Drug Discount Plan Requires Fix by Congress, Program Oversight

A drug discount plan desperately needs a legislative fix to protect patients and enhance the government’s program oversight, 340B program advocates told senators recently.

Advocates and program members are asking Congress to pass stricter guidelines on who can qualify as a 340B-covered entity eligible for discounted outpatient drugs. They also recommended policies to ensure transparency and oversight of the program administered by the Health Resources and Services Administration.

The input comes after a bipartisan group of senators requested suggestions on the 340B drug pricing program that would help strengthen the program’s operations, savings, and spending. Among those looking at the program are a 340B working group consisting of Sens. John Thune (R-S.D.), Debbie Stabenow (D-Mich.), Shelley Moore Capito (R-W.Va.), Tammy Baldwin (D-Wis.), Jerry Moran (R-Kan.), and Ben Cardin (D-Md.).

Section 340B of the Public Health Service Act requires drug makers to discount drugs for qualifying hospitals, clinics, and providers that treat low-income and uninsured patients—known as covered entities. Under the plan, eligible health-care organizations can receive outpatient drugs at discounted prices from drug manufacturers that participate in Medicaid, and then covered entities would use the savings and provide more comprehensive services.

“While the program does not utilize federal taxpayer dollars, federal oversight is necessary to ensure the program functions as intended. We have heard concerns from some stakeholders about ambiguity in the 340B program and the need to strengthen oversight and accountability in the program,” the senators said in a letter asking for comments on how well the program works.

The program Congress created in 1992 stands differently than what it first was, 340B program advocates told lawmakers in letters, and it now needs re-evaluation of hospital eligibility criteria, operations of contract pharmacies, and more oversight of the program’s operations. on its operations.

More Oversight, Transparency

Qualifications for hospitals to be considered a 340B-covered entity need stricter guidelines, some groups say. The current metric used to qualify hospitals for the discount program is based on an inpatient measure of low-income insured patients and does not account for the uninsured patients a hospital treats, some said in letters.

“Reevaluation of hospital eligibility criteria is needed to ensure the 340B program is meeting its intended purpose and aiding those hospitals providing a true safety net function by serving high numbers of low-income uninsured patients,” the Alliance for Integrity and Reform of 340B, said in a statement. “Defining a 340B patient will help determine when hospitals can obtain 340B discounts.”

Another major criticism by advocates is HRSA’s oversight of the 340B program and the tools it needs to enforce program rules among entities and contract pharmacies.

The American Hospital Association urged Congress to let HRSA finalize its administrative dispute resolution rule. The AHA represents close to 5,000 hospitals and health-care systems, and nearly 2,000 of them are members in the 340B program.

The ADR rule establishes a formal way for the agency to resolve disputed claims by 340B providers and drug manufacturers. The process has been challenged in court and has never been implemented in the way Congress intended, the AHA said. The group is asking that HRSA be given a chance to implement the process before new legislation related to enforcement authorities is considered.

Pits Hospitals Against Pharma

The refusal by some drug manufacturers to offer 340B discounts for covered outpatient drugs dispensed at contract pharmacies has also concerned 340b entities, and resulted in growing tensions between covered entities and manufacturers.

More than a decade ago, HRSA issued a guidance that allowed covered entities to dispense drugs through contract pharmacies in the 340B program since many covered entities do not have pharmacies in-house. Since then, there has been litigation over the treatment of drugs dispensed through contract pharmacies.

“Dispensing drugs at contract pharmacies allows America’s 340B providers to meet their patients where they are, rather than forcing them to travel long and costly distances to pick up prescriptions. In addition, the ability of 340B hospitals to contract with community and specialty pharmacies allows hospitals to get their patients drugs otherwise not available,” the AHA said in a statement.

The Pharmaceutical Research and Manufacturers of America asks that Congress prohibit for-profit corporations, like pharmacy benefit managers and for-profit chain pharmacies, from profiting from the program. The group worries the program now benefits profit-seeking pharmacy benefit managers and pharmacy conglomerates, and not low-income patients.

“The 340B program of today is unrecognizable in both character and size when compared to the program Congress originally created. Congress needs to take meaningful action to get 340B back on track for vulnerable patients,” Nicole Longo, spokesperson for PhRMA, said in a statement.

More than 50,000 covered entities participate in the program, and since HRSA’s 2010 guidance allowing covered entities to have relationships with contract pharmacies, the number of arrangements with pharmacies has grown, according to the National Pharmaceutical Council.

HRSA’s Office of Pharmacy Affairs (OPA) database lists thousands of contract pharmacies. Enrolled hospitals and other covered entities can achieve average savings of 25% to 50% in pharmaceutical purchases, according to HRSA.

Ongoing Litigation

Senators said they wouldn’t take a position on pending litigation as ongoing legal battles have stemmed from various drug manufacturers declining to offer 340B discounts. Attorneys familiar with the program say it’s unlikely for action to come from lawmakers soon.

Todd Nova, attorney at Hall Render, said the information shared with senators will inform them of the issues between covered entities and manufacturers.

“We all need some better guardrails, or clearer guardrails, in terms of what the program is or isn’t supposed to be, and I think the way to do that is to provide a little bit of additional authority to HRSA OPA to enforce their standards and to promulgate regulations and also subregulatory guidance,” Nova said.

Senators asking for information also “signaled a desire to find some type of compromise to put the program on surer footing moving forward,” said Brenda Shafer, Richard Davis, and Michael French of Quarles & Brady LLP.

“This much uncertainty is ultimately unsustainable—some type of legislative fix is likely needed to ensure that all stakeholders know and play by the same clear rules, and can stop operating in such a gray space without clear guidelines,” the Quarles & Brady LLP attorneys said.