On July 11, the U.S. House of Representatives Energy and Commerce Subcommittee on Health held a hearing on the 340B program, entitled “Opportunities to Improve the 340B Drug Pricing Program.” In his opening statement, Subcommittee Chairman Michael Burgess (R-TX) stated that it is reasonable to review the 340B program because healthcare has “evolved significantly” since the program began in 1992. Chairman Burgess also stressed that the members of the nonpartisan subcommittee all share the same goal of ensuring the integrity and accountability of the 340B program.

The hearing covered a June 2018 Government Accountability Office (GAO) report on the Health Resources and Services Administration (HRSA)’s lack of oversight of contract pharmacies within the program and recent legislative proposals aimed at reforming the program. The U.S. House of Representatives currently has 15 pending bills on 340B topics ranging from discounts for several types of orphan drugs for certain covered entities to changing the definition of a 340B patient. In order to address concerns regarding the program, the subcommittee heard testimony from Debra Draper of the Health Care Team, U.S. Government Accountability Office; Dr. Frederick Cerise of Parkland Health & Hospital System; Dr. Debra Patt of Texas Oncology; and Dr. Charles Daniels of University of California, San Diego.

Highlights from the hearing are explained in further detail below.

Disagreement over the Future of the 340B Program

When first enacted by Congress in 1992, a principal purpose of the 340B program was to provide front-end discounts on drugs purchased by covered entities so that low-income, uninsured Americans could have access to outpatient drugs. Since then, covered entity participation in the 340B program has grown substantially. According to a July 2017 GAO report, the number of covered entities that participate in the program has grown from several hundred in 2005 to 21,554 in 2017. This growth in the 340B program has led to Congressional scrutiny of the program and discussions regarding its future.

At the hearing, several of the Republican subcommittee members noted that this rapid growth has changed the program. Subcommittee member Joe Barton (R-TX) noted that “the 340B program was set up to be a really good deed, and word spread, and now, in my opinion, that program’s being abused.” Congressman Barton introduced a bill that would raise the disproportionate share hospital adjustment threshold from 11.75 percent to 18 percent with the intent to better ensure that only hospitals that serve a large population of low-income patients qualify to participate, which he believes is consistent with the original intent of the program.

On the other hand, subcommittee member Doris Matsui (D-CA) pointed out that the “creative and flexible” 340B program has allowed community providers to stretch scare resources. Congresswoman Matsui explained that the program allows hospital savings to be used not just to lower drug prices for low-income patients, but also to support other important services. Congresswoman Matsui introduced a bill last month intended to strengthen and modernize the 340B program.

Issues with Oversight by HRSA

At the hearing, Debra Draper testified about the June 2018 GAO report. Ms. Draper described that because of the increasing number and complexity of contract pharmacy relationships in recent years, HRSA has had difficulty keeping accurate data on contract pharmacies and has limited oversight of duplicate discounts. According to Ms. Draper, HRSA has incomplete data because while it requires covered entities to “register their contract pharmacies with the agency, it does not require covered entities to separately register contract pharmacies to each site of the covered entity with which a contractual relationship exists.” In terms of duplicate discounts, or discounts in which drugs prescribed to Medicaid beneficiaries are wrongfully discounted through both the 340B program and the Medicaid Drug Rebate Program, HRSA only assesses duplicate discounts in the Medicaid fee-for service program and not the Medicaid managed care program. Without complete information regarding the full scope of a covered entity’s compliance with the 340B program and adequate guidance from HRSA, Ms. Draper explained that HRSA cannot be sure that each site of a covered entity is following program requirements, and that manufacturers are not at risk of providing duplicate discounts to Medicaid beneficiaries’ prescriptions.

In addition to concerns regarding HRSA’s oversight of contract pharmacies, several committee members expressed a desire for HRSA to clarify which patients are eligible to receive discounted drugs under the program. Several of the subcommittee member’s advocated for a few of the pending bills that would revise 340B’s definition of a patient. For example, Congresswoman’s Matsui’s bill “seeks to codify the 340B definition of a patient that was published in the 1996 Federal Register.”

Increased Transparency and Accountability

Over the course of the hearing, the importance of transparency and accountability in the 340B program was widely discussed. The June 2018 GAO report disclosed that 30 out of the 55 covered entities that were audited by the GAO provided low-income, uninsured patients with some discount at their contract pharmacies. Currently, covered entities are not expressly required to directly pass on their full 340B discount to patients, or report to HRSA how they are using their 340B savings. Dr. Debra Patt, who is an Oncologist at Texas Oncology, testified that the program should be revised to guarantee that a covered entity’s savings go directly towards ensuring a discount for low-income patients on expensive drugs.

Congresswoman Matsui and several other Democratic subcommittee members also expressed displeasure with the fact that HRSA has only audited pharmaceutical companies 17 times over the past five years. This is substantially less than covered entities who have been audited 831 times in the same time period. These subcommittee members stressed a desire to audit “all of the players” in the 340B space in the future. In his written testimony, Dr. Fred Cerise, CEO and President of Parkland Health & Hospital System, agreed that HRSA should police both covered entities and pharmaceutical companies.

*Many thanks to Summer Associate Hayley White in preparing the draft of this blog post.