On March 24, the House Energy and Commerce Subcommittee on Health held the first hearing on the 340B drug discount program since 2005. Citizens Against Government Waste (CAGW) has called for a hearing on this program for well over a year and has written about problems with program for some time. (See, for example, my May 2014 and February 2015 WasteWatchers.)

First, a bit of background.

The 340B program, created in 1992, is overseen by the Health Resources and Services Administration (HRSA). It requires pharmaceutical manufacturers that participate in Medicaid to provide heavily discounted drugs, as much as 50 percent, to certain healthcare providers, called “covered entities.” In theory, the entity, or pharmacy it contracts with, is supposed to pass along the savings to low-income patients and according to the law, also use the savings to “stretch scare Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Unfortunately, due to vague language in the law and unclear regulations, this is not happening as intended.

In addition, the Affordable Care Act, better known as ObamaCare, doubled down on the number of entities that can utilize the program and in 2010 HRSA expanded the number of contract pharmacies that can participate in the program.  As a result, the 340B program has drifted even further from its original purpose.  The numerous changes to the program and lack of government oversight have allowed hospitals and pharmacies to generate millions of dollars in profit and too many low-income patients are not being offered the discounted drugs. 

Ultimately it is consumers and taxpayers that pay for this diversion through higher drug costs, insurance premiums, and taxes.

Witnesses at the March hearing included HRSA Deputy Administrator Diana Espinosa, Government Accountability Office (GAO) Health Care Director Debbie Draper, and Department of Health and Human Services' Office of the Inspector General (OIG) Assistant Inspector General Ann Maxwell.  (Their testimony is provided in the links attached to their name.)

Chairman Joseph Pitts (R-PA) said in his opening remarks that the GAO and OIG have reported that “unclear program guidelines and inconsistent oversight is partially responsible for some of the challenges the program currently faces in being accountable to taxpayers, patients, and stakeholders” and that “covered entities and manufacturers understandably cannot comply with rules that are unclear.” Chairman Pitts called for preservation of the 340B program and to “ensure that it is serving those who most need help” and that “greater oversight and transparency is needed to increase the program’s accountability.”

What became obvious in the hearing is that a clear definition for the type of patients that can use the 340B program is needed; that the law is too vague on how hospitals should spend their savings from pharmaceutical purchases; and that some non-profit hospitals that provide very little charity care are able to utilize the drug discount program to make a profit. Members from both side of the political aisle said more transparency and oversight was needed. More interesting news came after the hearing. 

The March 27 Inside Health Policy reports that, based on questions committee Members asked of the witnesses, lobbyists from the drug and hospital industries believe lawmakers may introduce a bill that will require monitoring of how hospitals are using the 340B drug discount savings and will clarify which patients at what hospitals may get the discounts. The Pharmaceutical Research and Manufacturers of America (PhRMA), the pharmaceutical trade association, has asked for more transparency and oversight of the program for some time. With regard to covered entities, PhRMA stated in a letter to the committee that, “Federally qualified health centers, Ryan White program grantees, family planning clinics and other grantees participating in 340B typically must demonstrate they serve a vulnerable population using an income-based, sliding-fee scale and must reinvest resources directly into services for those populations. Hospitals, however, do not have this requirement.”

HRSA is expected to release guidance soon on the definition of a patient, address what hospitals are eligible for the discount program, and sort out issues with contract pharmacies, among other concerns.  It comes at no surprise that Safety Net Hospitals for Pharmaceutical Access, a coalition of hospitals that participate in the 340B program, want legislators to wait until HRSA releases their expected guidance before moving forward with legislation. I suspect Congress will wait until they see HRSA’s guidance and then decide what further action is necessary. However, Congress should not wait too long; HRSA has been working on these guidance issues for almost two years and a continued delay means problems continue to grow.

But for now, the good news is Congress, after 10 years, is finally conducting oversight of the program. Hopefully the 340B program will be reformed so that it addresses the needs Congress originally intended: helping uninsured, indigent people get access to valuable pharmaceuticals.   You can view all hearing documents concerning the 340B program here. You can read the letter we submitted here.