Testimonies focus on benefits of 340B Drug Program

Various testimonies were provided in a hearing before the House Committee on Energy and Commerce examining how covered entities are using the 340B Drug Pricing Program. The hearing discussed various issues, including how covered entities (1) track and use savings from the 340B Program; (2) use contract pharmacy arrangements; (3) use child sites; and (4) interact with the Health Resources and Services Administration (HRSA). In addition, the hearing focused on the requirements different types of covered entities must meet in order to receive reduced prices through the 340B Program.

Neither the 340B statute nor HRSA guidance, however, explain how 340B entities must use savings from the program. There is no requirement that the discounted 340B price be passed on to uninsured patients who seek treatment at 340B entities. As a result, the 340B entity will acquire the drug at a discounted price, but the uninsured patient may pay the full list price for the drug. While some 340B entities pass savings on to uninsured patients, it has been reported that some use savings from the 340B Program to pay for the operations of the covered entity, such as marketing. The House Committee convened the hearing to examine current practices and usage of savings generated by the 340B Program.


Established by Congress, the 340B Drug Pricing Program mandates that drug manufacturers provide outpatient drugs to eligible health care organizations, also known as covered entities, at reduced prices to remain eligible for reimbursements through entitlement programs such as Medicaid and Medicare. Covered entities are eligible to receive discounts on outpatient prescription drugs from participating manufacturers and report saving between25 and 50 percent of the average wholesale price for covered outpatient drugs.

Covered entities do not receive discounts on inpatient drugs under the 340B Program. Covered entities can realize substantial savings on outpatient drugs through 340B price discounts and generate 340B revenue by selling 340B drugs at a higher price than the discounted price at which the covered entity obtained the drug.


Shannon A. Banna, Director of Finance and System Controller, at Northside Hospital, Inc., noted that the 340B Program savings allow the hospital to provide drugs to some of its most vulnerable patients and expand its charity care and community programs. In addition, the hospital met 340B Program requirements, with only a single instance of inadvertent diversion of less than $7 in an HRSA audit. Northside is an independent Georgia non-profit corporation that owns or operates an extensive network of health care facilities in Georgia, including three acute care hospitals located across the northern metropolitan Atlanta area with a total of 926 operational beds and more than 150 ancillary and physician service sites located across the 28 county Atlanta Metropolitan Statistical Area.

Michael Gifford, President and Chief Executive Officer, of AIDS Resource Center of Wisconsin, a non-profit providing health care services and support for HIV patients, stated that the savings generated by the 340B Program allowed entities to purchase certain medications at a price lower than what these medications are normally purchased for. In turn, these savings that are generated off the reimbursement for the medication purchased using 340B pricing are then reinvested into programs and services that directly benefit the individuals the covered entity serves.

Ronald A. Paulus, MD, President and CEO, of Mission Health Systems, Inc., testified that six Mission Health hospitals qualify to participate in the 340B Program based on either disproportionate share hospital (DSH) or critical access hospital status. The hospitals use of 340B Program savings directly reflects the intent and design of the 340B Program, going to support high quality, safety net services and programs many of which are otherwise unavailable in the region and would be unavailable absent the 340B program. He noted that funds provided by 340B program savings were integral to the hospital’s work.

Charles B. Reuland, Executive Vice President and COO, of The Johns Hopkins Hospital stated that participation in the 340B Program allowed the hospital to provide care and service to vulnerable individuals and families. As a safety net hospital, Johns Hopkins uses its 340B savings to respond to emerging crises and to continue serving the most vulnerable patients in Baltimore. Reuland noted that since 2009, Johns Hopkins has offered a charity program designed to improve access to effective, compassionate, evidence-based primary and specialty care to uninsured and underinsured patients from the neighborhoods immediately surrounding the hospital.

Sue Veer, President and CEO of Carolina Health Centers, Inc., a federally qualified health center that serves as the primary care medical home for 26,952 patients in the west central area of South Carolina, noted that using 2016 as a sample, 142,045 or 43.1 percent of the 329,679 prescriptions dispensed at the system’s two pharmacies were filled with 340B purchased inventory for eligible patients. The system’s total 340B savings for 2016—calculated as the net margin after the sale of the drug—was $561,620. She further noted that the savings enabled the health center to provide deeply discounted pharmacy services to those patients eligible for the income-based sliding fee program, offer medication therapy management to promote clinical and cost effective care, and assist patients with qualifying for manufacturer Patient Assistance Programs.