Action on 340B Program Expected to Heat Up After Election

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By Bronwyn Mixter

June 27 — Congressional and regulatory action on the 340B drug discount program is expected to heat up after the election, drug industry and safety-net provider groups told Bloomberg BNA recently.

Both the drug industry and safety-net providers would like to see changes to the 340B program. While pharmaceutical companies are concerned about unclear eligibility requirements and duplicate discounts on 340B drugs, hospitals and other providers are concerned that they aren't always receiving the appropriate discounts from drugmakers.

Bloomberg Intelligence analyst Brian Rye said June 22 “there isn't a lot of time left on the legislative calendar to address major issues” and other priorities have emerged in the health-care arena, such as opioid abuse and the Zika virus. Rye said activity on the 340B program “is likely to pick back up following the election.”

340B Program

Congress created the 340B program in 1992 to help needy patients gain better access to prescription medicines. The program requires drug manufacturers to provide outpatient drugs to eligible health-care organizations/covered entities at significantly reduced prices. The program is administered by the Health Resources and Services Administration (HRSA), part of the Department of Health and Human Services. Even though the program is more than two decades old, the government has been slow to issue rules on 340B, and has been hamstrung by court challenges to its rulemaking efforts.

The program has a broad impact on hospitals and drugmakers. David Bowman, a press officer for HRSA, told Bloomberg BNA in a June 24 e-mail that as of April, there were 2,323 hospitals participating in the 340B program. He also said 340B program sales in 2015 across all entity types were $12 billion.

Action on the Hill

Stephanie Silverman, a spokeswoman for the Alliance for Integrity and Reform of 340B (AIR 340B), told Bloomberg BNA that there continues to be substantial interest on the Hill “in addressing the 340B program and its challenges.” AIR 340B is a coalition of patient advocacy groups, clinical care providers and manufacturers. Members include the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO).

Rep. Chris Collins (R-N.Y.) spoke at an AIR 340B summit in May, and Silverman said he “was pretty explicit about the need for Congress, and I think specifically the committee, to take a look at the shortcomings of the 340B program to specifically address where it's not serving its intended objectives.” Collins serves on the House Energy and Commerce Health Subcommittee.

Collins “was quite direct about looking for opportunities in the 2017 legislative cycle to make potential changes,” Silverman said.

At the May 17 summit, Collins said he has been pushing for transparency in the 340B program because most participating hospitals don't have to report anything about how they use the money that they receive through the program. In particular, Collins said he was concerned about situations where a patient with full insurance coverage receives a drug from a 340B hospital and the hospital still gets a discount on that drug.

“It is wrong if a hospital fills in gaps in revenue by taking inappropriate discounts,” Collins said at the summit.

When asked about procedural opportunities for 340B legislation, Collins said “there's always the opportunity for a bipartisan bill,” but members of Congress need more information about the 340B program. “We don't have much time left this year, but it's an issue that's not going away,” he said.

Federal Grantees

Silverman said she believes one congressional office has asked the Congressional Research Service (CRS) to conduct an analysis that explores the different operating rules for 340B hospitals versus the rules for federal grantees that participate in the program. Health-care entities receiving one of 10 types of federal grants are eligible to participate in the 340B program. Grantees typically include clinics that offer primary and preventive care to uninsured or vulnerable patients.

“That's been a really active topic of conversation,” Silverman said. “We're very interested in seeing the additional research come out of CRS because we think that there are real questions that were raised at our summit and among the stakeholder community about whether or not there is an inequity of sorts reflected in the fact that the grantee community has to abide by very strict rules and guidelines and that those rules and guidelines don't apply, most of them, to the 340B [disproportionate share hospital] DSH hospital community.”

The CRS, when contacted by Bloomberg BNA, declined to identify the lawmaker's office requesting such an analysis.

Randy Barrett, vice president of communications at 340B Health, a group that represents health-care providers receiving discounts in the program, told Bloomberg BNA in early June that his group isn't expecting “any kind of legislative activity until the lame duck session at the very earliest. Not much is happening. Here we are in an election year and Congress is out more than in. The last thing they are doing is dealing with hugely controversial” issues, he said.

