House Panel Seeks to Shine Spotlight on Drug Discount Program

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By Victoria Pelham

House Republicans said a federal drug discount program for hospitals and other providers needs stricter oversight, and they’ll take a closer look at the program next week.

A House Energy and Commerce subcommittee will hold the hearing July 18 to evaluate the Health Resources and Services Administration’s oversight of the 340B discount program, and will hear from government witnesses. Safety-net and other federally funded hospitals that serve many low-income patients are eligible for mandatory drug price discounts from manufacturers under the program, created in 1992. The pharmaceutical industry has been critical of the program and has called on Congress to bolster it to ensure it serves those it’s intended to.

Subcommittee Chairman Tim Murphy (R-Pa.) called current oversight of 340B alarming.

“As the program continues to expand, our first priority must be to examine how this program is impacting patients, providers, manufacturers, and other stakeholders and ensure that we are protecting program integrity,” he said in a statement.

The hearing could be used to inform legislation in the works over 340B audits, attorney Jason Reddish, with Feldesman Tucker Leifer Fidell LLP in Washington, told Bloomberg BNA.

But that’s exactly why it’s too soon, he said. Reddish, who works with covered entities that receive the discounts, believes Congress should wait until there are more details on drug manufacturer oversight as well.

Focusing on Right Recipients

Murphy noted that the number of participating providers has almost quadrupled since 2011, and he pointed to evidence from the Government Accountability Office that he said showed gaps in monitoring provisions.

Scheduled to testify at the hearing are officials from HRSA, the GAO and the Health and Human Services Office of Inspector General. The agencies have each been involved in examining the issue.

The program has also grown in cost, from under $5.9 billion in 2010 to around $16 billion in 2016, according to a Berkeley Research Group report cited by proponents of overhauling 340B. In a March letter urging Congress to bring more scrutiny to 340B drug pricing, the Alliance for Integrity and Reform of 340B (including several advocacy groups) said the program is expected to make up to $23 billion in drug sales by 2021.

Further, AIR 340B noted hospitals receiving the discount only spent about 1 percent of patient costs on charity or uncompensated care. And just 37 percent of the hospitals offered it at all.

In addition, the federal government is too lax in its standards, the group said. It is urging stricter lines around who qualifies as a 340B patient and which hospitals qualify as safety nets.

“As the program continues to grow without all the necessary standards and oversight, we are concerned that it may lead to perverse financial incentives that fail to take into consideration patient care,” the March letter said.

“We are concerned that lack of oversight into the 340B program has allowed the program to veer away from its original, intended purpose of increasing access to life-saving drugs for vulnerable patient populations,” Stephanie Silverman, AIR 340B’s spokeswoman, told Bloomberg BNA in a separate July 12 statement.

She added the group looks forward to “supporting the growing interest in Congress in modernizing this vital program to ensure its sustainability for those who need it.”

The Pharmaceutical Research and Manufacturers of America, the lobbying wing of drugmakers, said in a statement to Bloomberg BNA, “This hearing is an important first step toward modifying the program to ensure it returns to serving the vulnerable or uninsured patients it was intended to help.” The group has warned of the program’s rapid growth and what it calls misuse by some hospitals that are not “good stewards of the program.”

Reddish said the HRSA audits often offer just brief, vague descriptions, creating a “false impression that noncompliance is commonplace.”

Most of the problems are actually technical errors or harsher interpretations of federal guidelines, he said.

“My concern is that they’re going to use the hearing to justify legislative action, and we think the program is working perfectly fine as it is,” William von Oehsen with Powers Pyles Sutter & Verville PC told Bloomberg BNA. Von Oehsen is a principal attorney with the firm focused on the 340B program and has worked with hospitals, clinics, and other covered entities.

Reddish said he has heard that House lawmakers may be pursuing legislation to increase requirements for transparency and monitoring.

Oversight of Drug Industry

Von Oehsen called into question the increased scrutiny on oversight of the providers, when the requirements are even more lenient for manufacturers.

He called the disconnect between the two “ironic,” pointing out the tally of 340B provider audits was more than 600 but just six for manufacturers. Why aren’t lawmakers examining the drugmakers’ oversight instead, he wondered.

“There seems to be no parity here,” he said.

The burdens on 340B safety-net hospitals are already high and burdensome, costing large sums for the software needed, he added.

“Anything more would be overkill,” he said.

Reddish said HRSA had just recently begun drugmaker audits, adding that regulations that would have penalized them for overcharges had been delayed.

“If HRSA had those tools in place, we’d know more regarding not just covered entity compliance but manufacturer compliance,” he said.

That information is on its way, and hearings like this should wait until there are more data from that, Reddish added.

“We would be worried if Congress were to take action without having both sides of the story,” he said.

To contact the reporter on this story: Victoria Pelham in Washington at

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

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