House Committee Recommends Fixes to 340B Drug Program

Jack O'Brien, January 12, 2018

In urging transparency, accountability, and compliance, federal lawmakers address concerns of stakeholders and advocates. 

A two-year review of the 340B Drug Pricing Program by the House Committee on Energy and Commerce recommends increased transparency and accountability for the federal discount drug operation.

The report issued this week highlights the growing cost of the 340B program as more Americans enroll in Medicaid and the number of pharmacies utilizing the program for drug savings increases.

First established in 1992, the 340B program provides Medicare payments for outpatient drugs to hospitals serving high volumes of low-income patients. Drug purchases through 340B have continued to surge in recent years, increasing by 30% in 2016 to a total of $16 billion.

Recently, the program has come under criticism for its perceived incentive toward profiteering and causing damage to the overall healthcare system.

Related: Report: 340B Drug Program Rife with Abuse, Profiteering

In audits dating back to at least 2012, the Health Resources and Services Administration (HRSA), which oversees the program, has found rampant noncompliance, according to the report. Due to a lack of authority and enforcement, however, HRSA could do little to address systemic problems.

The House report’s conclusions recommend enhancing HRSA’s authority over entities applying for 340B as well as implementing an independent audit system to ensure compliance. The report also recommends that Congress reevaluate whether disproportionate share hospitals are “an appropriate measure” for eligibility in the 340B program.

Recommendations elicit industry response

Industry stakeholders, specifically health systems and hospitals, have been closely following federal developments with the 340B program. They responded swiftly once Congress issued its recommendations.

Ted Slafsky, president and CEO of 340B Health, a group representing hospitals and health systems, said his organization appreciates the committee’s work but has some reservations.

“We also appreciate the committee’s finding that the 340B program ‘is an important program that enjoys strong bipartisan support in Congress,’” Slafsky said in a statement to HealthLeaders Media. “We support having a thoughtful conversation about the transparency of the 340B program. We are concerned, however, by recommendations that could limit the scope of the program, cause unnecessary burdens, and hinder the ability of hospitals to provide care to low-income and rural Americans. We look forward to reviewing the report in detail and discussing its findings and recommendations with policymakers from both parties.”

Federal cuts and pushback

340B has been on the White House’s chopping block for months, culminating in a final rule issued in November to reduce payments by 28.5%. The CMS rule took effect on New Year’s Day, resulting in an estimated $1.6 billion in cuts.

CMS Administrator Seema Verma said the move is in line with President Donald Trump’s efforts to reduce high prescription drug costs. Verma estimated Medicare beneficiaries would save $320 million because of the decision.

Efforts were made to block the move, including H.R. 4392, which never received a committee vote.

In November, the American Hospital Association (AHA) filed a lawsuit against the Department of Health and Human Services to halt the anticipated cuts to the program. The initial case was dismissed, but the AHA filed an appeal to the U.S. Court of Appeals in Washington, D.C., on Tuesday.

Jack O'Brien

Jack O'Brien is an associate editor at HealthLeaders Media. 

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