PhRMA Litigation Asserts 340B Administrative Dispute Resolution Final Rule is Unlawful and Unconstitutional

WASHINGTON, D.C. (January 22, 2021) – Today, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed a complaint in the U.S. District Court for the District of Maryland asserting that the 340B Drug Pricing Program: Administrative Dispute Resolution (ADR) Regulation (85 Fed. Reg. 80632) is arbitrary and capricious, not the product of reasoned decision-making and unconstitutional,

PhRMA Executive Vice President and General Counsel James C. Stansel stated:

“The biopharmaceutical industry is committed to the 340B program and working with policymakers to restore it to the safety-net program Congress originally intended – a program that puts patients first, not the financial interests of large hospital systems, for-profit pharmacies and other middlemen. However, the 340B program of today is riddled with problems that prevent it from truly working to help our nation’s vulnerable patients access the medicines they need. There are patient-centered solutions that could get the 340B program back on track – like increasing transparency in the program to ensure the tens of billions of dollars in discounts provided by manufacturers are used to help patients. Instead, the Trump Administration rushed to finalize a flawed ADR rule and ignored the program’s larger issues.”

Additional Information:

The Trump Administration’s Administrative Dispute Resolution (ADR) Final Rule further distorts an already broken program. 

While the creation of an ADR process was intended to help enforce compliance with program requirements, the rule the administration finalized does the opposite. Its overly burdensome and biased requirements hamper manufacturers’ ability to address violations of program requirements by covered entities. In its final form, the rule defeats a key purpose of the ADR process, which is to resolve disputes over violations of duplicate discounting and diversion.

The Trump Administration also failed to address concerns raised by stakeholders when the rule was first proposed in 2016, nor did they update the rule to reflect changes that have occurred in the program and the U.S. health care system over the last four years. 

In addition, the final ADR rule circumvents the roles of the President to appoint and the Senate to confirm ADR Board members, who are principal officers of the United States, which violates the U.S. Constitution. 

PhRMA’s complaint includes three causes of action and is seeking declaratory and injunctive relief to set aside, vacate and remand the 340B Drug Pricing Program: Administrative Dispute Resolution Regulation Final Rule.  

1. The ADR Rule is arbitrary and capricious in violation of the Administrative Procedure Act.
2. The manufacturer audit guidelines are contrary to law.
3. The ADR Rule is in violation of the Appointments Clause of the U.S. Constitution.

A more detailed summary and the full complaint can be found here.