Pharmacies May Be Significantly Impacted by the Final 340B Dispute Resolution Rule

Pharmacy Times^® interviewed Emily Cook, JD, a partner with McDermott Will & Emery, on the final 340B dispute resolution rule, which was recently sent by the Department of Health and Human Services (HHS) to the Office of Management and Budget (OMB) for review.

Alana Hippensteele: So Emily, could you explain further what the 340B dispute resolution rule is, and how it could impact pharmacies?

Emily Cook: Sure. The 340B dispute resolution rule actually stems from the Affordable Care Act. In 2010, Congress did modify the 340B statute to require an alternative dispute resolution process through regulation. At the time, they gave the Department of Health and Human Services 6 months to issue final regulations implementing a process through which 340B participating covered entities could bring disputes about overcharges from drug manufacturers, and drug manufacturers could bring disputes against covered entities for non-compliance with the 340B prohibition on what's known as diversion, that is selling 340B drugs to an unauthorized individual, or duplicate discounts, which are circumstances where the drug manufacturer is required to provide both a 340B discount and a Medicaid drug rebate on the same drug.

That dispute resolution rule did not meet the 6-month timeframe set forth by Congress. It was proposed in mid-2016, that is a proposed rule on which the public was able to provide comments, and those comments were provided during the end part of 2016, and the rule would, in the normal course, be anticipated to be finalized sometime thereafter. However, because of the timing of the rule and the change from the Obama administration to the Trump administration, the rule was never finalized, and in fact it was withdrawn. So, what we are now seeing is the finalization of that proposed rule that had originally been proposed in 2000.

Alana Hippensteele: So, I understand, like you're explaining, that the last step before rule is finalized for implementation is sending it to the OMB for review. So, what are the potential implications of this rule being finalized?

Emily Cook: Sure, so the potential implications of this rule being finalized are a bit unknown because we know what was in the proposed rule, but that rule was proposed and subject to public comment now almost actually over 4 years ago, and so we don't know what is in the final rule. We would anticipate in the normal course that it would be similar to what was in the proposed rule, taking into account those public comments, but we don't actually know what may be in that final rule.

So it is a bit unknown, but one would anticipate, if it is finalized in a manner similar to the proposed rule, that it would provide for a process for covered entities and drug manufacturers to bring disputes that they have been unable to resolve amongst themselves to a panel of individuals appointed by HHS, who would hear those disputes and make a determination, and this is very important because this dispute resolution process provides for an actual determination that the parties could appeal to a court.

Currently, that is not an option that is available within the 340B program, and it does create a bit of a stalemate when there is a dispute between a covered entity and a drug manufacturer because there is not a formal process forward for them to resolve a dispute if they are unable to resolve it amongst themselves.

Alana Hippensteele: Right, right. What is the argument for finalizing this rule and the argument against it as it's being presented?

Emily Cook: Sure. So, in general, the argument for finalizing this rule would be that it was mandated by Congress. Admittedly, we are now quite past the timeframe that they had issued for it to be finalized, but nevertheless, it was established by statute and the intent of Congress was that this will be finalized.

The argument against finalizing it now would be that the proposed rule is quite old and the comments on that rule are quite old. The 340B program is an incredibly dynamic program, and there have been a lot of changes in both the size, scope, and issues arising in the 340B program in the intervening time period. So one would anticipate the arguments against finalizing it would be that it is stale, and that the comments themselves are stale, and that the parties should have an opportunity to submit comments anew, given the changes that have occurred in the past 4 years.

Alana Hippensteele: Right, right. What is the ultimate impact of either decision on pharmacies and pharmacy practice?

Emily Cook: Sure. So, it is very interesting for pharmacies. They are so tightly involved in the 340B program but are neither covered entities nor drug manufacturers, but they play a vital role in ensuring that the 340B program operates as intended. One would anticipate that if this dispute resolution rule does move forward, it could create additional opportunities for covered entities and drug manufacturers to obtain information to present to this panel about various issues that have arisen, and so one would anticipate for pharmacies that this may create additional documentation requests, additional requests to present evidence, and other types of influence into that process where the pharmacy itself has the information necessary to inform the panel and resolve the dispute because they are involved in the dispensing of 340B drugs to those eligible.

