The 340B Safety Net Drug Program is in Dire Need of Reform

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Posted by Alexander Hendrie on Monday, July 9th, 2018, 10:00 AM PERMALINK

Created in 1992, the 340B safety net drug program was originally designed to provide uninsured and low-income Americans with access to life-saving and life improving prescription medicines. Unfortunately, the program is no longer working as intended and is in dire need of reform and oversight.

340B requires manufacturers to provide outpatient prescription drugs to healthcare organizations (typically hospitals, clinics, and other healthcare centers) at a significant discount. This discount can be as high as 50 percent of the average wholesale price and manufacturers are required to provide this discount as a condition of remaining eligible for federal funds from other entitlement programs, such as Medicare and Medicaid.

Over the last 25 years, the nation’s health care system has changed significantly. Congress has passed or expanded numerous laws designed to provide care to lower income individuals and expand access to prescription medicines.

Despite the changing landscape of healthcare, the safety net drug program remains the same as when it was first passed in 1992. Today, it is clear that the program has been operating without necessary safeguards and even may be creating perverse incentives that drive up costs.

President Trump has wisely called for oversight and reform over the 340B safety net drug. Lawmakers should heed his call and ensure that 340B is operating as intended.

Since its inception, the 340B program has operated with little to no oversight. This has included a complete lack of accountability over how savings are distributed to patients and an absence of any reporting requirements.

At the same time, the program has expanded considerably since it was first created. In 2005, just 583 hospitals participated in the program. Today, 12,000 hospitals and non-hospital clinics participate.

This combination of rapid expansion and no oversight has created structural problems and it remains unclear whether patients are seeing any benefit from the discounts provided by the program.

One of the biggest problems centers around hospitals that qualify for 340B based on the DSH (Disproportionate Share Hospital) program, which is designed to compensate those that serve the truly needy.

Most newly participating hospitals are qualifying for 340B based on DSH and these hospitals appear to be the worst offenders of 340B abuse. In 2012, the government initiated its first audit over 340B. Since then, government data has found that two-thirds of DSH hospitals have violated conditions to be eligible for the program.

Because of the absence of oversight, it is unclear if 340B is working as intended. 340B imposes a price control on prescription medicines in order to provide the truly needy with medicines. This price control comes at a cost – everyone else has to pay more. It is unclear whether the savings are being passed along to patients or being absorbed by middlemen.

In fact, a report by the Government Accountability Office (GAO) found that per beneficiary drug expenditures were higher at 340B hospitals than non-340B hospitals, even after accounting for medical conditions.  

Unfortunately, there is no incentive for hospitals to provide better quality care or to lower costs. Perversely, in many cases, there is actually an incentive to prescribe more expensive medicines.

Clearly, there is a need for Congress to act to ensure the safety net drug program is helping the truly needy. Fortunately, the House Energy and Commerce Committee and the Senate Health, Education, Labor and Pensions Committee have both conducted hearings over the program.

One of the next steps lawmakers can take is passing H.R. 4710, the 340B PAUSE (Protecting Access for the Underserved and Safety-net Entities) Act, which would implement reporting and regulation requirements in order to ensure that program is working for the truly needy. 

The legislation imposes a temporary moratorium on new DSH hospitals and requires commonsense data collection including a breakdown of patient mix, charitable care, 340B revenue and contracts with state or local governments that qualify hospitals for 340B.

Lawmakers should also oppose proposals that will perpetuate the abuse and unchecked growth of the 340B program. For instance, H.R. 6071, the “Stretching Entity Resources for Vulnerable (SERV) Communities Act” should be rejected, as it would allow even more hospitals to benefit from out-of-control government mandated price controls and subsidies.

This proposal would allow hospitals to more easily be able to take advantage of funding, due to the lack of requirements for individual patients to receive the discounts and the restrictions on patient definition. This proposal would only make the safety net drug program more unaccountable.

Reform to the 340B safety net drug program is clearly needed. Congress should follow President Trump’s call to ensure the program is working as intended and that waste and abuse is curtailed.

 

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