Hospitals Sue HRSA, HHS Over Failure to Act in Alternative Dispute Resolution Proceeding

On September 29, 2025, fifty-nine hospitals and health systems filed a lawsuit against the Health Resources and Services Administration (HRSA) and the U.S. Department of Health and Human Services (HHS) for the agencies’ failure to act on the hospitals’ Administrative Dispute Resolution (ADR) petition filed nearly two years prior. HRSA and HHS are required to respond to the hospitals’ complaint by November 30, 2025.

HRSA’s delay in acting on the hospitals’ ADR petitions is particularly concerning given that the ADR process is covered entities’ only avenue for recovering overcharges. Established as part of the Affordable Care Act, the ADR process provides an avenue for covered entities and manufacturers to resolve disputes over manufacturer overcharges for 340B drugs and covered entity violations of duplicate discount and diversion prohibitions.

The hospitals filed the ADR petition to dispute drug manufacturer Teva’s restrictive contract pharmacy policy. According to their complaint, neither HRSA nor HHS has taken any steps to process the petition since December 20, 2023, when HRSA notified the hospitals that their ADR documentation was complete. The hospitals allege that this inaction violates the federal regulations implementing the ADR process that requires a decision to be made within one year of receipt of a complete claim unless there are extenuating circumstances. In the event of extenuating circumstances, the regulations require the ADR Panel to provide notice to the parties; the hospitals allege such notice was not provided.

A 2011 Supreme Court case, Astra v. Santa Clara County, held that covered entities are required to use the ADR process, not the court system, to adjudicate their overcharge grievances. It remains unclear if the lawsuit will propel HRSA to respond more quickly to petitions filed not only by the plaintiffs in the lawsuit but by any covered entity that files an ADR petition.

Only one ADR decision has been published on HRSA’s website and we are unaware of any covered entity or covered entity group that has successfully used the ADR process to recover overcharges. The only published decision was in response to a 340B hospital alleging overcharges by AstraZeneca. The ADR panel found that there was no overcharge, citing the Third Circuit’s opinion that concluded that AstraZeneca’s restrictive contract pharmacy policy was permissible under the 340B statute. Following this ADR decision, Powers voluntarily withdrew a similar petition it filed against AstraZeneca on behalf of Ryan White Clinics for 340B Access (RWC-340B) and three community health centers.

An ADR panel also dismissed a petition filed by National Association of Community Health Centers (NACHC) against Sanofi and AstraZeneca for its restrictive contract pharmacy policy in September of 2022.

Powers will continue to monitor developments regarding this lawsuit and other 340B litigation.