines and 
procedures for filing a claim in Sec.  10.21(f). To address some 
redundancies, HHS is consolidating and finalizing the requirements for 
initiating an ADR action in a new paragraph (a) of Sec.  10.21. 
Correspondingly, the comments received on the proposals in the NPRM 
regarding deadlines and procedures for filing a claim are addressed 
here in paragraph (a).
    In the NPRM, HHS proposed that covered entities and manufacturers 
file a claim demonstrating that they satisfy certain threshold 
requirements and that the party filing a claim must send written notice 
to the opposing party regarding the claim within 3 business days of 
submitting the claim and the party must submit confirmation of the 
opposing party's receipt or acknowledgement of receipt. HHS also 
proposed that the written notice to the opposing party must include a 
summary of the documents submitted as part of the claim. HHS proposed 
that information will be reviewed that is submitted as part of the 
claim to verify that the requirements for filing a claim have been met. 
The initiating party would then be contacted once the claim has been 
received and may request additional information before accepting a 
claim for review by the 340B ADR Panel. If HRSA requests additional 
information, the party filing the claim would have 20 business days of 
receipt of the request to respond. Claims would not move forward for 
review by the 340B ADR Panel if a party files a claim for any purpose 
other than those specified in the statute (i.e., overcharging, 
duplicate discount, or diversion), or if the alleged violation occurred 
more than 3 years before the date of filing the claim.
    HHS proposed that a determination will be made as to whether all 
requirements are met and provide written notice to all parties within 
20 business days after receiving the claim and any subsequently 
requested information. If it is determined the claim includes all 
necessary documentation and meets the requirements for filing a claim, 
the claim would be forwarded to the 340B ADR Panel for review. 
Additional information would be provided on the 340B ADR process to all 
parties at that time, including contact information for requested 
follow-up communications and an approximate timeframe for the 340B ADR 
Panel's review.
    HHS proposed that if the claim does not move forward for review by 
the 340B ADR Panel, written notice would be sent to the parties 
involved that includes the basis for the determination and would advise 
the party that they may revise and refile the claim if the party had 
new information to support the alleged statutory violation.
    HHS is finalizing these filing requirements with some changes. Any 
covered entity or manufacturer may initiate an action for monetary 
damages or equitable relief against a manufacturer or covered entity, 
as the case may be, by filing a written petition for relief with HRSA 
that satisfies all of the requirements set forth in this section. The 
parties may voluntarily submit additional information to substantiate a 
claim. In this final rule, HHS also clarifies that the party filing a 
claim must mail a copy of its petition, along with any attachments, to 
the General Counsel or other senior official (e.g., Executive Director) 
opposing party or legal counsel for the opposing party, if applicable, 
at its principal place of business by certified mail, return receipt 
requested, within three days of filing the

[[Page 80636]]

claim with HRSA. HHS intends for the 340B ADR Panel to have wide 
latitude to define the proper course of conduct, scope of the process, 
and any additional instructions necessary or desirable for the ADR 
proceedings. HHS underscores that the 340B ADR Panel may in its sole 
judgment request additional information from the parties to ensure that 
it will be able to conduct a fair, efficient, and expeditious review of 
a claim. Our summary of the comments and responses follow.
    Comment: Some commenters request that just as covered entities have 
advance notice of potential claims due to a prior audit, manufacturers 
should also know about a potential covered entity's claim so that the 
parties can make good faith efforts to resolve the claim. These 
commenters explain that such an early notification requirement for 
covered entities would reinforce HHS' efforts to limit the ADR process 
to disputes that cannot be resolved informally and would be consistent 
with the requirement suggested earlier in this letter that any claim 
(whether asserted by a manufacturer or covered entity) must be 
accompanied by documentation of prior good faith efforts to resolve the 
dispute. Advance notification of potential claims and the opportunity 
to resolve them are crucial. Accordingly, manufacturers should have the 
same advance notice of potential claims as covered entities that learn 
of such claims due to a prior audit.
    Response: While HHS appreciates the comments regarding advance 
notification to manufacturers of claims, it does not agree with the 
assertion that a manufacturer audit constitutes notification of a 
manufacturer filing an ADR claim. If a manufacturer engages in ADR 
after an audit of a covered entity, the manufacturer must provide 
written notice. Further, HHS believes there is already a process in 
place for good faith negotiations between manufacturers and covered 
entities that occurs before filing an ADR claim.
    Comment: When reviewing the sufficiency of a claim, HHS proposed 
that HRSA will decide whether a claim will move forward for review. 
Commenters request that HRSA include an additional safeguard clarifying 
that the individual or individuals who review the sufficiency of a 
claim should not be involved further in the process. The 340B ADR Panel 
should receive the claim (including any supporting documentation and 
response) as one complete package. That way, the 340B ADR Panel would 
be able to review the claim as a matter of first impression. The 340B 
ADR Panel could remain impartial, and would not be prejudiced by any 
claims that are initially deemed inadequate or that are further refined 
through additional documentation.
    Response: HHS disagrees that the 340B ADR Panel could not remain 
impartial or would be prejudiced by claims that are initially deemed 
inadequate or that are further refined through additional 
documentation. In any event, HHS anticipates that the 340B ADR Panel 
will receive a complete package with all of the supporting 
documentation that is submitted by the parties for ADR review and 
resolution.
    (b) 340B ADR Panel's jurisdiction. In response to comments received 
as discussed above (General Comments), HHS is finalizing this new 
paragraph (b), which provides that the 340B ADR Panel shall have 
jurisdiction to entertain any petition where the damages sought exceed 
$25,000 or where the equitable relief sought will likely have a value 
of more than $25,000 during the twelve-month period after the 340B ADR 
Panel's final agency decision, provided the petition asserts claims of 
the type set forth below.
    (c) Claims permitted.
    Section 7102 of the Affordable Care Act added section 340B(d)(3) of 
the PHSA, which instructs the Secretary to establish and implement a 
binding ADR process to resolve certain 340B Program statutory 
violations. Section 340B(d)(3)(A) of the PHSA 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 PHSA, that a covered entity has violated the 
prohibitions against duplicate discounts and diversion (sections 
340B(a)(5)(A) and (B) of the PHSA). This includes covered entity 
eligibility, patient eligibility, or manufacturer restrictions on 340B 
sales that the 340B ADR Panel deems relevant for resolving an 
overcharge, diversion, or duplicate discount claim. Each 340B ADR Panel 
will necessarily have jurisdiction to resolve all issues underlying any 
claim or defense, including, by way of example, those having to do with 
covered entity eligibility, patient eligibility, or manufacturer 
restrictions on 340B sales that the 340B ADR Panel deems relevant for 
resolving an overcharge, diversion, or duplicate discount claim in a 
fair, efficient, and expeditious manner.
    Comment: Some commenters suggest that the proposed rule's 
requirement that permits claims by a manufacturer only after it has 
conducted an audit of a covered entity pursuant to section 
340B(a)(5)(c) of the PHSA is overly burdensome. These commenters claim 
that in addition to audits being costly and time-consuming, there are 
instances where an audit of a covered entity is not possible, but a 
legitimate basis for a dispute exists. For example, a covered entity 
may reasonably or unreasonably withhold audit information or behave in 
a manner that would make an audit ineffective.
    Response: HHS disagrees that the process for conducting an audit of 
a covered entity is improperly burdensome. More important, HHS does not 
have the authority to waive this statutory requirement. Section 
340B(d)(3)(B)(iv) of the PHSA states that the ADR process requires 
``that a manufacturer conduct an audit of a covered entity pursuant to 
subsection (a)(5)(C) as a prerequisite to initiating administrative 
dispute resolution proceedings against a covered entity.''
    Comment: Some commenters recommend that HHS clarify that it is 
outside of the jurisdiction of the ADR process for a covered entity to 
pursue claims which challenge a manufacturer's Average Manufacturer 
Price (AMP) or best price (BP) calculations as a covered entity's 
claims are limited to the allegation that they were overcharged 
relative to the statutory 340B ceiling price as calculated using the 
manufacturer's current ``as submitted'' AMP and BP data.
    Response: Section 340B(d)(3)(A) of the PHSA states, in part, that 
the ADR process is to resolve claims of alleged 340B overcharges. HHS 
believes that to do so, the 340B ADR Panel may find it necessary to 
assess whether the manufacturer's claimed ``ceiling price'' is in fact 
accurate. Even though a challenge to the claimed ceiling price is 
within the 340B ADR Panel's jurisdiction and any potential overcharges 
that may have resulted from an incorrect ceiling price, a challenge to 
a manufacturer's AMP or BP calculations is beyond the scope of this 
jurisdiction.
    Comment: A few commenters recommend that HRSA consider allowing the 
parties the opportunity to voluntarily select mediation, as opposed to 
arbitration, as a mechanism for resolving disputes. Only after the 
attempt at mediation proves unsuccessful or if the parties do not agree 
to meditation, then the process should move to binding arbitration 
before the 340B ADR Panel.
    Response: HHS appreciates the comments regarding the ability of the 
parties to select mediation as opposed to

