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“340B Reform Legislation: Is Anything in the Offing?”

To Be or Not To 340B By Alyce C. Katayama

As readers of this blog already know, manufacturers and some legislators believe the 340B program has grown too large, suffers from mission creep and needs reform. They argue that the program’s purpose is simply to reduce drug costs for the uninsured and the indigent, nothing more. All three of the federal agencies with program oversight (HRSA, GAO, and the HHS OIG) see its purpose as helping safety-net providers stretch scarce resources.

These three agency viewpoints were presented on March 24, 2015 at a hearing held by the House Energy & Commerce Health Subcommittee. The subcommittee’s original news release announcing the hearing stated that its members would review the functionality of the program “to ensure it is meeting its goal of improving access to prescription drugs for needy patients at facilities serving these populations.” A later announcement took a blander tone: “Subcommittee members will review the functionality of the program to ensure it is meeting its intended goals.” This may be indicative of some disagreements behind the scene, as views on the intent of the program continue to evolve. It is not inconceivable that there could be an effort over the next couple of years to clarify the intent in new legislation. One subcommittee member even invited HRSA to be more forthcoming in requesting more legislative authority if needed.

The questioning at the hearing revealed the political fault lines on this topic. Republicans seemed more concerned about the lack of any legal requirement for covered entities to account for their uses of 340B savings, while Democrats seemed more supportive of allowing the program to generally improve access to care for the underserved. However, both parties seem to agree that improved program oversight is needed.

Another issue to reckon with is also starting to come into sharper focus. Earlier this month at the request of a commissioner on the Medicare Payment Advisory Commission (MedPAC), MedPAC staff modeled the difference between Part B drug reimbursement and 340B acquisition costs. Using publicly available price data, staff estimated that, in 2013, there was an $800 million difference between Medicare reimbursement to 340B hospitals for Part B drugs and hospital acquisition costs for those drugs. Urban and nonprofit hospitals accounted for most of the utilization of these drugs.

This same issue is also an item in the FY 2015 Work Plan of the U.S. Department of Health and Human Services Office of Inspector General. OIG is examining Medicare Part B payments for 340B drugs and will undertake to determine how much Part B spending could be reduced if Medicare were able to share in savings on 340B purchased drugs. It is anticipated OIG’s study will show that Medicare could save significantly by doing this. At this time, no one knows whether the idea will catch fire in Congress or on the administrative side. If Medicare were to implement such a policy, hospitals now availing themselves of the 340B program might well decide to drop out of the program and have to forego the 340B savings they now realize. If that were to happen, Medicare’s move would have been counterproductive.

It should be noted that both the possibility and scope of any legislative affecting the 340B program and the timing of that legislation may be tied to funding for the Food and Drug Administration. Every five years, major legislation is enacted to provide continued funding for the FDA. The 2017 FDA appropriations bill is already in the works in the Senate. This is a piece of legislation on which the pharmaceutical industry has major influence and it may become the battle ground for 340B reform. Among other points advanced by the industry is the idea that the 340B discounts which it is compelled to give take resources away from efforts to develop new drugs and maintain U.S. leadership in that arena.

The FDA appropriations bill may also be the context in which specialty drug price concerns are addressed. Although the bill will not be passed until 2017, it is in draft and will go through mark up and be the subject of hearings over the next 12 to 18 months. Pay attention to the forward movement of this bill and stay tuned to this blog for further updates.

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