Study Highlights Need for Greater Transparency in 340B Drug Pricing Program

In 1992, the 340B Drug Pricing Program was created with the goal of being able to incentivize safety net hospitals and clinics that support the low-income and underserved populations by discounting outpatient drug costs.^1,2 By being able to dispense discounted drugs, these facilities are able to directly impact more patients, in the form of additional health care services and programs.

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In a review of the 340B program conducted by the JAMA Health Forum, the program was associated with financial benefits for hospitals, clinics, and pharmacies; greater access to health care services for patients; and substantial costs to manufacturers. To help the program achieve its intended purposes, the authors of the study called for a greater level of transparency regarding the use of revenue, along with strengthened rule making and enforcement authority for the Health Resources and Services Administration (HRSA), which they said would support compliance.

Specifically, the 340B Drug Pricing Program requires manufacturers to offer discounted drug prices to support safety net hospitals and clinics (covered entities) that provide care to low-income populations. However, amid the expansion of 340B, the program has received criticism and calls for reform, as experts have suggested³ that this is an area that will continue to evolve.

For their research, the study authors searched databases that included PubMed, Embase, EconLit, National Bureau of Economic Research (NBER), Westlaw, the Department of Health and Human Services Office of the Inspector General (HHS-OIG) website, the Government Accountability Office (GAO) website, and Google in February 2023. The searches included peer-reviewed literature, legal publications, opinion pieces, and government agency and committee reports related to the 340B program, with 289 documents meeting their criteria. Since the program’s inception, there were approximately 1000 covered entities, a figure that includes child sites, which the authors noted are associated with offsite facilities of covered entities; by 2021, there were over 50,000.⁴

As alluded to previously, covered entities’ compliance with 340B program requirements has been examined in detail. The HRSA audits of covered entities between 2012 and 2016 found noncompliance rates of one or more violations of 340B program requirements to be between 63% and 82%.5 The authors noted that a 2020 Government Accountability Office (GAO) study6 of 1242 HRSA audits from 2012 through September 2020 found similarly high rates of noncompliance. Examples of noncompliance the investigators found included record keeping discrepancies regarding 340B program eligibility, duplicate discounting, and diversion.

From the pharma manufacturers’ perspective, agreeing to participate in the program leads to high costs because they are required to provide steep discounts on their drugs at levels far below private market prices. In 2020, their products generated over $80 billion in sales—representing 16% of US sales for manufacturers—at discounted prices totaling about $38 billion.^7,8 In essence, the 340B program has caused manufacturers to lose revenue, which has impacted their profits; as a result, manufacturers have pushed back against the program in court by not only challenging HRSA regulations, but also in placing restrictions on their involvement with contract pharmacies, which district courts have disagreed with.^9,10 To date, only one appeal of a district court ruling has been filed, with the verdict in favor of manufacturer restrictions on 340B drug sales.¹¹

However, this should not necessarily indicate that the program is a detriment to all parties that comprise the US healthcare system, according to the investigators. Studies that the JAMA Health Forum uncovered have referenced that many of these covered entities have successfully utilized this 340B revenue to offer patients more health services, including free or low-cost medications.

The review also found significant opportunities to reform the program, with the authors noting that covered entities are profiting from the 340B program. For instance, there aren’t currently requirements as to how covered entities must spend their 340B revenue, which has been a controversial area of focus that the federal government has made note of.^12-14 In 2017, the Centers for Medicare & Medicaid Services ruled that it would lower Medicare Part B reimbursement for 340B hospitals from average sales price (ASP) plus 6% to ASP minus 22.5% in order to cover discounts received under the 340B program. This only lasted five years, as in 2022, the Supreme Court rescinded the rule,¹⁵ and a federal court ruled that repayment to the hospitals at the higher reimbursement rate was required.¹⁶

Therefore, the 340B program’s effects on drug pricing remain unresolved.

“At a minimum, all covered entities should be required to report to HRSA data on 340B revenue and their spending to expand health care service offerings and programming,” the study authors wrote. “Additional requirements could be set for the proportion of 340B revenue that must be put toward community benefit spending. These rules will promote trust and accountability in the 340B program and support future evaluations of its successes and effectiveness.”

