Federal 340B Drug Discount Program – The Gathering Storm

Federal 340B Drug Discount Program – The Gathering Storm

“The best-laid plans of mice and men often go awry” – Robert Burns via John Steinbeck

In 1992, Congress created a program called 340B, the alphanumeric name deriving the Public Health Service Act section in which it resides. The program obliges drug manufacturers to provide substantial discounts — in the 20 to 50 percent range — to health care providers serving large populations of low-income or uninsured patients in exchange for the cost of their drugs being covered under Medicaid. The 340B program helps stretch scarce Federal resources as far as possible, while reaching more eligible patients and providing them with more comprehensive services — at least that was the plan…..

In order to participate in the 340B Program, eligible organizations and covered entities must register to be enrolled and comply with all program requirements. Once enrolled, covered entities are assigned a 340B identification number that drug vendors use to verify before allowing an organization to purchase 340B-covered drugs at the discounted price.

KowalskiTHowever Tom Kowalski, president and CEO of the Texas Healthcare and Bioscience Institute for nearly two decades, observes that even the best of intentions will sometimes go awry, and in his estimation that is what has befallen the 340B discount program somewhere along the road from conception to execution.

In a guest op-ed column entitled “Federal drug discount program lacks oversight” published in the Waco Tribune-Herald newspaper, Mr. Kowalski says that initially 340B worked as its architects had intended. In order to qualify for the program, health care facilities had to be nonprofit organizations serving a disproportionately high number of Medicaid beneficiaries. In Texas, which he notes leads the nation in numbers of uninsured patients, he observes that 340B has had a huge, positive impact .

However, Mr. Kowalski observes that during the past 10 years, the number of hospitals and clinics participating in the 340B program grew by a whopping 500 percent, to a point that today some 30,000 facilities have been qualified as 340B providers — a metric encompassing fully one-third of the country’s hospitals. The Affordable Care Act significantly expanded the list of 340B-eligible providers — a proportion far exceeding the program’s original design. And, he observes, more health care institutions are joining the program even as the number of uninsured individuals in America declines. “It simply defies credibility to believe that one in three American hospitals focuses almost exclusively on low-income or uninsured patients,” he argues.

BIO (Biology Industry Organization),  which lays claim  to being the world’s largest trade association representing biotechnology companies, academic institutions, state biotechnology centers and related organizations across the United States, and in more than 30 other nations, has produced a white paper that examines the history and original intent of the 340B program, highlights key findings to help policymakers ensure that the program meets its stated purpose, and includes a list of recommendations to provide a roadmap for regulators pondering the 340B program’s future.

In a Health Affairs blog entitled “The Coming Storm Over The 340B Rx Drug Discount Program”, healthcare policy consultant, entrepreneur, commentator, Partner in Thorn Run Partners of Denver, Colorado, and founder of Healthcare Lighthouse, an aggregator of Federal policy information for healthcare businesses and organizations Billy Wynne observes that The Government Accountability Office (GAO) and the Office of the Inspector General at the Department of Health and Human Services (HHS) have called for increased oversight of the 340B discount program, which he nots has been by and large self-regulated since its inception in 1992. He says that while enrolled providers are required to maintain records and provide pharmaceutical manufacturers with access to their the books, such audits only occur rarely, with the Health Resources and Services Administration (HRSA) at HHS, within which the program resides, has generally adopted a hands-off approach.

Mr. Wynne notes that Senator Charles Grassley had sent letters to program participants questioning the use of 340B discounts to cross-subsidize other service lines, and that Sen. Grassley and others have called attention to difficulties that can manifest in ensuring that 340B-discounted drugs don’t find their way into the hands of non-qualifying patients, especially when pharmaceutical providers contract with independent pharmacies to dispense drugs.

Tom Kowalski charges that the 340B program’s recent rapid growth combined with lax government oversight have opened the door to rampant abuse, asserting that some health care facilities have “figured out how to game the system” which they are now exploiting to pad their bottom lines. He alleges that some institutions are selling discounted drugs to patients who have insurance charging the latter full price and then pocketing the extra revenue rather than using it to help low-income patients.

