80632 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations 

This rule is not expected to lead to the 

promulgation of a rule constituting a 

‘‘regulatory action’’ under Executive 

Order 13771 because the final rule is 

fixing a procedural error from a prior 

rulemaking and does not impose burden 

on regulated entities. The addition of 

the phrase ‘‘allegedly committed by the 

patient’’ was not a logical outgrowth of 

the 2016 NPRM proposals, or of 

comments received thereon, and it was 

added in error to the regulatory text of 

section 2.63. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires agencies that issue a regulation 

to analyze options for regulatory relief 

of small businesses if a rule has a 

significant impact on a substantial 

number of small entities. The RFA 

generally defines a ‘‘small entity’’ as (1) 

a proprietary firm meeting the size 

standards of the Small Business 

Administration; (2) a nonprofit 

organization that is not dominant in its 

field; or (3) a small government 

jurisdiction with a population of less 

than 50,000. (States and individuals are 

not included in the definition of ‘‘small 

entity’’). HHS considers a rule to have 

a significant economic impact on a 

substantial number of small entities if at 

least five percent of small entities 

experience an impact of more than three 

percent of revenue. HHS determines 

that this rule does not have a significant 

economic impact on a substantial 

number of small entities. The rule 

would merely correct an erroneous 

change made in 2017 to, and restore the 

pre-2017 language to, the longstanding 

provision in 42 CFR 2.63, in order to 

avoid a possible interpretation that 

could hamper or impede Federal 

enforcement efforts in the fight to 

address the opioid crisis, including 

investigations that involve disclosures 

of Part 2 program records authorized by 

court orders. As such, this final rule will 

have a de minimis, if any, impact on 

small entities. 

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 $100,000,000 

or more (adjusted annually for inflation) 

in any one year.’’ In 2019 that threshold 

level is approximately $154 million. 

HHS does not expect the rule to exceed 

the threshold. 

Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (PRA), agencies are required to 

provide a 60-day notice in the Federal 

Register and solicit public comment 

before a collection of information 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. The change in this 

rulemaking would result in no new 

reporting burdens. 

Congressional Review Act 

Pursuant to the Congressional Review 

Act (5 U.S.C. 801 et seq.), the Office of 

Information and Regulatory Affairs 

designated this rule as not a major rule, 

as defined by 5 U.S.C. 804(2). 

List of Subjects in 42 CFR Part 2 

Alcohol abuse, Alcoholism, Drug 

abuse, Grant programs—health, Health 

records, Privacy, Reporting and 

recordkeeping requirements. 

For the reasons stated in the 

preamble, HHS amends 42 CFR part 2 

as follows: 

PART 2—CONFIDENTIALITY OF 

SUBSTANCE USE DISORDER PATIENT 

RECORDS 

■ 1. The authority citation for Part 2 

continues to read follows: 

Authority: 42 U.S.C. 290dd–2. 

Subpart E—Court Orders Authorizing 

Disclosure and Use 

§ 2.63 [Amended] 

■ 2. Amend § 2.63(a)(2) by removing the 

phrase ‘‘allegedly committed by the 

patient’’. 

* * * * * 

Dated: August 27, 2020. 

Elinore F. McCance-Katz, 

Assistant Secretary for Mental Health and 

Substance Use, Substance Abuse and Mental 

Health Services Administration. 

Approved: September 30, 2020. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2020–25810 Filed 12–11–20; 8:45 am] 

BILLING CODE P 

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. 

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 


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1See https://www.whitehouse.gov/presidentialactions/memorandum-heads-executivedepartments-agencies/. 

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. 

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 


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80634 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations 

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 § 10.21. 

Subpart C—Administrative Dispute 

Resolution 

§ 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 abovereferenced 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-today 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). 

§ 10.21 Claims 

(a) Initiating an action. In the NPRM, 

HHS proposed deadlines and 

procedures for filing a claim in 

§ 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 § 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 


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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 twelvemonth 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 


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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 


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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 


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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 


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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.’’ 

§ 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 


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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. 

§ 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. 

§ 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 


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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 

§ 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, 


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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 


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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 

■ 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. 

■ 2. Amend § 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: 

§ 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. 

* * * * * 

■ 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. 

§ 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 

§§ 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. 

§ 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 


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$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. 

§ 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. 

§ 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. 

§ 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 

§ 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 

§ 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 


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80646 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations 

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 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

49 CFR Part 26 

RIN No. 2105–AE92 

Disadvantaged Business Enterprise 

Program; Inflationary Adjustment 

AGENCY: Office of the Secretary (OST), 

Department of Transportation (DOT). 

ACTION: Final rule. 

SUMMARY: The United States Department 

of Transportation (DOT) is amending 

the small business size limit under its 

Disadvantaged Business Enterprise 

(DBE) program, also known as the gross 

receipts cap, to ensure that small 

businesses may continue to participate 

in the Department’s DBE program after 

taking inflation into account. This final 

rule provides an inflation adjustment to 

the size limit on small businesses 

participating in the DBE program and 

implements a statutory change to the 

size standard pursuant to the Federal 

Aviation Administration (FAA) 

Authorization Act of 2018. 

DATES: This rule is effective January 13, 

2021. 