References

1. Knox, RP; Wang, J; Feldman, WB; Kesselheim, AS; Sarpatwari, A. Outcomes of the 340B Drug Pricing Program: A Scoping Review. JAMA Health Forum. November 22, 2023. Accessed November 27, 2023. 2023;4(11):e233716. doi:10.1001/jamahealthforum.2023.3716

2. 340B Health. 340B Drug Pricing Program Overview of the 340B drug pricing program. Accessed November 27, 2023. https://www.340bhealth.org/members/340b-program/overview/

3. Access Insights 2023: Andrew Brownlee Discusses How the 340B Landscape Will Continue to Evolve Moving Forward. Pharmaceutical Commerce. November 9, 2023. Accessed November 27, 2023. https://www.pharmaceuticalcommerce.com/view/access-insights-2023-andrew-brownlee-discusses-how-the-340b-landscape-will-continue-to-evolve-moving-forward

4. Mulligan, K. The 340B Drug Pricing Program: Background, Ongoing Challenges and Recent Developments. University of Southern California Leonard D. Schaeffer Center for Health Policy & Economics. Published October 14, 2021. https://healthpolicy.usc.edu/research/the-340b-drug-pricing-program-background-ongoing-challenges-and-recent-developments/

5. Examining HRSA’s Oversight of the 340B program. 115 Cong. 46. Published July 18, 2017. https://www.govinfo.gov/content/pkg/CHRG-115hhrg26929/html/CHRG-115hhrg26929.htm

6. US Government Accountability Office. Drug Pricing Program: HHS Uses Multiple Mechanisms to Help Ensure Compliance with 340B Requirements. Published December 14, 2020. https://www.gao.gov/assets/gao-21-107.pdf

7. Fein, AJ. EXCLUSIVE: The 340B program Soared to $38 Billion in 2020—Up 27% vs. 2019. Drug Channels. Published June 16, 2021. https://www.drugchannels.net/2021/06/exclusive-340b-program-soared-to-38.html

8. Martin, R; Hasan, S. Growth of the 340B program Accelerates in 2020. IQVIA. Published March 31, 2021. https://www.iqvia.com/locations/united-states/blogs/2021/03/growth-of-the-340b-program-accelerates-in-2020

9. Yang, YT; Chen, B; Bennett, CL. Federal 340B Program payment scheme for drugs designated as orphan products: congressional clarification needed to close the government-industry revolving door. J Clin Oncol. 2016;34(36):4320-4322. doi: 10.1200/JCO.2016.68.2989

10. Church, RP; Hamscho, VK. Contract pharmacy restrictions, legal challenges, and congressional action: What to expect from the 340B Drug Pricing Program. J Health Care Compliance. 2021;23(1):45-77.

11. Sanofi Aventis v. United States Dep’t of Health & Hum. Servs., 58 F.4th 696 (3d Cir. 2023).

12. Pearson E, Frakt A. 340B is a well-intentioned drug discount program gone awry. STAT News. Published March 22, 2018. https://www.statnews.com/2018/03/22/340b-drug-discount-program-gone-awry/

13. Barlas S. More clouds form over 340B program: potential Medicare cut underlines need to rein in program. P T. 2017;42(10):628-631.

14. Thomas, S; Schulman, K. The unintended consequences of the 340B safety-net drug discount program. Health Serv Res. 2020;55(2):153-156. doi :10.1111/1475-6773.13281

15. American Hospital Association v. Becerra, 141 S.Ct. 2853 (2022).

16. Hospital Outpatient Prospective Payment System. Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022 Proposed Rule (CMS 1793-P). Centers for Medicare and Medicaid Services. Published July 7, 2023. https://www.cms.gov/newsroom/fact-sheets/hospital-outpatient-prospective-payment-system-remedy-340b-acquired-drug-payment-policy-calendar#:~:text=On%20September%2028%2C%202022%2C%20the,generally%20ASP%20plus%206%25