However, Mr. Kowalski suggests that reform, long overdue, may be finally coming, noting that last month, Congress got around to holding its first 340B oversight hearing in more than a decade and only the second such hearing since the program was created 23 years ago. He reports that lawmakers and policymakers are now in the process of examining how the 340B program can be realigned with Congress’ original intent to extend federal dollars through drug discounts while putting checks and safeguards in place that will ensure drug price discounts are actually benefiting low-income patients. Mr. Kowalski reports that the most common suggestions are tightening of eligibility criteria for participant health care facilities, and changing the program’s patient definition guidance to ensure that 340B-discounted drugs don’t wind up in the hands of non-qualifying patients.

The BIO white paper also raises questions about whether the 340B program has been allowed to drift into unintended and potentially harmful consequences for its intended beneficiaries, with areas of particular concern including:

• Concerns that some uninsured indigent patients may not be experiencing direct benefit from the program’s existence.

• Anecdotal evidence that clinical decision making may be skewed by efforts to take advantage of the 340B discount.

• Growing evidence of displacement of non-340B providers who serve a key role in providing patient access to important health care services.

The paper also identifies critical ambiguities in the 340B eligibility standards and potential deviations from Congressional intent that, along with limited oversight of the program, have made it difficult to determine whether it is meeting Congressional goals. In addition to identifying unintended and potentially harmful consequences for patients, the white paper identifies several key findings to help policymakers ensure that the 340B program meets its stated purpose of helping uninsured indigent patients gain better access to prescription medicines, and provide a roadmap for reforms, including:

• Adequate funding for the Health Resources and Services

• Administration (HRSA) to ensure he 340B program is appropriately resourced and overseen in support of efforts it has already begun.

• Continued oversight of the 340B program to ensure it remains consistent with its statutory purpose.

• Improved transparency to help advance the program’s goals and ensure that resources are being directly used to reduce drug costs for uninsured indigent patients.

• Full and transparent accounting for all cost savings derived from the 340B program in order to ensure that they are used to reduce drug costs for uninsured indigent patients.

• Clearer definition of the term “patient” to ensure that it corresponds to the purpose of the 340B law, particularly given increased coverage of prescription medicines by commercial insurance, coverage of uninsured persons through the Affordable Care Act and creation of Medicare Part D providing prescription drug insurance to seniors and disabled persons.

• Clarification of hospital eligibility criteria to ensure the 340B program is 1) meeting its intended purpose of helping uninsured indigent patients improve access to prescription medicines, and 2) does not further expand because more patients are insured and fewer are uninsured.

• 340B guidance to follow formal notice and comment rulemaking under the Administrative Procedures Act in order to ensure that careful, well-informed decisions are made and all stakeholders have the opportunity to provide information and perspectives before HRSA policies are finalized.

The BIO white paper concludes that because of potentially serious consequences that could evolve from these and other findings, Congress should conduct a thorough examination of the 340B program to ensure it is meeting its original goals.

Tom Kowalski agrees with that assessment, maintaining that a properly run 340B program could do some serious good, and that what is needed is for Congress to pro-actively step up, put an end to profit-hungry exploitation of the program and return it to its intended purpose of helping the poor afford vital drugs. He warns that if rampant abuse of 340B continues to go largely unchecked,  serious public backlash could convince lawmakers to dismantle the program entirely, which he says would be a shame since many people in America can’t can’t afford the high cost of medications and are forced to skip doses or refills, leading in turn to poorer health outcomes and more costly, invasive procedures.

The Waco Herald-Tribune
BIO (Biology Industry Organization)
Health Affairs blog
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Charles Moore is a syndicated columnist for several major Canadian print newspapers and has an extensive background in covering technology. He serves as a Contributing Science and Technology Editor for BioNews Texas.

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