[[Page 80637]]

arbitration. HHS notes that there is already an informal process in 
place for good faith negotiations between covered entities and 
manufacturers to attempt to resolve 340B disputes before pursuing ADR.
    (d) Limitations of actions.
    In the NPRM, HHS proposed that the covered entity and the 
manufacturer meet certain requirements for filing an ADR claim set 
forth in proposed paragraph (d). The proposed requirements would ensure 
that a claim of the type specified in section 340B(d)(3)(A) of the PHSA 
is the subject of the dispute.
    The Department proposed that covered entities and manufacturers 
file a written claim, based on the facts available, or that should have 
been available, within 3 years of the date of the sale at issue in the 
alleged violation and that any claim not filed within 3 years would 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. The 
party filing the ADR claim would need to submit documents with each 
claim to verify that the alleged violation is not time barred. This 
proposed requirement would prevent a party from asserting a claim that 
is stale.
    HHS also proposed that any file, document, or record associated 
with a claim be maintained by the covered entity or manufacturer until 
the 340B ADR Panel's final agency decision is issued unless the 340B 
ADR Panel provides otherwise. HHS received comments both agreeing with 
and questioning the timeframe proposed. HHS is finalizing this 
provision of the rule as proposed, with some modifications, to ensure 
consistency with requirements set forth in 340B PPAs setting record 
retention for 3 years for both manufacturers and covered entities. 
Below is a summary of the comments received and HHS' responses.
    Comment: While many commenters agree with the effort to establish a 
timeframe by which the parties should file a claim, many disagree with 
the proposed 3-year requirement and suggest a period of at least 5 
years. Certain commenters urge HHS to extend the document retention 
period to take into account the length of manufacturer audits and the 
time it may take to work with manufacturers on potential solutions 
(e.g., which could include beginning the 3-year period on the date that 
the required covered entity audit is concluded, or other similar 
solutions). Other commenters urge HHS to adopt a different start date 
based on when a manufacturer restates the 340B ceiling price or when a 
covered entity discovers that the manufacturer should have restated the 
340B ceiling price.
    Response: HHS is changing the title of paragraph (d) to 
``Limitation of Actions'' in this final rule. HHS appreciates comments 
regarding the requisite record retention period. HHS plans to finalize 
the 3-year period to be consistent with the PPA record retention 
requirements that apply to both covered entities and manufacturers. 
However, the three-year time limit would be subject to normal rules 
governing statutes of limitations that are not jurisdictional, 
including the doctrine of equitable tolling. See United States v. Wong, 
575 U.S. 402, No. 13-1074 (2015); United States v. June, 575 U.S. 402, 
No. 13-1075 (2015).

Covered Entity Claims

    In the NPRM, HHS proposed that to be eligible for the ADR process, 
each claim filed by a covered entity must include documents sufficient 
to demonstrate a covered entity's claim that it has been overcharged by 
a manufacturer, along with any such documentation as may be requested 
to evaluate the veracity of the claim. Such documentation may include: 
(1) A 340B purchasing account invoice which shows the purchase price by 
national drug code (NDC), 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; and (3) documentation of the attempts made to 
purchase the drug via a 340B account at the ceiling price, which 
resulted in the instance of overcharging. HHS believes that these 
documents are readily available to a covered entity through the usual 
course of business and should not be overly burdensome to produce. HHS, 
however, recognizes that in some cases, a covered entity or 
manufacturer may not have access to all needed documentation. HHS may 
also request that a party in need of information provide it with a 
written summary of attempts to work in good faith to resolve issues 
with the other party. In cases where documents are essential to a case, 
but not in the possession of one party and are not provided voluntarily 
by the other party, the 340B ADR Panel may request the documents and 
ensure that they become a part of the administrative record and that in 
most cases, summary judgment would not be entertained where there are 
outstanding documents in the possession of the party seeking summary 
judgment but not in the possession of the other party. HHS received 
comments recommending additional instructions on how to file claims and 
the type of information requested, which are addressed below. HHS 
clarifies in this final rule that notwithstanding Rules 8 and 10 of the 
Federal Rules of Civil Procedure, a covered entity filing a claim 
described in paragraph (c)(1) of this section must provide documents 
sufficient to demonstrate in its claim that it has been overcharged by 
a manufacturer, along with any such other documentation as may be 
requested by the 340B ADR Panel.
    Comment: Some commenters recommend that HHS should separate covered 
entity documentation requirements for the different types of 
illustrative overcharge claims: (1) Claims that the initial purchase 
price of a drug purchased by the covered entity exceeded the ceiling 
price at that time; and (2) claims that the purchase price of a drug 
should have been adjusted downward later and a refund should have been 
issued at a specified later point in time, but was not issued within 
the time period required under HRSA's yet-to-be-developed refund 
procedure.
    Response: HHS disagrees and believes the documentation requirements 
set forth in this final rule will provide, in most cases, the necessary 
information to ascertain the type of overcharge a covered entity is 
alleging in its claim. Where that is not the case, the petitioner would 
be entitled to limited discovery, in the case of a covered entity, or 
an opportunity to make an information request to the 340B ADR Panel, in 
the case of a manufacturer.
    Comment: Commenters object to the requirement that covered entities 
would need to submit 340B ceiling price information when initiating a 
claim. According to those commenters, the proposed rule did not 
consider that covered entities do not have access to 340B ceiling 
prices, and this information is central to proving that a manufacturer 
overcharged for a drug. These commenters suggest that HRSA fast-track 
the development of the ceiling price system that would ensure a level 
playing field in the ADR process.
    Response: HHS has acted to ensure that covered entities have access 
to the 340B ceiling price, through its launch of the pricing component 
of the 340B Office of Pharmacy Affairs Information System in January 
2019. Every active covered entity has access to the pricing component 
of 340B OPAIS and can view the prices of all active National Drug Codes 
(NDC) in the 340B Program. A covered entity's authorizing official and 
primary contact have secure access through an account and two-factor

[[Page 80638]]

authentication. A manufacturer's authorizing official and primary 
contact also have access to this secure, online system to view the 
prices of their company's NDCs.