Barrett said “there have been some threats” of legislative activity from Collins, and the pharmaceutical industry “has now moved to him as their main attack dog on the Hill.” Barrett said he thinks things will speed up after the election.

“PhRMA has put way too much time and effort and money into this to not keep pushing,” Barrett said. “If things stay under Republican control. I think it's fairly realistic that we're going to see some kind of legislation from the industry by next year. I think they've been laying the groundwork for too long not to try.”

Fee for Covered Entities

On Capitol Hill, lawmakers are contemplating requiring a fee on hospitals and other providers participating in the 340B program.

The HHS appropriations bill (S. 3040) for fiscal year 2017 contains a provision that would allow the HHS secretary to collect a fee of 0.1 percent of each purchase of 340B drugs from entities participating in the program. The fee is intended to pay for the program's operating costs.

The bill was approved by the Senate Appropriations Committee on June 9 (112 HCDR, 6/10/16).

Both Silverman and Barrett said their groups haven't taken a position on the fee.

However, Silverman said that “broadly speaking, we see this as further recognition in Congress that there is a need for change in 340B and growing congressional attention to the program, where continued challenges persist.”

Presidential Election

Barrett said it's unclear yet whether the presidential election will have an effect on the program.

Republican presidential candidate Donald Trump “has come out against the pharmaceutical industry in some cases, particularly around the issue of drug prices,” Barrett said. “Obviously, he's not worried about 340B. That's far too down in the weeds for him.”

Barrett also said it's not clear where Democratic presidential candidate Hillary Clinton “stands, though even under the Obama administration, we've seen the mega regs come through that are fairly draconian. We don't know whether” Hillary Clinton would continue that or stop, he said.

HRSA withdrew its proposed regulation, called the “mega reg,” from White House review in November 2014 before it was even published. This action followed a May 2014 federal district court ruling that said the agency didn't have the authority to issue another regulation on a narrower issue, concerning the eligibility of certain drugs for 340B pricing (220 HCDR, 11/14/14). PhRMA filed that lawsuit against the government (102 HCDR, 5/28/14).

At the time HRSA withdrew the mega reg, the agency said it would issue a proposed guidance to address key policy issues in 340B. HRSA also said it would issue proposed regulations where the statute provides explicit rulemaking authority.

More recently, the White House Office of Management and Budget started its review in June of a proposed rule (RIN:0906-AA90) that would establish a binding administrative dispute resolution process for claims raised by covered entities such as hospitals that say they were overcharged for drugs under the 340B program (117 HCDR, 6/17/16). This process also would be available to drug manufacturers, according to OMB's explanation of the rule.

“We're kind of in watch-and-wait mode,” Barrett said. “We're frankly glad to have some breather to be able to assess things and keep pushing our message. We're thankfully in a phase where we've got a decent handful of months where we have a chance to keep pushing our side of the argument and explain why the program is so important for hospitals, communities and poor people.”

Barrett said 340B Health is continuing to push its message on Capitol Hill and with the committees of jurisdiction.

HRSA `Omnibus' Guidance

After it pulled the mega rule, HRSA in August 2015 released a proposed version of what it called an omnibus guidance document for public comment (167 HCDR, 8/28/15). The agency said at the time it was “proposing this omnibus guidance to provide increased clarity in the marketplace for all 340B Program stakeholders and strengthen HHS’s ability to administer the 340B Program effectively.”

The proposed guidance would define who is considered a patient for purposes of the 340B program. The guidance also covers drug company responsibilities, such as procedures for issuing credits and refunds. Other subjects covered in the guidance are HHS's audit of a covered entity, HHS's audit of a manufacturer and a manufacturer's audit of a covered entity.

HRSA has yet to release the final version of the omnibus guidance. Silverman said HRSA has indicated that it won't issue the final 340B guidance until later this year.

