WASHINGTON: The U.S. Department of Health and Human Services building is shown in Washington, DC. … [+]
In 1992, Congress created the 340B Drug Pricing Program to provide funding to safety net hospitals so they could offer expanded services to eligible vulnerable patients. The program requires manufacturers to provide price reductions on covered outpatient drugs through rebates or rebates. The intended benefactor is the covered entity or institution, and not directly the specific patient, so these hospitals can use the drug cost savings to provide more services to the patients they serve.
The objectives of the 340B program are important. By having access to discounted drug prices, healthcare providers who serve a large number of low-income, uninsured patients can use their limited resources to provide patients with more comprehensive care. By reducing the financial burden of drug costs, 340B was designed to help maintain the financial viability of safety net hospitals and clinics that are essential to their communities.
As I described in a previous article, the 340B program is not working as intended. Today, hospitals use 340 billion “spreads” to finance general health care services, an argument that the American Hospital Association continues to argue is consistent with the purpose of the statute. The program has grown dramatically beyond its original intent: in the number of facilities covered, the number of drugs covered, and the number of patients considered “eligible.” These estimated discounted purchases increased from approximately $4 billion per year in 2007-2009 to $66.3 billion in 2007-2009. 2023. This explosive growth is largely the result of hospital companies buying up hospitals and independent physician practices that have been serving vulnerable populations, and then expanding use of the $340 billion rebate to all their satellite hospitals, even those in wealthy suburbs. The lack of any meaningful oversight of the program has underscored the pharmaceutical industry’s concerns about the program’s misuse as a financing mechanism to support generally cash-strapped hospitals—well beyond the original safety net hospitals and clinics for which the program was intended.
Given that 340B is the second largest federal prescription drug program, there should be clear evidence justifying the validity of the 340B claims submitted and how rebates have been used to achieve the intent of the program. Unfortunately, there is little evidence that the program is achieving its intended objectives. What is clear is that the program has become an important source of revenue for healthcare organizations in general that are struggling to make ends meet. The impact of the program is difficult to demonstrate due to a lack of transparency and reporting requirements. CEs are not required to demonstrate how they have invested in expanded services for vulnerable populations.
Since its inception, the 340B program has not had the necessary level of oversight to ensure program integrity and compliance. Compliance with requirements such as preventing diversion of 340B drugs to non-340B eligible patients and preventing duplicate rebates between 340B and Medicaid has been largely left to the discretion of stakeholders. Examples of prescription drug abuse include: 1) dispensing 340B drugs in ineligible locations; 2) failure to monitor/correct inventory; 3) providing 340 billion medications written by ineligible providers; and 4) dispensing 340B drugs to ineligible patients at a contract/onsite pharmacy. Health Resources and Services Administration audits conducted in 2014 revealed more than 500 cases of abuse and 400 cases of double discounting in a sample of 1,242 cases investigated between 2012 and 2019. Steps taken by HRSA to improve compliance (e.g., audits of CEs, self-audits, disclosure for reporting non-compliance, contract pharmacy integrity controls) have been inadequate and impose additional administrative burdens on providers, manufacturers, payers and pharmacies, diverting resources from their mission to deliver better health outcomes for consumers. Lack of transparency about how CEs are deploying 340 billion savings and the absence of clear oversight are enabling the diversions and double discounts that HRSA audits have revealed.
There are also questions about the extent to which the $340 billion in revenues is used to provide services to low-income populations. CEs often use 340 billion savings to finance services outside the scope of the intended program. A 2022 New York Times investigation found that nonprofit giant Bon Secours Mercy Health used a Virginia community hospital’s $340 billion eligibility to generate huge profits while reducing services for vulnerable patients.
Experts and political figures alike agree with concerns about 340B’s transparency. Dr. For example, Adam Fein, CEO and president of the Drug Channels Institute, wrote: “…there continues to be a near-total disregard for accountability and transparency, combined with blatant misrepresentations by nonprofit hospitals. responsibilities.” Senator Bill Cassidy (R-LA), ranking member of the Senate Health, Education, Labor, and Pensions Committee, called for an investigation into hospital revenues of $340 billion by 2023, noting that “GAO has identified the troubling recent pattern of among the 340 billion covered entities providing more and more services wealthier communities with higher insurance rates, a far cry from those of the program intention.”
Double rebates, another major concern among many stakeholders, occur when a drug manufacturer provides more than one rebate on the same unit of a drug. This usually occurs when a drug sold at a discounted price under the 340B program is also subject to a discount under another program (e.g., Medicaid). Manufacturers are not required to provide multiple rebates for the same drug, and CEs must have mechanisms in place to prevent duplicate rebates. This ban is in place to protect drug manufacturers from significant financial losses. Surprisingly, HRSA defers oversight of double rebates to drug manufacturers, which drains resources and diverts them from their work to develop innovative therapies for the benefit of consumers. Furthermore, while deferring responsibility to manufacturers, HRSA does not holistically require claim level details to be provided nor facilitate adequate dispute resolution when duplicates are found. Disputes can remain unresolved for years.
Despite the ban, manufacturers are faced with requests for multiple discounts on the same medicine. This practice can distort drug pricing, potentially leading to higher drug prices to offset the losses. Double rebates violate the Medicaid Best Price rule, which requires drug manufacturers to offer state Medicaid programs the lowest available U.S. price. 340B program rebates can provide medications at a price lower than the prices available to Medicaid. When a hospital claims a $340 billion rebate, the actual price paid may be less than the Medicaid rebate, causing the manufacturer to inadvertently violate the Medicaid Best Price rule. Addressing duplicate rebates is essential to maintaining the integrity of the Medicaid Best Price rule and protecting pharmaceutical companies from compliance issues and associated financial losses.
Clearly, legislative reforms are needed to ensure that the 340B program achieves its goals. The ambiguity in the way the law is written allows for abuse and encourages hospitals to obtain rebates beyond the intended patient population. Furthermore, the way the law is interpreted by the supply sector translates into an indefinite liability for the production sector. That loss must be compensated for at some other point in commercialization, resulting in higher costs for consumers in general and making the current situation unsustainable.
Congress should encourage political and industry willingness to improve transparency and oversight of the 340B program to effect change. Reforms must emphasize visibility into how hospitals use the 340 billion savings. Congress should also require reporting and monitoring of 340 billion rebates to limit the risk of duplicate rebates. These adjustments will ensure that vulnerable populations realize the benefits for which 340B was designed.