Manufacturer Claims

    In the NPRM, HHS proposed that, to be eligible for the 340B ADR 
process, each manufacturer claim must include documents sufficient to 
demonstrate that a covered entity has violated the prohibition on 
diversion or duplicate discount. After receiving such a claim, HRSA may 
request the following documentation for an initial screening of the 
claim: (1) A final audit report to indicate that the manufacturer 
audited the covered entity for compliance with the prohibition on 
diversion (section 340B(a)(5)(B) of the PHSA) or duplicate discounts 
(section 340B(a)(5)(A) of the PHSA), and (2) the covered entity's 
written response to the manufacturer's audit finding(s). HRSA may also 
request that the manufacturer submit a written summary of attempts to 
work in good faith to resolve the claim with the covered entity. In 
this final rule, HHS clarifies that it is the 340B ADR Panel that is 
reviewing a claim that is responsible for making a request for 
documents or other information from a party, and not HRSA. We further 
note that notwithstanding Rules 8 and 10 of the Federal Rules of Civil 
Procedure, a manufacturer filing a claim under paragraph (c)(2) of this 
section must provide documents sufficient to demonstrate its claim that 
a covered entity has violated the prohibition on diversion or duplicate 
discount, along with any such documentation as may be requested by the 
340B ADR Panel.
    Comment: Commenters express concern that the causes of actions for 
manufacturers to file a claim are limited to two instances (diversion 
and duplicate discounts) and recommend that they be broadened to 
include other legitimate claims, particularly for other unforeseen 
examples that may emerge. The commenters recommend an inclusion of 
``catch-all'' language that would allow the 340B ADR Panel to accept 
other legitimate claims, such as a dispute of the covered entity's 
eligibility that led the manufacturer to grant the 340B ceiling price, 
or a dispute concerning the dollar amount attributable to a violation.
    Response: HHS agrees that in adjudicating claims of duplicate 
discounts and diversion, it may be necessary for a 340B ADR Panel to 
address issues such as covered entity eligibility in making its 
decisions. HHS is clarifying in this final rule that a 340B ADR Panel's 
review of diversion and duplicate discounts may include a review of 
issues such as whether an individual does not qualify as a patient for 
340B Program purposes and claims that a covered entity is not eligible 
for the 340B Program. These issues, although they may appear ancillary, 
would be entertained because they may determine the outcome of any 
claim by the manufacturer that the covered entity has engaged in 
diversion.
    Comment: Commenters recommend that HHS exclude specific types of 
allegations involving duplicate discounts, including the following: (1) 
The allegation involves duplicate discounts on claims submitted to 
Medicaid managed care organizations (MCOs); (2) the covered entity 
incorrectly elected Medicaid carve-out status on the OPA database or 
failed to include state-mandated modifiers on its claims, but the state 
Medicaid agency did not claim rebates on the 340B drugs purchased by 
the covered entity; and (3) a covered entity has correctly listed its 
carve-in status on the OPA database and has included state-mandated 
modifiers on its claims, or otherwise followed state requirements to 
identify 340B drugs, but the state Medicaid agency claimed rebates on 
the 340B drugs purchased by the covered entity nonetheless.
    Response: HHS appreciates these comments, and 340B ADR Panels will 
consider the first and third types of claims listed above as section 
340B(d)(3)(B) of the PHSA states that the decision-making body or 
official shall be responsible for considering manufacturer duplicate 
discount claims (violations of section 340B(a)(5)(A) of the PHSA). 340B 
ADR Panels will not consider claims where the covered entity 
incorrectly elected Medicaid carve-out status on the OPA database or 
failed to include state-mandated modifiers on its claims, but the state 
Medicaid agency did not claim rebates on the 340B drugs purchased by 
the covered entity, as manufacturers would have not demonstrated that 
the drugs at issue were subject to duplicate discounts under the 
Medicaid Drug Rebate and the 340B Programs.
    (e) Combining claims.
    In the NPRM, HHS proposed that, if requested, covered entities or 
manufacturers may be permitted to combine their individual claims. 
Section 340B(d)(3)(B)(vi) of the PHSA permits ``multiple covered 
entities to jointly assert claims of overcharges by the same 
manufacturer for the same drug or drugs in one administrative 
proceeding . . . .'' HHS proposed that for joint claims, the claim must 
list each covered entity and include documentation or information from 
each covered entity demonstrating that the covered entity meets all of 
the requirements for filing a claim with HHS and that a letter 
requesting consolidation of claims must also accompany the claim and 
must document that each covered entity consents to the consolidation of 
the claims.
    Pursuant to section 340B(d)(3)(B)(vi) of the PHSA, joint claims are 
also permitted on behalf of covered entities by associations or 
organizations representing their interests. Therefore, HHS proposed 
that the covered entities must be members of the association or the 
organization representing them and that each covered entity must meet 
the requirements listed in paragraph (d) for filing a claim. The 
proposed joint claim must assert overcharging by the same manufacturer 
for the same drug(s), and the organization or association will be 
responsible for filing the claim. HHS also proposed requiring that a 
letter requesting consolidation of claims must accompany the claim and 
must document that each covered entity consents to the organization or 
association asserting a claim on its behalf.
    Similarly, at the request of two or more manufacturers, section 
340B(d)(3)(B)(v) of the PHSA permits the consolidation of claims 
brought by more than one manufacturer against the same covered entity 
if consolidation is appropriate and consistent with the statutory goals 
of fairness and economy of resources. HHS proposed that the claim must 
list each manufacturer and include documentation or information from 
each manufacturer demonstrating that the manufacturer meets the 
requirements listed in paragraph (d) for filing a claim. HHS also 
proposed 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. 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 did not propose this 
option in the NPRM.
    With regard to the consolidation of claims by manufacturers against 
a covered entity, HHS sought specific comment on the grounds under 
which consolidation would be consistent with the statutory goals of 
fairness and economy of resources, as required by section 
340B(d)(3)(B)(v) of the PHSA. In addition, while HHS proposed, as 
required by the 340B statute, an ADR

