AHA Claps Back at Drug Companies in Conflict Over 340B Program

Drug companies are more likely than hospitals to violate 340B regulations, according to a recent American Hospital Association report.

The 340B Drug Pricing Program has been under constant attack on multiple fronts, although drug companies have arguably led the charge. Now, the American Hospital Association (AHA) is firing back.

In a recent review of Health Resources and Services Administration (HRSA) data, AHA found that participating drug companies are less likely to be audited and more likely to violate 340B rules than hospitals.

AHA Turns the Tables with HRSA data

HRSA was given authority to issue 340B regulations and to audit 340B participants, including both hospitals and drug companies, when the program was established in 1992. 

Among the rules governing hospital participation, one prohibits participants from giving 340B discounts to ineligible patients and another prohibits them from receiving both a 340B discount and Medicaid rebate on the same drug. The first type of violation is referred to as a diversion and the second as a duplicate discount. HRSA can require repayment of 340B discounts to drug companies if a hospital violates either rule.

HRSA audits approximately 160 participating hospitals each year, or around 6% of the total number of participating hospitals.

AHA determined that adverse findings for either type of violation declined by 62.1% between 2018 and 2022. The AHA report showed that 39.7% of audited hospitals violated diversion rules and 30.8% violated duplicate discount rules in 2018 compared to 13.2% and 10.7%, respectively, in 2022.

Among its rules governing participating drug companies, HRSA prohibits the sale of 340B-eligible drugs to participating hospitals at or above the 340B ceiling price. HRSA can require companies violating this rule to repay affected hospitals for the total amounts of the overcharge. 

HRSA audits approximately five drug companies per year, or 0.6% of all participating drug companies.

Of the 25 HRSA audits conducted between 2018 and 2022, 60% revealed a violation. Of these, only one did not require repayment. Meanwhile, the violation rate for hospitals fell each year from a five-year-high of 71% in 2018 to a five-year-low of 26% in 2021, and then rose slightly to 28% in 2022, according to the report.

Drug Companies and Lawmakers Push for Stricter Oversight

In recent years, drug companies have consistently accused provider organizations of using 340B funds for purposes beyond the original scope of the program and blamed HRSA for lax oversight.

Pharmaceutical Research and Manufacturers of America (PhRMA), an industry group representing drug companies, claimed in an October 2024 letter to HRSA that growth in Medicaid managed care organizations has increased the risk of duplicate discount violations and accused the agency of ignoring government watchdog recommendations to ramp up oversight.

“We continue to have serious concerns about persistent and often illegal abuse of 340B, which is driving up costs for patients, employers and taxpayers,” PhRMA Senior Vice President Alex Schriver said in a November 2024 statement.

“Hospitals are taking a ‘just trust me’ approach to requesting 340B discounts on medicines despite well-documented abuses,” the statement continued. “For too long, the Department of Health and Human Services has refused to implement basic transparency and accountability requirements needed to prevent illegal activity.” 

Drug companies aren’t the only ones suspicious of how hospitals use the 340B program. As the program has grown, federal legislators have taken note. In a report on the program released earlier this year, Senator Bill Cassidy (R-Louisiana) called on Congress to consider stricter oversight.

“This investigation underscores that there are transparency and oversight concerns that prevent 340B discounts from translating to better access or lower costs for patients,” Cassidy said in an April 24 statement. “Congress needs to act to bring much-needed reform to the 340B Program.”

However, AHA has now turned the tables on drug companies, suggesting that legislators and regulatory agencies should turn a more watchful eye on them.  

“Policymakers should reject the baseless claims made by drug companies of widespread program abuse by 340B hospitals and urge HRSA to increase their audits of drug companies,” the AHA report concluded. “Greater oversight of these drug companies is necessary to ensure the continued success of the 340B program for the millions of vulnerable patients and communities nationwide who rely on it.”