Alana Hippensteele: Could you explain further how the timing of this rule being sent to the OMB relates to the ongoing issues involving drug manufacturer restrictions on access to 340B drugs for dispensing under contract pharmacy arrangements?

Emily Cook: Sure. It is a very interesting timing of this particular rule being issued now. There are many rules that we have seen either issued for comment, issued in final form, or sent to OMB within the past few months, and in part that has to do with the timing of the transition from the Trump administration to the Biden administration. The inauguration is January 20th, and that is a very important date when it comes to regulations issued by the executive branch. Rules that are finalized before January 20th often continue in their final form after the change in administration and require additional notice and comment rulemaking to be changed. Rules that are issued prior to the change in the administration but will not become final until after January 20th can be subject to additional review and potentially be either withdrawn, suspended, or otherwise modified prior to being implemented.

So we've seen a lot of activity because rules typically have a 60-day period between when they're finalized and implemented or a 30-day period between when they're finalized and implemented, so for those that had a 60-day period, we saw quite a few rules being issued around November 19th to meet that 60-day rule before January 20^th, and we're expecting another set of those to be finalized towards the end of December, so that there's 30 days before January 20^th. This particular rule would likely have a 30-day time period between the date in which it is published as final and when it would be implemented, and so that is likely one component as to why we're seeing it now.

However, the other interesting element of this rule is that it was originally proposed under the Obama administration and was withdrawn by the Trump administration, so we would not have expected this particular rule to have resurfaced during the Trump administration because it is technically an Obama administration rule. Right now, as you mentioned there is quite a lot of activity in the 340B space as it relates to certain drug manufacturers who have been restricting access to 340B drugs for dispensing through contract pharmacy arrangements, and the covered entities and drug manufacturers have certainly been very vocal in their various arguments for and against those restrictions, but there is no clear path forward to resolve those because this dispute resolution process, the drug manufacturers would argue, does not exist. Covered entities, on the other hand, argue that this particular dispute resolution process is not necessary for the federal government to take action against drug manufacturers because the argument on the covered entity side is that the restrictions on access to 340B pricing are clear violations of the statute, not a dispute between the parties.

But it is curious that this rule would be released in the midst of that particular dispute between the entities, and again, also because we know the history of this rule, and it is a bit unusual to have a rule resurface in this manner, given the fact that it was originally proposed during a prior administration, and quite a lot of time has passed since the proposed rule. So again, we are just speculating as to the timing, and what that may mean in terms of both wanting to finalize this during the Trump administration, as well as the relation to the ongoing concerns related to restricted access to 340B drugs for contract pharmacy dispensing. So, it allows for some interesting analysis and speculation. We don't know for sure, but it is certainly interesting timing.

Alana Hippensteele: Yeah, absolutely. Do you have any additional thoughts to add on this subject?

Emily Cook: So, I do think that it is again very interesting that the administration has opted to move forward now with the dispute resolution rule. It is certainly something that we had expected for quite some time. It was originally intended by Congress to be issued in 2010, so we're over 10 years late now on a dispute resolution process. We don't know what is in the final rule, so that again will be very interesting to see if and when it is released.

I think there is still somewhat of an ‘if’ it's released and again based on the timing, if it will even continue forward to being fully implemented under the Biden administration, or whether we will see it suspended or postponed or otherwise reissued for comment. This is also one of many issues right now in the 340B program, it is always a very dynamic program, and I encourage pharmacies again, even though they are not covered entities, in most cases, or drug manufacturers, in most cases, to make sure that they are well-informed about developments in the 340B program. Again, pharmacies are an essential component of the 340B program and are significantly impacted by developments.

Alana Hippensteele: Right, absolutely. Thank you so much for taking the time to speak with me today, Emily. Now let’s hear from some of our other MJH Life Sciences brands on their latest headlines.