[[Page 80639]]

process that allows manufacturers to consolidate claims against a 
covered entity, we recognized the operational challenges presented by 
the statutory requirement for a manufacturer to first audit the covered 
entity. HHS, therefore, sought comment on how manufacturers requesting 
a consolidated claim against a covered entity could satisfy the audit 
requirement. HHS received comments regarding the combining of claims 
for both manufacturers and covered entities. Both covered entities and 
manufacturers request the same drugs and alleged violations be present 
when making a request for combining claims and entering into the 
dispute process. HHS is finalizing this section as proposed as it did 
not receive specific comments on how to address the operational 
challenges set forth in the proposed rule and believes the process 
proposed to be sound, fair, and equitable to both parties. However, it 
should be noted that consolidation of claims by manufacturers against a 
single covered entity, or joint claims by multiple covered entities 
against one manufacturer shall be governed by this section guided by 
the relevant Rules of the Federal Rules of Civil Procedure (Rules), 
including Rules that contemplate multiple petitioners. Additionally, 
joinder, consolidation, and other third-party practice not referenced 
in this subsection (e) shall be governed by the Rules, as relevant, 
unless the parties and 340B ADR Panel agree otherwise. Below is a 
summary of the comments received and HHS' responses.
    Comment: For consolidated manufacturer claims, commenters request 
that HHS should add a requirement that: (1) All manufacturers assert 
covered entity duplicate discount violations, diversion violations, or 
both arising out of the same policy or practice by the covered entity; 
and (2) all manufacturers assert these violations during the same time 
period. HHS must also recognize manufacturers' right to pursue claims 
(consolidated or otherwise) through a trade association or other agent 
of their choice.
    Response: HHS disagrees. HHS believes that the above proposal would 
unnecessarily limit the scope of claims that could be brought against a 
covered entity, when the 340B statute provides only that the claim be 
based on a duplicate discount or diversion. The statutory ADR 
provisions allow associations to file joint ADR claims on behalf of 
covered entities; however, it does not include similar language for 
associations to file consolidated claims filed on behalf of 
manufacturers. Therefore, HHS will not alter the final rule to permit 
joint claims by associations representing manufacturers.
    Comment: While the proposed rule outlines that covered entities 
must submit a letter requesting consolidation of claims, some 
commenters suggest that HHS further require covered entities to provide 
proof of consent of an organization or association asserting a claim on 
the covered entities' behalf. These commenters argue that the proposed 
rule implies that a covered entity would have to request and be granted 
permission in order to combine claims, which is not consistent with the 
statute.
    Response: Section 340B(d)(3)(vi) allows for the combining of claims 
by a covered entities and does require proof of consent. HHS has 
outlined a process for resolving 340B disputes and has given the 340B 
ADR Panels wide latitude to establish the proper course of conduct and 
scope of the process including any additional deadlines, procedures, or 
instructions that may be necessary or desirable for a fair, efficient, 
and expeditious ADR proceeding.
    Comment: Commenters recommend that HHS clarify that multiple 
covered entities may combine claims as long as they have in common an 
overcharge allegation relating to at least one of the same NDCs. For 
example, if one covered entity alleges overcharges against a 
manufacturer for three NDCs and another covered entity alleges 
overcharges against the same manufacturer for two out of three of those 
NDCs (potentially because the second covered entity only purchased two 
of the three drugs), these commenters suggest that covered entities 
should be permitted to combine their claims.
    Response: Section 10.21(e) allows for the combining of covered 
entities' overcharge claims against the same manufacturer for the same 
drug or drugs. The 340B statute does not require that joint claims 
contain overcharge claims for the identical set of NDCs. Section 
340B(d)(3)(B)(vi) states that ``multiple covered entities . . . (may) 
jointly assert claims of claims of overcharges by the same manufacturer 
for the same drug or drugs in one administrative proceeding[.]''
    (f) Responding to a submitted claim.
    In the NPRM, HHS proposed that once the parties have been notified 
that the claim has met the filing requirements (subsection (b) of the 
NPRM) and will move forward for review by the 340B ADR Panel, the 
opposing party will have 20 business days to submit a written response 
to the allegation to the 340B ADR Panel. The 340B ADR Panel may make 
subsequent requests for information regarding the claim as needed, and 
will consider any additional information provided by the named parties 
involved. However, if an opposing party does not respond to the ADR 
Panel's request for information or otherwise elects not to participate 
in the 340B ADR process, the 340B ADR Panel will issue its decision on 
the claim based on the information submitted in the claim. Commenters 
raised concerns regarding the lack of detail as it relates to 
timeframes and recommends set timeframes.
    After consideration of the comments received, HHS is finalizing 
this section with some changes. In this final rule, HHS is extending 
the timeframe for responding to a claim. After an initiating party (or 
Petitioner) has received notification from HRSA that its claim will 
move forward to a 340B ADR Panel for review, the opposing party (or 
Respondent) will have 30 days to submit a written response to the 340B 
ADR Panel that may be of the type authorized by Rules 12, 13, or 56 of 
the Federal Rules of Civil Procedure. The 340B ADR Panel may issue 
additional instructions as may be necessary or desirable governing the 
conduct of ADR proceedings, including instructions pertaining to 
deadlines for submission of additional information that it may request. 
If the opposing party does not respond to the claim from the 
Petitioner, the 340B ADR Panel may enter a final agency decision by 
default in favor of the Petitioner. HHS believes that in a proceeding 
for damages, the Petitioner must still introduce evidence sufficient to 
support its claim for damages even though the merits have been resolved 
through default.
    Comment: Several commenters raise concerns about the proposed 
rule's lack of detail regarding the timeframes for the 340B ADR Panel. 
They suggest that to better ensure predictability of the ADR process, 
HRSA should establish discreet timeframes for each of the steps in the 
ADR process for which HRSA is responsible. They explain that 
identifying these timeframes in the final rule will improve 
transparency of the process for all parties involved.
    Response: HHS disagrees with the assertion that detailed timeframes 
must be established at this juncture for each step in the ADR process. 
Flexibility is needed as each dispute will be evaluated on its merits 
and the documents presented, and some disputes may take longer than 
others based on the level of complexity. The 340B ADR Panel is 
empowered to utilize the deadlines set forth in the

[[Page 80640]]

