Subcommittee gives agencies a dose of questions on 340B program

An evaluation of the functionality of the 340B drug pricing program was conducted at a March 24, 2015, hearing titled “Examining the 340B Drug Pricing Program.” The hearing was held by the U.S. House of Representatives Committee on Energy and Commerce, Subcommittee on Health. Through witness testimony, the hearing established the background of the 340B program, recent changes made to the program by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), Health Resource and Services Administration (HRSA) oversight efforts, and the findings of the HHS Office of Inspector General (OIG) regarding the integrity of the program.


The 340B program was created by section 340B of the Public Health Service Act (PHSA) (42 U.S.C. § 256b). Under the program, pharmaceutical drug manufacturers wishing to participate in Medicaid must enter into pharmaceutical pricing agreements in order to receive Medicaid reimbursement. The agreements require manufacturers to provide discounts on certain covered outpatient drugs when those drugs are purchased by certain public health facilities, which the program calls “covered entities.” Participation for public health facilities is voluntary. However, the program encourages participation by discounting the drugs from participating manufacturers.


Health Subcommittee Chairman Joseph Pitts (R-Pa) called the program “critically important” referring to the manner in which it helps low-income patients receive drugs that would otherwise be “out of reach.” While some testimony praised the program and the manner in which it allows covered entities to use savings derived from the program to provide greater care to patients, opponents of the program criticized the manner in which the HRSA has conducted oversight on the program. For example, Rep. Renee Ellmers (R-NC) criticized the fact that the federal government runs the program but does not account for how facilities utilize savings derived from the program. Ellmers also testified that there is a need for greater transparency and better understanding as to how the program is utilized in light of a recent explosion in the program’s growth, due in part to Medicaid expansion under the ACA. The general tenor of the hearing was that the mission of the program was sound, but that greater oversight of HRSA was necessary to ensure the longevity and success of the program. Other criticisms focused on the lag in time between recommendations made by the Government Accountability Office (GAO) and OIG and HRSA actions to enhance oversight.


Debbie Draper, Director of Health Care for the GAO, addressed HRSA’s oversight inadequacies and the recommendations that the GAO made to resolve such inadequacies. Draper’s testimony also considered how HRSA adopted GOA recommendations to improve the program. In terms of oversight efforts, the GAO discovered oversight failures due to a policy where HRSA “primarily relied on covered entities and manufacturers to police themselves and ensure their own compliance with 340B Program requirements.” Draper testified that part of the oversight shortcomings related to a failure of HRSA to offer clear guidance on issues like patient definition and the criteria hospitals must meet in order to qualify for the program. Draper also fielded questions regarding how the metrics used by the 340B programs might be inadequate to determine which hospitals are actually serving a disproportionate share of patients. The testimony acknowledged that hospital burdens and eligibility have been impacted by increased Medicaid coverage in states with expanded Medicaid programs under the ACA. Draper commented that questions about program eligibility would be best resolved through a currently lacking analysis regarding the essential purpose of the 340B program.


In addition to discussing the use of funding to conduct oversight, Diana Espinosa, Deputy Administrator of HRSA, testified about forthcoming omnibus proposed guidance regarding covered entity and manufacturer oversight. HRSA expects that the guidance will offer the agency’s positon on the three areas over which HRSA has explicit regulatory authority: “calculation of 340B ceiling prices, imposition of manufacturer civil monetary penalties, and implementation of a dispute resolution process.” Espinosa testified in response to questions regarding the specifics of the forthcoming guidance and affirmed that HRSA plans to include definitions of “patient” for the 340B program in the forthcoming guidance. Other areas that the forthcoming guidance will address included guidelines for contract pharmacies and eligibility for hospitals. Espinosa’s testimony also explained the manner in which HRSA conducts risk-based assessments to determine which entities to audit.


Ann Maxwell, Assistant Inspector General for Evaluation and Inspections of the HHS OIG, testified as to some specific recommendations that the OIG has made to improve HRSA oversight. A key recommendation of the OIG was to make 340B ceiling prices transparent to 340B providers and to state Medicaid agencies so that those entities would be able to determine that they have or have not paid appropriate prices for 340B drugs.