What are the changes in the 2024 ADR Final Rule?

1. Removes onerous evidence and procedural requirements, establishing a more efficient ADR process.
2. Changes the review panel to include 340B Program subject-matter experts from the Office of Pharmacy Affairs (OPA).
3. Requires manufacturers and 340B Covered Entities (CEs) to “undertake good-faith efforts to resolve the disputed issues” prior to initiating the ADR process.
4. Limits the ADR process to issues regarding 340B Program overcharges, diversion, or duplicate discounts. Importantly, this includes “claims that a manufacturer has limited the covered entity’s ability to purchase covered outpatient drugs at or below the 340B ceiling price.”
5. Establishes a process to appeal or reconsider an ADR decision.

Key takeaways

• HRSA recognizes few manufacturers and CEs have initiated an ADR process to resolve 340B Program disputes. Although certain barriers have been removed or updated by the 2024 final rule, manufacturers are still required to complete a CE audit and must attempt good-faith negotiations before initiating the ADR process.
• CEs may be encouraged to initiate the ADR process against manufacturers with the final rule provision to include claims where access to Covered Outpatient Drugs (CODs) at the 340B Ceiling Price is limited, such as the case with contract pharmacy restrictions

Questions and Consideration

• Manufacturers with contract pharmacy restrictions should prepare to respond to CEs that initiate good faith efforts to resolve claims that their ability to purchase CODs is limited.
• Will the new ADR process increase the number of claims initiated by CEs?
• Will CEs join together and target certain manufacturers for restricting drugs at 340B Ceiling Price through contract pharmacies?

2. Medicare Part D MDP

a. Phase-In Eligibility Determination

What to do now?

• Manufacturers in the Medicare Part D MDP should consider reviewing information used to determine the specified manufacturer or specified small manufacturer designation in the Health Plan Management System (HPMS).
• If a manufacturer disagrees with the determination, a recalculation request with rationale and supporting information may be submitted to CMS. The request must be received by CMS no later than 30 calendar days from the date of the determination notice.

b. Frequently Asked Questions (FAQs) from CMS

What to do now?

• Manufacturers should monitor for notices from CMS and the FAQ list for additional Medicare Part D MDP guidance.

3. 2023 Medicaid Proposed Rule – Get a jump start on changes!

4. Government Program Calculation and Reporting Updates

5. Sustain Act

6. Bona Fide Service Fees

Quick Refresher on BFSF

Pursuant to 42C.F.R.§447.502, the definition of BFSF for purposes of Average Manufacturers Price (AMP), Best Price (BP), and Average Sales Price (ASP):

Fees paid by a manufacturer to an entity that represent fair market value for a bona fide, itemized service actually performed on behalf of the manufacturer that the manufacturer would otherwise perform (or contract for) in the absence of the service arrangement and that are not passed on in whole or in part to a Company or customer of an entity, whether or not the entity takes title to the drug.

BFSF Test Components

1. The fee is paid for a bona fide, itemized service actually performed on behalf of the manufacturer.
2. The manufacturer would otherwise perform (or contract for) the service in the absence of the service arrangement.
3. The fee is not passed on in whole or in part to a client or customer of the service-providing entity, whether or not the entity takes title to the drug.
4. The fee represents Fair Market Value (FMV) for the service.

What to do now and Key Considerations to Mitigate Risk?

• Inventory your contracts and evaluate if you have sufficient BFSF documentation.
• Document your BFSF evaluation, follow your BFSF process, perform FMV, and ensure that fees and other payments (including admin fees, credit card fees, distribution fees, data fees, other service fees, etc..) are treated appropriately based on the results of the BFSF evaluation. As a reminder, there is no conservative approach for BFSF (i.e., depending on your product, what’s conservative in one government program may be aggressive in another). Note we generally recommend checking with counsel; especially for new or complex arrangements, if it’s your first evaluation, or if it’s a sensitive matter that should be performed under privilege.
• Develop processes and incorporate tools (i.e., checklist/questionnaires/FMV estimators) to help facilitate and incorporate BFSF evaluations in contracting process. This is a key item to help ensure that service arrangements are being evaluated not only from a fair market value perspective but taking a close look at the qualitative prongs of the test (i.e., is this a service on our behalf, is their pass-through evidence or notice, services itemized in the contract) and having a framework in place for the evaluation including when to seek counsel advice. In practice, we’ve seen it work well when manufacturers incorporate BFSF review as part of the contracting process to ensure appropriate stakeholders are aligned and there are no surprises when it comes to government pricing or gross to net. Also, for large manufacturers and or manufacturers that do a lot of contracting, think about ways to modernize and streamline the process.
• Perform periodic BFSF/FMV training so business teams are aware of process and mindful of current rules, regulations, and that the company creates and maintains documentation of the BFSF analysis and treats the fees appropriately in government pricing.
• Monitor and track performance of service providers and overall spend and evaluate whether there’s an opportunity to mitigate risks.
• If you’re contracts allow the vendor to invoice net of service fees, discounts, and other adjustment on their invoices, ensure that you’re reviewing them and treating the fees appropriately. Note this is an area that is commonly overlooked especially as it relates to items like price appreciation credits. It’s important to note that CMS has made clear that price appreciation credits are not BFSF and should be included in calculations
• Perform periodic government pricing assessments to ensure calculations are accurate and complete, appropriate reasonable assumptions and methodology are documented, policies and procedures are current, and service fee treatment in calculations aligns to BFSF documentation and that all service arrangements are reviewed.
• If you’ve already performed FMV and BFSF evaluation, keep track and perform periodic refreshes as needed. We typically recommend every 2-3 years, unless something significantly changes (i.e., sales or service changes, new rules/guidance, etc.).