Federal Rules of Civil Procedure as necessary.
    Comment: Some commenters recommend that HRSA change the period to 
respond to claims to 60 days as opposed to 20 business days, with 
potential extensions if needed. These commenters urge HRSA to provide 
more flexibility, especially as those involved in the process may not 
have had adequate prior notice of the subject of the claim. The 
commenters claim that the proposed 20 business day response time frame 
does not provide manufacturers sufficient time to review the data 
underlying a claim, assess the factual or legal questions raised by the 
claim, and prepare a response.
    Response: HHS recognizes that there will be instances that require 
time beyond the stated deadlines. HHS has included in the final rule a 
provision that the ``340B ADR Panel may issue additional instructions 
as may be necessary or desirable governing the conduct of ADR 
proceedings, including instructions pertaining to deadlines for 
submission of additional information.''
Sec.  10.22 Information requests
    Pursuant to section 340B(d)(3)(B)(iii) of the PHSA, regulations 
promulgated by the Secretary for the 340B ADR process will establish 
procedures by which a covered entity may discover and obtain 
information and documents from manufacturers and third parties as may 
be relevant to a claim that the manufacturer has overcharged the 
covered entity. The NPRM proposed that such covered entity information 
requests be facilitated by the 340B ADR Panel. HHS proposed that a 
covered entity must submit a written request for information to the 
340B ADR Panel no later than 20 business days after the entity was 
notified that the claim would move forward for the 340B ADR Panel's 
review. The 340B ADR Panel will review the information/document request 
to ensure that it is reasonable and within the scope of the asserted 
claim. The 340B ADR Panel will notify the covered entity in writing if 
its request is deemed as such and permit the covered entity to submit a 
revised information/document request, if it is not.
    In this section, HHS proposed 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 proposed that the manufacturer must fully respond in 
writing to the information 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 that may facilitate sales or 
distribution of its drugs to covered entities. HHS proposed that if a 
manufacturer anticipates it will not be able to fully respond 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, the reason why the 
deadline is not feasible, and outline a proposed timeline for fully 
responding to the information 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 a manufacturer does not respond to 
a request for information, HHS proposed that the 340B ADR Panel will 
issue its decision on the claim based on the information submitted in 
the submitted claim package. Many of the commenters recommended changes 
to the ability of parties to request and receive information during the 
course of the ADR proceedings including allowing a manufacturer to 
submit an information request, which was not addressed in the NPRM.
    HHS has decided to broaden the scope of this section to include 
information requests from the 340B ADR Panel. To provide further 
guidance to the parties involved, HHS has also decided that covered 
entities' discovery shall be governed by the Federal Rules of Civil 
Procedure. While HHS limited the scope of these information requests to 
covered entities in the NPRM, consistent with the limited discovery 
requirements of the statute pertaining to covered entities, this final 
rule allows the 340B ADR Panel to request additional information from a 
party if deemed necessary to ensure that claims shall be resolved 
fairly, efficiently, and expeditiously. This leaves open the 
possibility that a drug manufacturer could petition the 340B ADR Panel 
to request further information from a covered entity. If the 340B ADR 
Panel determines that such a request would enhance its deliberations, 
the 340B ADR Panel could make the request to the covered entity. Based 
on comments received, HHS has also added (c) to this section to address 
actions the 340B ADR Panel may take if a party fails to fully respond 
to the information request.
    Comment: Some commenters recommend that a covered entity should be 
afforded an opportunity to review the manufacturer's response before 
crafting and submitting its request for additional information. Once 
the covered entity has seen the manufacturer's position, it can better 
tailor its information request to the dispute, and request only those 
documents it needs to pursue its overcharge claim. HHS should allow 
covered entities 30 calendar days from the date on which it receives 
the manufacturer's response to submit an information request.
    Response: The 340B ADR Panel is given wide latitude to determine 
the proper course of conduct in an ADR proceeding and may issue 
additional instructions as may be necessary or desirable governing the 
conduct of ADR proceedings including instructions pertaining to 
submission of additional information.
    Comment: Some commenters recommend that HHS allow manufacturers to 
submit information requests regarding disputes just as covered entities 
can. They argue that manufacturers must have the right to submit 
information requests in the event that they are unable to obtain all 
relevant information during an audit or new information relevant to the 
dispute arises.
    Response: Section 340B(d)(3)(B)(iii) of the PHSA expressly 
authorizes covered entities to ``discover and obtain such information 
and documents from manufacturers'' as may be relevant to their filed 
claims. As the statute does not provide similar authorization for 
manufacturer document requests, HHS declines to alter the final rule in 
this area. However, to the extent that a manufacturer believes an 
information request to a covered entity is necessary for the 340B ADR 
Panel's deliberations, it may petition the 340B ADR Panel to make the 
request to the covered entity.
    Comment: The proposed rule allows 340B covered entities to request 
information relevant to their claim from manufacturers and third 
parties; however, commenters argue that the proposed rule does not hold 
a manufacturer accountable for actually producing the requested 
information. These commenters recommend that if a manufacturer fails to 
comply with the information request, the 340B ADR panel should rely on 
the information contained in the original submitted claim and issue a 
finding in favor of the covered entity due to lack of

[[Page 80641]]

information obtained from the manufacturer.
    Response: HHS agrees. Section 10.22(c) has been added to address 
sanction for failure to respond or failure to respond fully to an 
information request.
    Comment: Some commenters urge HHS to consider that the filing party 
should be required to share with the responding party all of the 
documents it has filed with HRSA to ensure that the ADR process 
benefits from the full and open exchange of information. These 
commenters explain that full disclosure of the filing documents also 
might prevent some parties from seeking judicial review of 340B ADR 
Panel final agency decisions. A party dissatisfied with a 340B ADR 
Panel final agency decision might be more prone to seek judicial review 
if it has not had the opportunity to review the evidence on which the 
340B ADR Panel relied.
    Response: HHS agrees. Section 10.22(b) allows the 340B ADR Panel to 
take into account the possibility that a manufacturer would need 
additional information in order to respond appropriately to the dispute 
in question. While it is expected that a manufacturer would have all 
the information needed through its audit of a covered entity, this 
section would allow the 340B ADR Panel to make an information request 
of any party and to share that information with the opposing party if 
necessary for the fair, efficient, and expeditious conduct of the ADR 
proceeding.
Sec.  10.23 Conduct of the ADR proceeding
    HHS has added this section to address comments received regarding 
the needs of the parties as it relates to the conduct of these 
proceedings. HHS recognizes there are instances, sometimes beyond the 
control of the parties that warrant flexibility in how it conducts the 
proceedings and that may warrant additional instructions. This new 
section will allow for ADR proceedings to take place in the most fair, 
efficient, and expeditious manner, which could include video 
conference, in-person, or through other means. It will also allow the 
340B ADR Panel discretion in admitting evidence and testimony during 
the course of a proceeding as well as provide the 340B ADR Panel with 
the additional flexibility to provide instructions during the 
proceeding in order to achieve a fair, efficient, and expeditious 
review. HHS has also decided that unless the parties agree otherwise 
and the 340B ADR Panel concurs, the Federal Rules of Civil Procedure 
(https://www.uscourts.gov/sites/default/files/federal_rules_of_civil_procedure_-_dec_1_2019_0.pdf) and the Federal 
Rules of Evidence (https://www.uscourts.gov/sites/default/files/federal_rules_of_evidence_-_dec_1_2019_0.pdf), to the extent 
applicable, shall apply to proceedings. HHS has summarized and 
responded to comments received below.
    Comment: Some commenters recommend HHS provide the parties with the 
opportunity to present evidence live in front of the 340B ADR Panel. 
The commenters explain that relying exclusively on a paper record could 
potentially lengthen the ADR process if the documents were interpreted 
differently by the parties and further clarification were needed before 
proceeding. A live process could allow for questions arising from paper 
records to be answered efficiently. These commenters explain that by 
enabling parties to present evidence and respond to questions from the 
340B ADR Panel orally, HHS can provide a forum where information is 
shared among affected parties.
    Response: HHS agrees that there may be instances where portions of 
the ADR may need to be conducted by telephone or video conference, or 
through other means. Therefore, HHS has clarified the means by which 
the process may be conducted in this final rule.
    Comment: Several commenters suggest that HHS detail in the final 
rule how it plans to establish safeguards and protections to ensure 
that proprietary information submitted on behalf of either party is 
kept confidential by the 340B ADR Panel in order to minimize risk of 
harm.
    Response: HHS appreciates the suggestion on addressing safeguards 
to ensure confidentiality and minimize disclosure risk. HHS believes 
adequate safeguards are in place to ensure that confidential, 
proprietary information is not disclosed.
Sec.  10.24 Final agency decision
    In the NPRM, HHS proposed that the 340B ADR Panel would review the 
documents submitted by the parties to determine if there is adequate 
support to conclude that a violation occurred. HHS proposed a process 
whereby the 340B ADR Panel's draft agency decision letter would be sent 
to all parties, and the parties involved would have 20 business days to 
respond to the 340B ADR Panel. HHS sought specific comments on this 
process and whether this proposed process would facilitate or hinder 
the fair, efficient, and timely resolution of claims.
    HHS also proposed that once the parties have reviewed and submitted 
comments in response to the draft agency decision letter, the 340B ADR 
Panel would prepare and submit its final agency decision letter to all 
parties in the dispute. In issuing a final agency decision letter, the 
340B ADR Panel will be operating under an express, written delegation 
of authority from the Secretary of HHS to make such final agency 
decisions. This Regulation constitutes that ex officio delegation. The 
final agency decision made by the 340B ADR Panel would conclude the 
administrative resolution process; however, HHS proposed that the final 
agency decision letter also be submitted to HRSA to provide remedies 
and enforcement of determinations through mechanisms and sanctions as 
described section 340B(d)(1)(B) or (d)(2)(B), as appropriate.
    HHS proposed that the 340B ADR Panel's final agency decision letter 
would be binding upon the parties involved, unless invalidated by an 
order of a court of competent jurisdiction, acting under Section 10 of 
the Administrative Procedure Act (5 U.S.C. 706), and in accordance with 
section 340B(d)(3)(C) of the PHSA. HHS is finalizing the rule as 
proposed with modifications. First, in this final rule, HHS is 
replacing ``HSB'' with ``HRSA Administrator,'' in order to elevate the 
responsibilities conducted under the ADR process. Second, this final 
rule adds section 10.24(d), which states the final agency decision will 
be precedential and binding on the parties. Lastly, given that HHS has 
added procedural protections and more clearly defined the ADR process, 
HHS does not feel that it is necessary to provide the parties an 
opportunity to respond to a draft agency decision.
    Comment: Commenters explain that the proposed rule does not 
incorporate an appeals process and recommend that an appeals process be 
made available to all parties. These commenters also suggest that HHS 
publish all findings and decisions by the 340B ADR Panel to enable all 
parties to be informed and more compliant. These commenters suggest 
that publication of the ADR's decisions will also prevent inconsistent 
decisions and unsupported rulings.
    Response: HHS agrees, as these ADR decisions will be precedential. 
Therefore, HHS will ensure that the final agency decisions are 
publically available (e.g., by publication on the HRSA website). HHS 
does not believe that an appeals process is necessary given that an 
aggrieved party has a right to seek judicial review under section 10 of 
the Administrative Procedure Act (5 U.S.C. 706).
    Comment: When deciding disputes, some commenters suggest that the 
340B ADR Panel use a ``preponderance of the

