Trump Budget Aims to Overhaul Drug Discounts for Hospitals


The Trump administration’s 2018 budget envisions big changes to a drug pricing program that offers discounts to hospitals and other providers.

The president’s budget request for fiscal year 2018 released May 23 directs the Department of Health and Human Services to work with Congress to develop a legislative proposal to improve the 340B drug pricing program’s “integrity and ensure that the benefits derived from participating in the program are used to benefit patients, especially low-income and uninsured populations.”

The Health Resources and Services Administration, the part of the HHS that administers the 340B program, has had trouble in the courts with implementing 340B program rules due to a lack of statutory authority. For instance, in 2014 a federal district court said HRSA lacked the authority for a rule that would have allowed rural hospitals and free-standing cancer hospitals to buy discounted “orphan” or rare-disease drugs when the drugs aren’t used to treat a rare disease or condition. Such drugs can be used treat diseases or conditions that are not rare.

The 340B program requires drug manufacturers to provide discounts on outpatient prescription drugs to certain safety-net health-care providers specified in the statute. In 2015, total sales in the 340B program were about $12 billion, according to HRSA’s budget justification.

Bloomberg Intelligence Analyst Brian Rye told me given “HRSA’s repeated difficulty in promulgating new rules or guidances, Congress appears increasingly likely to revisit the 340B program’s underlying statute.”

The budget language “indicates HRSA’s continued interest in taking the lead in issuing program changes by seeking enhanced regulatory authority to avoid future legal challenges,” Kyle Vasquez, an attorney with Polsinelli in Chicago told me. “It will be interesting to see if any changes come to fruition this year given the variety of interests involved and considering Congress’s other priorities.” Vasquez represents health-care clients including community hospitals.

Meanwhile, 340B Health, a group that represents hospitals and health systems participating in the program, said in a statement it “supports program integrity and transparency but believes legislation is unnecessary to accomplish those goals. The 340B program has operated for a quarter century with numerous requirements for how hospitals must use the program.”

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