“It continues to be our view that more clarity is necessary and that HRSA should certainly move deliberatively,” Silverman said. “We also recognize that HRSA's authority to implement is really quite limited. And so whether or not HRSA” finalizes the guidance in 2016 or waits until the end of 2017, “it still doesn't alleviate the need for congressional engagement.”

Silverman said AIR 340B is “really looking to continue to use this year to build the body of evidence and broaden awareness and understanding of some of the core issues” with the program.

Lori Reilly, executive vice president for policy and research at PhRMA, said that “there has been a lot of interest from all sorts of stakeholders in that guidance” and “we would love to see it finalized in part because our belief is that there is additional clarity that's needed around things like the patient definition.”

However, Reilly told Bloomberg BNA that her group was disappointed that the guidance didn't address other issues such as contract pharmacies.

“We think that signals to Congress that there's still ample areas that need to be addressed that are not going to be addressed through regulation, and congressional action will be needed at some point,” Reilly said.

Reilly also said that PhRMA “is hopeful that HRSA will issue the final guidance this year.”

Commitment to Rules

Silverman said she hopes that regardless of who is the next president, “that there would be a commitment to enforcing the rules and making sure that the program more appropriately serves the patient community that was intended.”

“We haven't seen a lot of rhetoric or policy concepts from the Trump campaign to give us any sense of where he might be on those issues,” Silverman said. “I think that certainly we know that Secretary Clinton is a passionate advocate for the vulnerable, uninsured population and so, we can hope that perspective would help compel a Clinton administration to engage more aggressively or to build on the early engagement that's happened in the latter part of the Obama administration. But it's really hard to tell at this juncture.”

“Certainly next year promises a whole lot more in terms of an active legislative agenda whether it's in the context of conversations on Medicare extenders or anything else, there will be vehicles moving forward and it will be a more active time,” Silverman said.

Medicaid Duplicate Discounts

Reilly told Bloomberg BNA that Medicaid duplicate discounts in the 340B program are a big concern for her group.

On June 8, the HHS Office of Inspector General released a report that said the Centers for Medicare & Medicaid Services should require states to change the way they identify 340B program drugs to avoid duplicative discounts in the Medicaid program (112 HCDR, 6/10/16). The OIG said duplicative discounts, prohibited by law, occur when manufacturers pay Medicaid rebates on drugs sold at the already discounted 340B price.

“Medicaid already gets discounts in the form of Medicaid rebates so they're prohibited from also getting 340B discounts,” Reilly said. “The OIG report essentially said that states are not taking adequate steps to avoid duplicative discounts, and provides an additional data point on why reform of the program is needed.”

Below Average on Charity Care?

Reilly also said AIR 340B published a report in May that looked at the amount of charity care at 340B hospitals. “Unfortunately, for almost three-quarters of the hospitals that are participating in 340B, they're providing less charity care than the national average,” she said.

The report said 64 percent of 340B-participating hospitals have charity care rates below the 2.2 percent national average for all hospitals.

When it comes to congressional action to reform the program, Reilly said things don't move quickly in an election year, “but we view it as positive momentum that we continue to have government oversight interest in this program calling for reform.”

“Our hope is that the Senate will at some point have a hearing on 340B similar to what the House did,” Reilly said. In March 2015, the House Energy and Commerce Health Subcommittee held a hearing on the 340B program.

Reilly said PhRMA continues “to see momentum with regard to interest both from the administration, as well as from Congress, in looking at the 340B program to see whether or not its actually meeting the needs that it was intended to” meet.

Collins held a congressional briefing on the 340B program a couple of months ago, Reilly said.

“I think he's like many people who are really wanting to take a look at this program and see if it's benefiting the patients that it was intended to help,” Reilly said. “It's not clear to me yet whether he would introduce a bill this year or potentially in the next Congress. We've seen him now on a couple of occasions mention his continued interest in wanting to take a look at this issue.”

To contact the reporter on this story: Bronwyn Mixter in Washington at

To contact the editor responsible for this story: Brian Broderick at

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