HRSA to Collect Information on Manufacturer Audit Process

26 Jun 2019

On June 18, 2019, HRSA issued an information collection request (ICR) regarding the guidelines for manufacturer audits of 340B covered entities and the OPA informal dispute resolution process to resolve disputes between covered entities and manufacturers.   Manufacturers may conduct an audit of covered entities when there is reasonable cause to believe that the covered entity has violated the prohibitions on duplicate discounts or diversion.  In 1996, HRSA developed an informal dispute resolution process for manufacturers and covered entities to attempt in good faith to resolve disputes.  In August, 2016, HRSA issued a proposed rule with requirements and procedures to implement a mandatory administrative dispute resolution (ADR) process.  The proposed 2016 ADR requirements were intended to replace the informal dispute resolution process; however, HRSA never finalized the mandatory ADR regulations.

According to the ICR notice, HRSA proposes to collect information related to the current manufacturer audit and informal dispute resolution processes in order to ensure “the orderly conduct of manufacturer audits,” and informal disputes “will be resolved in a fair and equitable manner.”  HRSA is seeking comments on the following paperwork requirements related to the manufacturer audit guidelines:

  1. The manufacturer must notify the covered entity in writing when it believes a violation has occurred;
  2. The manufacturer must submit documentation to the Office of Pharmacy Affairs (“OPA”) as evidence of good faith of attempts to resolve a dispute;
  3. The manufacturer must submit an audit work plan to OPA;
  4. The manufacturer must submit an audit report to the OPA and informational copies to the HHS OIG;  and
  5. The covered entity should provide a written response to the audit report.

HRSA is also seeking comments on the following paperwork requirements related to the informal dispute resolution process:

  1. The manufacturers or the covered entity must submit a written request for the informal dispute resolution process to OPA; and
  2. The party alleged to have committed a 340B Program violation may provide a response or rebuttal to OPA.

It is unclear what HRSA will do with the information collected, and whether HRSA intends to use this information to issue a new proposed rule to establish a binding-ADR process, or if the agency is attempting to refine the existing informal dispute resolution process and/or the manufacturer audit guidelines.  Manufacturers have long complained about the ineffectiveness of their audit rights under the latter policy so it’s possible that HRSA is planning to respond to those complaints.  Refining the audit guidelines could be harmful to covered entities if the result is to make it easier for manufacturers to initiate and perform audits or to secure an enforceable remedy against covered entities.  It is also possible that HRSA is updating the paperwork burden information related to the manufacturer audit guidelines and administrative dispute resolution process, which it has done periodically since 1997 under the Paperwork Reduction Act of 1995.

For more information regarding the current informal dispute resolution process and the difference from the proposed ADR process, please see this memo from the Powers 340B team:  Manufacturer Overcharges under 340B: How to Right a Wrong.

We will notify you of any future developments related to this issue.  Comments on the ICR are due Aug. 19, 2019.

Category: Drug Pricing

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