Controversial 340B Drug Discounts Linked to Drug Pricing Issues

Pharma companies have been protesting expansion of the federal program that provides deeply discounted prescription drugs to certain hospitals and health providers serving low-income, uninsured patients. The program has grown notably since it was expanded under the Affordable Care Act (ACA) to include cancer centers and other providers. This has raised questions about whether the “covered entities” use savings from 340B drug purchases more to support other programs than to reduce prescription drug costs for individuals, and has prompted manufacturers to seek greater oversight of how these providers reimburse for and dispense covered drugs.

The Trump administration has indicated support for tighter regulation of 340B, but under the heading of doing more to reduce expenditures on prescription drugs. George Sigounas, recently named administrator for the Health Resources and Services Administration (HRSA) in HHS, which oversees 340B, cited Trump administration interest in using 340B to curb drug pricing, in outlining plans for updating the program at the 340B coalition conference July 10-12 in Washington, D.C. Sigounas cited interest in finding better ways to verify compliance with program policies by covered hospitals and by manufacturers, including greater scrutiny of whether savings from 340B pricing benefit patients.

HRSA Office of Pharmacy director Krista Pedley highlighted efforts to strengthen program integrity through an increase in audits of covered entities and more oversight of manufacturers to uncover incidents of overcharging or blocking access to eligible drugs. HRSA is working with industry to further improve systems for detecting “duplicate discounts” to 340B and state Medicaid programs, an issue that has long generated disputes.

Soon after the conference, the Centers for Medicare and Medicaid Services (CMS) proposed significant changes in how Medicare reimburses covered entities for outpatient drugs covered by the program. As part of a 600-page proposed rule for setting certain hospital payments, CMS included language to revise Medicare Part B reimbursement for 340B drugs from average sales price (ASP) plus 6% to ASP minus 22.5%. While a number of analysts consider the change a better fit to Part B reimbursement policies, hospitals are crying foul, and reformers say it will do nothing to reduce drug prices overall.

The adequacy of reporting requirements and HRSA oversight of 340B were examined further at a hearing July 18 before the House Energy & Commerce Oversight subcommittee. A main issue was whether the estimated $6 billion that covered entities save each year on drug expenditures actually benefit patients. But Democrats on the House panel maintained that changes in 340B policies will do little to reduce drug prices, and that drug cost issues warrant separate investigation by Congress. 

The HHS Office of the Inspector General (OIG) noted that  limited reporting requirements make it difficult to know if payments are accurate, and Pedley of HRSA acknowledged that the agency lacks authority to audit that information. A report from the Government Accountability Office (GAO) described HRSA efforts to increase audits of 340B participants and to issue more guidance, but noted that additional guidance on eligibility for program participation remains unpublished. GAO said it will further investigate growth in the number of contract pharmacies involved in the program and their financial arrangements with covered entities.