FOR FURTHER INFORMATION CONTACT: 

Chris Cialeo, Office of the General 

Counsel (C–10), U.S. Department of 

Transportation, 1200 New Jersey 

Avenue SE, Washington, DC 20590, 

(202) 366–8789, christopher.cialeo@

dot.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The DBE program for DOT-assisted 

contracts is a statutory program 

intended to ensure nondiscriminatory 

contracting opportunities for small 

business concerns owned and 

controlled by socially and economically 

disadvantaged individuals in the 

Department’s highway, mass transit, and 

airport financial assistance programs. 

The statutory provision governing the 

DBE program in the highway and mass 

transit financial assistance programs is 

section 1101(b) of the Fixing America’s 

Surface Transportation (FAST) Act 

(Pub. L. 114–94, Dec. 4, 2015), and the 

statutory provision governing the DBE 

program as it relates to airport financial 

assistance programs is 49 U.S.C. 47113. 

Under the Department’s existing 

rules, to qualify as an eligible DBE firm, 

a firm’s average annual gross receipts 

over the preceding three fiscal years 

cannot exceed a DOT-specific gross 

receipts cap. On April 2, 2007, in 

response to direction in the Safe, 

Accountable, Flexible, Efficient 

Transportation Equity Act: A Legacy for 

Users (SAFETEA–LU) (Pub. L. 109–59, 

August 10, 2005) to adjust this gross 

receipts cap annually for inflation, the 

Department published a final rule 

adjusting the gross receipts cap for its 

DBE program in 49 CFR part 26 from 

$19,570,000 to $20,410,000 (72 FR 

15614). On April 3, 2009, the 

Department published another final rule 

adjusting the gross receipts cap for its 

DBE program from $20,410,000 to 

$22,410,000 (74 FR 15222). The Moving 

Ahead for Progress in the 21st Century 

(MAP–21) Act (Pub. L. 112–141, July 6, 

2012) maintained the $22,410,000 gross 

receipts cap amount set by the April 

2009 final rule. On October 2, 2014, the 

Department issued a final rule that 

increased the gross receipts cap to 

$23,980,000 (79 FR 59565). In 2015, The 

FAST Act maintained the $23,980,000 

gross receipts cap set by the October 

2014 rule. Section 1101(b)(2)(A)(ii) of 

the FAST Act reaffirms the Secretary of 

Transportation’s requirement to adjust 

this amount annually for inflation. 

Accordingly, this final rule adjusts the 

gross receipts cap for inflation by 

increasing the gross receipts cap 

applicable to firms for purposes of 

Federal Highway Administration 

(FHWA)—and Federal Transit 

Administration (FTA)—assisted work to 

$26,290,000. 

The Federal Aviation Administration 

(FAA) Reauthorization Act of 2018 (Pub. 

L. 115–254) removed the gross receipts 

cap for purposes of eligibility for FAAassisted work. Therefore, the revised 

rule reflects that the gross receipts cap 

does not apply for purposes of 

determining a firm’s eligibility for FAAassisted work. 

II. Business Size Standards for the DBE 

Program 

To make an inflation adjustment to 

the gross receipts figures, DOT uses the 

Department of Commerce’s price index 

for State and local consumption 

expenditures (gross output of general 

government). The Bureau of Economic 

Analysis at the Department of 

Commerce prepares constant dollar 

estimates of State and local government 

purchases of goods and services by 

deflating current dollar estimates by 

suitable price indexes. These indexes 

include purchases of durable and nondurable goods, and other services. Using 

these price deflators enables the 

Department to adjust dollar figures for 

inflation from past years. 

The current inflation rate on 

purchases by State and local 

governments is calculated by dividing 

the price deflator for the fourth quarter 

of 2019 (116.030) by 2015’s fourth 

quarter price deflator (105.829). See 

Bureau of Economic Analysis Table 

3.10.4, Price Indexes for Government 

Consumption Expenditures and General 

Government Gross Output (January 30, 

2020). The result of the calculation is 

1.09639, which represents an inflation 

rate of 10.9639% from the fourth quarter 

of 2015. Multiplying the FAST Act’s 

$23,980,000 standard for disadvantaged 

business enterprises in DOT financial 

assistance programs by 1.09639 equals 

$26,291,465, which will be rounded off 

to the nearest $10,000 is $26,290,000. 

Therefore, if a firm’s gross receipts 

averaged over the firm’s previous three 

fiscal years exceeds $26,290,000, it 

exceeds the small business size limit for 

participation in FHWA and FTAassisted work under the Department’s 

DBE program. The Department will 

adjust this amount for inflation on an 

annual basis. In subsequent years, the 

revised amount will be published on the 

Departmental Office of Civil Rights’ 

website. 

Regulatory Analyses and Notices 

Under the Administrative Procedure 

Act (5 U.S.C. 553(b)(B)), an agency may 

waive notice and comment procedures 

if it finds good cause that such 

procedures are impracticable, 

unnecessary, or contrary to the public 

interest. The Department finds that 

notice and comment for this rule is 

unnecessary because it only relates to 

ministerial updates of business size 

standards and gross receipts caps to 

account for inflation, which does not 

change the standards or caps in real 

dollar terms. Accordingly, the 

Department finds good cause under 5 

U.S.C. 553(b)(B) to waive notice and 

opportunity for public comment. 


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