Senate HELP Panel Explores More Clarity for 340B Drug Program

Kerry Dooley Young

May 16, 2018

WASHINGTON — The Senate's health committee chairman, Lamar Alexander (R-TN), on Tuesday said he'd like to know more about how medical organizations apply the savings they get from the so-called 340Bb drug discount, a program for which federal officials have been trying for years to devise new rules.

The federal 340B Drug Pricing Program requires drug manufacturers to provide discounted drugs to hospitals that treat low-income patients. The idea is that participating facilities would dedicate resources generated from these discounts to expand and improve care to these populations.

"It very well may be that hospitals and clinics are using the savings to benefit low-income patients as intended," Alexander, chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, said at a hearing held here yesterday."But it is hard to know that until we have more information."

Alexander's questions highlighted a lack of clarity about the discount drug program, which has swelled in recent years. Not even the leader of the Senate's chief health committee knows for certain how the 340B savings flow within the medical system. Currently, safety-net hospitals and clinics and other participants in the 340B program are not required to reveal this information. Instead, advocates for 340B offer anecdotes, such as those cited at a previous Senate HELP hearing held in March on the program.

UK HealthCare, based in Lexington, Kentucky, uses its savings to maintain dedicated pharmacy staff to help indigent, self-pay, and underinsured patients receive needed medications through copayment assistance and other financial support programs, said Bruce Siegel, MD, MPH, president and chief executive of America's Essential Hospitals, in his testimony.

In Alexander's home state, Chattanooga-based Erlanger Health System uses 340B savings to provide trauma, oncology, and stroke services programs to underserved patients, as well as counseling on medication adherence and chronic disease management, Siegel said.

"We have few tools as effective as 340B for countering high drug prices. And we have no tools as cost-effective as 340B for the federal government and taxpayers," Siegel said. "Support to hospitals comes from manufacturer discounts, not taxpayer dollars. In fact, restricting 340B likely would leave state and local governments picking up the tab for uncompensated care, or necessitate further federal investments."

The 340B program started in the 1990s as a work-around to allow drugmakers to continue to offer safety-net hospitals and organizations discount medicines in light of new Medicaid rules. The Affordable Care Act of 2010 altered the terms for participation in the 340B program, triggering a significant expansion.

Total 340B sales in 2016 were $16 billion, or about 3.6% of the US drug market, according to government testimony presented at the Tuesday hearing. The Trump administration's recently released blueprint on drug prices said there had been an almost 400% increase in 340B purchases since 2009. In 2015, the 340B discount roughly halved the $12 billion tab for drugs handled through the program, according to the White House's blueprint.

"Is there any reason why we shouldn't ask hospitals and clinics, covered entities, to tell us how they spend this $6 billion?" Alexander said at the Tuesday hearing, referring to the 2015 figure. "It would seem to me that we could do a better job of oversight if we knew that."

Different Opinions

There is widespread agreement about a need for new rules for 340B, although opinions differ about what they should do. Sen. Patty Murray of Washington, the ranking Democrat on HELP, and Sen. Elizabeth Warren (D-MA) were among those who on Tuesday called for tougher policing of pharmaceutical companies by the Health Resources and Services Administration (HRSA), which oversees the 340B program.

Murray pointed out that the 2010 law provides new authority to keep the 340B program accountable. In the Obama administration, HRSA drafted a rule to help make sure pharmaceutical companies were giving the discounts required by the 340B program, because they have not always done so, Murray said.

"But the Trump administration has delayed its implementation over and over," she said. "The most recent delay came last week — the same week he gave a speech claiming he was getting tough on drug companies."

Murray also criticized a 340B policy that the White House counts as a victory.

Medicare decided last year to cut its reimbursement on drugs when hospitals acquire them through the 340B discount program. Medicare used to cover these costs through its policy of adding a premium of 6% to the reported average sales price (ASP), an amount that was reduced in recent years by sequester. Under Trump, the Medicare reimbursement for 340B drugs was switched to a 22.5% reduction on the ASP in many cases. Certain rural, cancer, and children's hospitals will be exempt from this policy in 2018, according to Medicare.

"Even if President Trump doesn't appreciate the value of the 340B program, the many hospitals across the country — and the many patients they help — do," Murray said. She cited the example of a retired social worker in Centralia, Washington, who has melanoma. "Thanks to the 340B program, her medication costs $45 a month — without the program, it would cost several hundred dollars."

The intent of the cut was to share the 340B discount more directly with the federal government and Medicare patients, according to the Trump administration. Research published in recent years in the New England Journal of Medicine and Health Affairs has heightened concerns that the benefits of the 340B program do not always reach patients. It has also been said that the program has unintended consequences on the practice of medicine, such as helping fuel acquisition of physician practices.

Regulatory Setbacks

HRSA has been struggling for years to establish a framework for 340B. Ann Maxwell, assistant inspector general for evaluation and inspections in the Office of Inspector General (OIG) at the Department of Health and Human Services, detailed recent failed HRSA efforts in her testimony at the Tuesday hearing.

HRSA developed a proposed omnibus 340B regulation in 2014, but withdrew it because of a legal challenge. HRSA then in 2015 issued proposed omnibus 340B guidance that would have addressed a number of OIG and US Government Accountability Organization (GAO) recommendations, such as clarifying the definition of a patient. HRSA never finalized this guidance, and formally withdrew it in January 2017.

At the Tuesday hearing, Debra A. Draper, director of health care for the GAO, outlined research on the 340B program underway at her agency. The GAO is investigating the extent to which hospitals and other 340B participants contract with pharmacies to distribute drugs and is assessing the financial arrangements hospitals have with these pharmacies. There has been significant expansion in recent years of contract arrangements for the 340B program. Walgreens, for example, says on its website that its 340B program provides "audit support, inventory management, operational support and end-to-end implementation to more than 1100 contracted covered entities."

Currently, hospitals, clinics, and other 340B organizations are not required to share drug discounts directly with patients. Some make arrangements to ensure this happens during interactions at outside pharmacies, but the practice is not universal, according to OIG's Maxwell.

"If they do not, uninsured patients can pay full price for drugs filled at contract pharmacies and thus not directly benefit from the 340B discount on their prescriptions," Maxwell said.

Several bills pending in Congress, including bills from Sen. Bill Cassidy, MD (R-LA), and Rep. Larry Bucshon, MD (R-IN), seek to halt much of the expansion of the 340B sites and require greater reporting on the finances of hospitals involved in the program. Bucshon has said his legislation is not intended to affect critical-access hospitals, sole community hospitals, and rural referral centers. There are similar exceptions in Cassidy's bill.

Nonprofit consumer groups, including Public Citizen, say they are worried about bids to shrink 340B under the guise of making hospitals reveal their finances. Scores of groups led by Families USA signed a May 14 letter to lawmakers. In it, the groups say they are "troubled by assertions that the program has grown too large, suggestions that safety net providers are 'profiting' from the 340B program, and allegations that safety net providers are not truly serving underserved patients.

"As advocates for patients and consumers, we support transparency in the program to ensure that 340B is meeting the needs of patients," they write. "However, we cannot support any proposals branded as enhancing 'transparency and oversight' that would have the effect of reducing the number of safety net providers in the program and, in turn, the number of patients served."

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