Senator Alexander to Hold Hearing on 340B Drug Pricing Program


Posted by Alexander Hendrie on Wednesday, March 14th, 2018, 1:58 PM PERMALINK

This week, the Senate Health, Education, Labor and Pensions (HELP) Committee will hold a hearing on the 340B prescription drug program under the leadership of Chairman Lamar Alexander (R-TN). This hearing is an important step in determining what reforms are needed to ensure the program remains efficient and effective.

340B was originally created in 1992 to ensure uninsured and low-income Americans would have access to prescription drugs. The program 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 entitlement programs such as Medicare and Medicaid.

The program has expanded considerably since it was first created. In 2005, just 583 hospitals participated in the program. Today, 12,000 participate. This rapid expansion has resulted in structural problems with 340B and it remains unclear whether patients are benefiting from the discounts provided in the program.

Instead, the program appears to be creating perverse incentives that eliminate the need for efficiency and leave insurers and taxpayers with higher costs.

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

In addition, as noted in a report by the House Energy and Commerce Committee, there is a lack of accountability regarding how any savings are distributed to patients including a lack of any reporting requirements.

Clearly, the 340B program suffers from a lack of oversight and efficiency and is no longer working as intended. Chairman Alexander and the HELP Committee should be commended for exploring the 340B program and examining the need for reforms that will ensure the program is working as intended.   

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