[[Page 80642]]

evidence'' standard. Once the 340B ADR Panel reaches its decision, HHS 
should mandate the issuance of a summary that includes a transparent 
analysis of the reasons for the decision, without disclosing any 
proprietary or otherwise confidential information. HHS should also 
recognize that the 340B ADR Panel decision is binding on the parties 
involved in the dispute (unless otherwise overturned by a court acting 
pursuant to the Administrative Procedure Act), but is not binding on 
third parties.
    Response: HHS agrees, as the final agency decisions will be 
precedential and binding on the named parties in the dispute. As such, 
HHS will ensure that all final agency decisions are publically 
available. HHS also agrees that the 340B ADR Panel use a 
``preponderance of the evidence'' standard when making its 
determinations and has adjusted the final rule accordingly in section 
Sec.  10.24(a).
    Comment: Commenters suggest that HHS clarify that it will not 
impose sanctions on a party as a result of a 340B ADR Panel decision 
until the party has been given an opportunity to complete corrective 
action with respect to the 340B ADR Panel's findings.
    Response: Section 340B(d)(3)(A) includes a requirement that the ADR 
process include the ``appropriate procedures for the provision of 
remedies and enforcement of determinations made pursuant to such 
process through mechanisms and sanctions described in paragraphs (1)(B) 
and (2)(B) (of 340B(d))'' Therefore, when appropriate, the 340B ADR 
Panel may make recommendations to HRSA for sanctions, including 
referrals to the HHS Office of Inspector General for its consideration 
of civil monetary penalties, as appropriate. Whether sanctions or 
remedial action is appropriate will be dependent on the type of 
violation that occurred.
    Comment: A few commenters were concerned that the proposed rule 
does not address how HRSA will enforce the findings of the 340B ADR 
panel or any underlying manufacturer audit. These commenters explain 
that the NPRM does not address if, or how, HRSA will go about enforcing 
the findings of the 340B ADR Panel or the underlying manufacturer 
audits. For example, if the 340B ADR Panel's final agency decision 
requires covered entities to make any applicable repayments to 
manufacturers, timeframes should be established around such payment 
and, at a minimum, HRSA should permit affected manufacturers to 
withhold future discounts until HRSA, the manufacturer, and the covered 
entity have resolved the findings noted in the manufacturer's audits.
    Response: Wide varieties of covered entities participate in the 
340B Program, from small, rural health care facilities to large 
academic medical centers. HHS expects that the 340B ADR Panel will 
review violations ranging from minor and inadvertent to systematic and 
intentional. Given the wide variety of 340B Program participants and 
varying types of violations, HHS believes that the form of enforcement 
should be left open to permit HHS maximum flexibility in determining 
what is appropriate given the specific facts of each situation.
    Comment: Some commenters urge HRSA to incorporate a timeframe for 
the issuance of 340B ADR Panel's final agency decisions. They recommend 
that the final agency decision should be issued 30 business days from 
the date when the submission of all requested information is complete 
and in complex cases, the process should be extended 15 business days, 
so that the final agency decision would be issued within 45 business 
days. The commenters argue that this approach would be consistent with 
Medicare where the deadline for initial determination decisions is 45 
days and for redetermination decisions is 60 days.
    Response: HHS disagrees. The 340B ADR Panel has been given wide 
latitude to determine the scope of the process and should not be held 
to a timeframe that does not allow for thorough and thoughtful 
consideration of all materials presented.
    Comment: Some commenters state that the ADR process should be 
governed by the Administrative Procedure Act (APA), 5 U.S.C. 551 et 
seq. They explain that a reviewing court should be authorized to hold 
unlawful and set aside ADR Panel decisions found to be arbitrary, 
capricious, an abuse of discretion, or otherwise not in accordance with 
law or unsupported by substantial evidence. The commenters request that 
HRSA clarify that the APA will apply to the ADR Process, including 
judicial review.
    Response: The form of judicial review for 340B ADR Panel decisions 
is beyond the scope of this final rule.
    Comment: Commenters support the proposal that HRSA has the sole 
authority to enforce the 340B ADR Panel's decision. The commenters 
explain that the 340B ADR Panel may not fully appreciate HRSA's 
historical enforcement practices, and the NPRM will ensure that HRSA 
retains responsibility for compliance with 340B statutory requirements.
    Response: While HHS appreciates the support of HRSA having sole 
enforcement authority, this final rule contemplates and allows HRSA to 
take appropriate action, which could include enforcement action or 
referral to another HHS Operating Division or to another Federal 
agency. For example, if the 340B ADR Panel's final agency decision is 
that an overcharge did occur, HRSA could recommend the OIG review the 
overcharge to determine if it was knowing and intentional and should be 
assessed a civil monetary penalty.
    Comment: Commenters express concern that HRSA should not use its 
enforcement authority to transform a 340B ADR Panel decision into a 
broad 340B policy decision. The commenters explain that enforcement 
should be limited to the parties to the ADR proceeding. 340B ADR Panel 
decisions should not have general applicability.
    Response: As set forth in section 10.23(b)(2), 340B ADR Panel 
decisions will be final agency decisions, binding on the parties, and 
precedential.

