Today, the House Energy & Commerce Committee held a hearing to examine the Health Resources and Services Administration (HRSA) oversight of the 340B Drug Pricing Program. The 340B Program was created in 1992, to enable “covered entities”, such as Disproportionate Share Hospitals (DSHs), Children’s Hospitals, Federally Qualified Health Centers (FQHCs), HIV/AIDS Programs and other “safety-net” providers, to obtain outpatient drugs at significantly discounted prices.

HRSA estimates 340B Providers Saved Roughly $6 Billion

Covered entities provide these discounted drugs to patients, regardless of their insurance status or income, and then generate additional revenue via reimbursements from patients’ insurance companies. Currently, the program does not specify how this additional revenue is to be used, or whether or not these discounts should be passed along to the patients. Since this program has so rapidly expanded, and is now estimated to save providers $6 billion annually,[1] there has been a call for more oversight. Expert witnesses called to testify on the panel included Captain Krista M. Pedley, Director, Office of Pharmacy Affairs, HRSA, U.S. Department of Health and Human Services (HHS); Erin Bliss, Assistant Inspector General, Office of Evaluation and Inspections, Office of Inspector General (OIG), HHS; and Debra A. Draper, Director, Health Care, Government Accountability Office (GAO).

Opinions of 340B Program Differ Across Party Lines

There was certainly some partisan divide amongst the congressmen with regards to their comments and questions to the expert witnesses. Republicans spent time highlighting the inadequacies in the program, and gross lack of transparency and accountability on the part of hospitals in their use of the revenue generated from this benefit. While still agreeing on the shortcomings of 340B, Democrats alternatively spent time acknowledging how vital of a program it is, and stressed how the proposed $900 million cut to the 340B program in the recent Calendar Year 2018 Hospital Outpatient Prospective Payment (OPPS) and Ambulatory Surgical Center (ASC) Payment Systems proposed rule (click here for our summary),  “does nothing to get to the root of high drug prices” Rep. Diana Degette (D, CO-01).

Although Capt. Pedley (HRSA) was unable to comment on the impact such a cut would have on 340B, given that CMS is still in the rulemaking process, the democratic congressmen were not afraid to speculate. Republican committee members remained remarkably silent on the proposed cut, but continually highlighted how poorly regulated, and murky the current guidelines for program participation are. Georgia congressman, Buddy Carter (R, GA-01) was very vocal on the impact of 340B on drug pricing as a whole, stating, “I can assure you 340B is driving increases in prescription drug costs.” A stark contrast to the disconnect Rep. Frank Pallone (D, NJ-06) drew between the two issues, when he emphasized, “the 340B program is not the problem, nor the solution to rising drug prices.”

Audits Casts Doubt on Charity Care and Program Integrity

Many congressmen had questions regarding how hospitals used the additional revenue from this drug discount program, which no one on the panel could definitively answer given that they did not represent hospitals. However, Dr. Debra Draper (GAO) made many insightful comments referencing some work the GAO did in 2015 on this issue. Per Dr. Draper, the GAO has found that drug spending for DSH hospitals are roughly twice as high as non-DSH hospitals. She also mentioned that she has been told by hospitals that they use this money to develop more programs for charity care. But, since these funds are not tracked, and hospitals are not required to pass on the discounts to patients, there is very little clarity on how these funds are used. Draper is, “sure hospitals are taking advantage of this.”

Rep. Tim Walberg (R, MI-07) asked a number of questions regarding the high rates of noncompliance discovered in HRSA audits, with some years exceeding 80% noncompliance (of programs audited). Capt. Pedley (HRSA) cited that on average, the programs audited are at higher risk of noncompliance given the fact that they target programs based on allegations received by other stakeholders, and other risk factors. Both Rep. Walberg and Rep. Collins (R, NY-27) highlighted the trend of hospitals acquiring oncology practices, and suggested that participation in the 340B program may be those hospitals’ motivation to do so. In response to this, Dr. Draper (GAO) mentioned that the average number of oncology patients treated in 2015 increased more significantly in 340B hospitals than all others, and that GAO has found that drug spending was significantly higher at these hospitals; suggesting that financial incentives may influence prescribing patterns.

All Parties Agree on How to Improve 340B, But More Regulatory Authority is Needed

The OIG oversees HRSA’s operation of the 340B program, and Ms. Erin Bliss (OIG) very clearly walked through the main issues with program oversight and operations that the OIG has identified. Per Bliss, a lack of program transparency preventing accurate payments, and a lack of clarity regarding program rules has resulted in decreased accountability. Increased transparency, and further clarification on program rules are the main recommendations from OIG to improve 340B program integrity. Specifically, Bliss highlighted more transparency on the sharing of ceiling prices, and on reporting requirements that are actually tied to program criteria and goals. The sentiment of OIG, HRSA and GAO is that more regulatory authority would need to be given to HRSA in order to accomplish these goals effectively. As of a court ruling in 2014, HRSA’s current regulatory authority is limited to ceiling prices, civil monetary penalty for manufacturers, and an administrative dispute resolution process. For all other areas of the program, HRSA does not currently have the regulatory authority. Capt. Pedley (HRSA) was unclear if any regulatory language has been recently shared with Congress, when questioned by Rep. Collins, who pledged to push this through if HRSA were to share such language with the committee.


[1] 82 Fed. Reg. 1210, 1227 (January 5, 2017)


Comments are closed.