III. Regulatory Impact Analysis

    HHS has examined the effects of this final 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).

Executive Orders 12866, 13563, and 13771

    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, of harmonizing rules, and 
of 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 1 year, or adversely and materially affecting a sector of the 
economy,

[[Page 80643]]

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 (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year), and a 
``significant'' regulatory action is subject to review by the Office of 
Management and Budget (OMB).
    HHS does not believe that this final rule will have an economic 
impact of $100 million or more in any 1 year, and is therefore not 
designated as an ``economically significant'' final rule under section 
3(f)(1) of Executive Order 12866. This rule creates a framework for the 
Department 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 introduction of an ADR 
process to result in significant economic impacts.
    Executive Order 13771 (January 30, 2017) requires that the costs 
associated with significant new regulations ``to the extent permitted 
by law, be offset by the elimination of existing costs associated with 
at least two prior regulations.'' This final rule is not expected to be 
an E.O. 13771 regulatory action because this final rule is not 
significant under E.O. 12866.

The Regulatory Flexibility Act (RFA)

    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, the Secretary 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 an RFA threshold of at least a three percent impact on at least 
five percent of small entities.
    The rule 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. Approximately 600 drug manufacturers participate in 
the 340B Program. While it is possible to estimate the impact of the 
final rule 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. The rule 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 $7.5 
million to $38.5 million. Currently, in 2020,, 12,500 covered entities 
participate in the 340B Program, which represent safety-net healthcare 
providers across the country.
    The final rule introduces an ADR mechanism to review manufacturer 
claims that covered entities have violated certain statutory 
obligations and covered entities claims that they have been overcharged 
for covered outpatient drugs by manufacturers. The documentation 
required as part of this administrative process are 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 sufficiently 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 ADR process will provide a cost-effective option 
for resolving claims that would otherwise remain unresolved or prompt 
litigation. The final rule provides an option to 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 
final rule will 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, 
it is not preparing an impact analysis for the purposes of the RFA. HHS 
estimates that the economic impact on small entities and small 
manufacturers will be minimal and less than 3 percent.

Unfunded Mandates Reform Act

    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 2020, that threshold is approximately 
$156 million. HHS does not expect this rule to exceed the $156 million 
threshold.

Executive Order 13132--Federalism

    HHS has reviewed this final rule in accordance with Executive Order 
13132 regarding federalism, and has determined that it does not have 
``federalism implications.'' This 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 rule 
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.

Paperwork Reduction Act

    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. Given the small number 
of requests for the informal dispute resolution process, HHS asserted 
in the proposed rule that the ADR process would not have a significant 
impact on the current reporting and recordkeeping burden for 
manufacturers or covered entities under the 340B Program. HHS solicited 
comments on the accuracy of this statement. No comments were received 
challenging the accuracy of this statement. Moreover, HHS believes that 
the 340B ADR Process is exempt from

[[Page 80644]]

the 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).

    Dated: November 25, 2020.
Thomas J. Engels,
Administrator, Health Resources and Services Administration.
    Dated: December 9, 2020.
Alex M. Azar II,
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 amends 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), as amended.


0
2. Amend Sec.  10.3 by adding in alphabetical order definitions for 
``Administrative Dispute Resolution (ADR) Process'', ``Administrative 
Dispute Resolution Panel (340B ADR Panel)'', ``Claim'', ``Consolidated 
claim'', and ``Joint claim'' 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 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 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 Department that, acting on an express, 
written delegation of authority from the Secretary of HHS, reviews and 
makes a precedential and binding decision for a claim brought under the 
ADR Process.
* * * * *
    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' (or their membership organizations' or associations') claims 
against the same manufacturer for the same drug or drugs.
* * * * *

0
2. Add subpart C to read as follows:

Subpart C--Administrative Dispute Resolution

Sec.
10.20 Administrative Dispute Resolution Panel.
10.21 Claims.
10.22 Information requests.
10.23 Conduct of the ADR proceeding.
10.24 Final agency decision.


Sec.  10.20   Administrative Dispute Resolution Panel.

    The Secretary shall establish a 340B Administrative Dispute 
Resolution Board (Board) consisting of at least six members appointed 
by the Secretary with equal numbers from the Health Resources and 
Service Administration (HRSA), the Centers for Medicare & Medicaid 
Services (CMS), and the Office of the General Counsel (OGC) from which 
Administrative Dispute Resolution Panels (340B ADR Panel) of three 
members shall be selected by the HRSA Administrator (to review claims 
and, pursuant to authority expressly delegated through this rule by the 
Secretary, and to make precedential and binding final agency decisions 
regarding claims filed by covered entities and manufacturers). There 
shall also be one ex-officio, non-voting member chosen from the staff 
of the HRSA Office of Pharmacy Affairs (OPA). HRSA and CMS Board 
members shall have relevant expertise and experience in drug pricing or 
drug distribution. OGC Board members shall have expertise and 
experience in handling complex litigation.
    (a) Members of the 340B ADR Panel. (1) For each case, the HRSA 
Administrator shall:
    (i) Select from the Board three voting members, one from each of 
the three HHS operating or staff divisions involved (i.e., CMS, HRSA, 
OGC) to form a 340B ADR Panel.
    (ii) Remove an individual from a 340B ADR Panel for cause; and
    (iii) Appoint replacement members from the Board should an 
individual be unable to complete his or her duties on a 340B ADR Panel.
    (2) No member of a 340B ADR Panel may have a conflict of interest, 
as defined in paragraph (b) of this section.
    (b) Conflicts of interest. All individuals who serve on a 340B ADR 
Panel will be screened for conflicts of interest prior to reviewing a 
claim. Conflicts of interest may include:
    (1) Financial interest in a party involved, a subsidiary of a party 
involved, or in the claim before a 340B ADR Panel;
    (2) Family or close relation to a party involved; and
    (3) Current or former business or employment relation to a party.
    (c) Duties of the 340B ADR Panel. The 340B ADR Panel will 
adjudicate each claim using the procedures described Sec. Sec.  10.21, 
10.22, 10.23, and 10.24.
    (1) Review and evaluate documents and other information submitted 
by covered entities and manufacturers;
    (2) Request additional information or clarification of an issue 
from any or all parties to make a final agency decision;
    (3) When necessary, evaluate a claim in a separate session from the 
parties involved;
    (4) Consult with OPA and the parties, as appropriate and necessary, 
regarding any inquiries or concerns while reviewing a claim; and
    (5) Issue a final agency decision on each claim and submit the 
written decision to the parties, and to HRSA for appropriate action.


Sec.  10.21   Claims.

    (a) Initiating an action. Any covered entity or manufacturer may 
initiate an action for monetary damages or equitable relief against a 
manufacturer or covered entity, as the case may be, by filing a written 
petition for relief with HRSA and mailing a copy of the petition with 
any attachments to the General Counsel or other senior official of the 
opposing party at its principal place of business by certified mail, 
return receipt requested, within three days of filing the claim. The 
petition should satisfy the pleading requirements of Rules 8, 10, and 
11 of the Federal Rules of Civil Procedure, including setting forth the 
factual basis for invoking the 340B ADR Panel's jurisdiction. A claim 
must include all of the requirements in paragraph (d) of this section. 
Additional information to substantiate a claim may be submitted.
    (b) 340B ADR Panel's jurisdiction. The 340B ADR Panel shall have 
jurisdiction to entertain any petition where the damages sought exceed

[[Page 80645]]

$25,000 or where the equitable relief sought will likely have a value 
of more than $25,000 during the twelve-month period after the 340B ADR 
Panel's final agency decision, provided the petition asserts claims of 
the type set forth below.
    (c) Claims permitted. The ADR process is limited to the following:
    (1) Claims by a covered entity that it has been overcharged by a 
manufacturer for a covered outpatient drug, including claims that a 
manufacturer has limited the covered entity's ability to purchase 
covered outpatient drugs at or below the 340B ceiling price; 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 PHSA, that the 
covered entity has violated section 340B(a)(5)(A) of the PHSA regarding 
the duplicate discount prohibition, or section 340B(a)(5)(B) of the 
PHSA regarding the diversion prohibition, including claims that an 
individual does not qualify as a patient for 340B Program purposes and 
claims that a covered entity is not eligible for the 340B Program.
    (d) Limitation of actions. (1) A covered entity or manufacturer 
must file a written claim for administrative dispute resolution with 
HRSA within 3 years of the date of the alleged violation. Any file, 
document, or record associated with the claim that is the subject of 
the ADR process must be maintained by the covered entity and 
manufacturer until the final agency decision is issued by the 340B ADR 
Panel.
    (2) Notwithstanding Rules 8 and 10 of the Federal Rules of Civil 
Procedure, a covered entity filing a claim described in paragraph 
(c)(1) of this section must provide documents sufficient to demonstrate 
its claim that it has been overcharged by a manufacturer, along with 
any such other documentation as may be requested by the 340B ADR Panel.
    (3) Notwithstanding Rules 8 and 10 of the Federal Rules of Civil 
Procedure, a manufacturer filing a claim under paragraph (c)(2) of this 
section must provide documents sufficient to demonstrate its claim that 
a covered entity has violated the prohibition on diversion or duplicate 
discount, along with any such documentation as may be requested by the 
340B ADR Panel.
    (e) 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 that could file a claim against the 
manufacturer consents to the jointly filed claim, including submission 
of the required documentation, described in paragraph (d) of this 
section.
    (2) An association or organization may file claims of overcharges 
by the same manufacturer for the same drug or drugs on behalf of 
multiple covered entities if each covered entity represented could file 
a claim against the manufacturer, is a member of the association or 
organization, meets the requirements described in paragraph (d) of this 
section, including submission of the required documentation, and each 
covered entity has agreed to representation by the association or 
organization on its behalf.
    (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 filing of the consolidated claim, meets 
the requirements described in paragraph (d) of this section for that 
claim, and the 340B ADR Panel determines that such consolidation is 
appropriate and consistent with the goals of fairness and economy of 
sources. The 340B ADR Panel will not permit consolidated claims filed 
on behalf of manufacturers by associations or organizations 
representing their interests.
    (4) Joinder, consolidation, and other third-party practice not 
referenced in this paragraph (e) shall be governed by the Federal Rules 
of Civil Procedure, as relevant, unless the parties and 340B ADR Panel 
agree otherwise.
    (f) Responding to a submitted claim. Upon receipt of service of 
petition, the respondent must file with the 340B ADR Panel a written 
response to the Petition as set forth in Rule 12 or 56. The 340B ADR 
Panel may issue additional instructions as may be necessary or 
desirable governing the conduct of ADR proceedings, including 
instructions pertaining to deadlines for submission of additional 
information. If an opposing party does not respond to the petition, the 
340B ADR Panel may enter a final agency decision by default in favor of 
the Petitioner. In a proceeding for damages, the Petitioner must still 
introduce evidence sufficient to support its claim for damages even 
though the merits have been resolved through default.


Sec.  10.22   Information requests.

    (a) Discovery. The 340B ADR Panel may permit a covered entity 
limited discovery to obtain such information and documents as may be 
relevant to demonstrate the merits of a claim. Such discovery shall be 
governed, to the extent applicable, by the Federal Rules of Civil 
Procedure.
    (b) 340B ADR Panel information requests. Taking into account any 
party's request for further information, the 340B ADR Panel may request 
additional information from either party.
    (c) Failure to respond to information requests. If the 340B ADR 
Panel finds that a party has failed to respond or fully respond to an 
information request, the 340B ADR Panel make take the following 
actions, including:
    (1) Holding facts to have been established in the proceeding;
    (2) Precluding a party from presenting or contesting a particular 
issue;
    (3) Excluding evidence; or
    (4) Judgment in the proceeding or dismissal of proceeding.


Sec.  10.23   Conduct of the ADR proceeding.

    (a) The 340B ADR Panel will determine, in its own discretion, the 
most efficient and practical form of the ADR proceeding. Unless the 
matter is resolved through a motion to dismiss or summary judgment 
under Rule 56, the 340B ADR Panel shall conduct an evidentiary hearing 
when there are material facts in dispute. The ADR proceeding may be 
conducted by video conference, in-person, or through other means.
    (b) The 340B ADR Panel will determine the proper course of conduct 
in an ADR proceeding. Unless the parties agree otherwise and the 340B 
ADR Panel concurs, the Federal Rules of Civil Procedure, to the extent 
applicable, shall govern the proceedings.
    (c) Unless the parties agree otherwise and the 340B ADR Panel 
concurs, the Federal Rules of Evidence shall apply to the proceedings.
    (d) The 340B ADR Panel may issue additional instructions or 
guidance as may be necessary or desirable governing the conduct of ADR 
proceedings.


Sec.  10.24   Final agency decision.

    (a) The 340B ADR Panel will review the evidence submitted by the 
parties and determine if the preponderance of the evidence supports the 
conclusion that a violation as described in Sec.  10.21(c)(1) or (2) 
has occurred.
    (b) The 340B ADR Panel will prepare an agency decision based on its 
review and evaluation of the evidence submitted by the parties, 
including documents provided as required in Sec.  10.21(d), information 
requests in support of a claim, and responses to a claim.
    (c) The agency decision will represent the decision of a majority 
of the 340B

[[Page 80646]]

ADR Panel's findings regarding the claim and discuss the findings 
supporting the decision.
    (d) The agency decision constitutes a final agency decision that is 
precedential and binding on the parties involved unless invalidated by 
an order of a court of competent jurisdiction.
    (e) The 340B ADR Panel will submit the final agency decision to all 
parties, and to HRSA for appropriate action regarding refunds, 
penalties, removal, or referral to appropriate Federal authorities.

[FR Doc. 2020-27440 Filed 12-10-20; 11:15 am]
BILLING CODE 4165-15-P