News & Resources

Publications & Media

“Near Miss on Congressional Overhaul of 340B Program”

To Be or Not To 340B By Alyce C. Katayama and Elizabeth R. Gebarski

In just a matter of days, changes to the 340B Program were proposed and then withdrawn from H.R. 6, The 21st Century Cures Act. Had hospitals, health systems, and related lobbying groups not been closely watching the Act, the changes might have quietly gone through when the 21st Century Cures Act was unanimously passed out of Committee on May 21, 2015.

The 21st Century Cures initiative, advanced by the House Energy & Commerce Committee and spearheaded by committee chairman, Michigan Representative, John Upton, had been underway since last year. The Act covers matters affecting the regulation of pharmaceuticals, medical devices, biotechnology, and reimbursement and funding for medical research. Issues relative to 340B were never part of this legislative package.

Nevertheless, in the final weekend before voting, Committee staff distributed a new Discussion Draft containing provisions that would affect the 340B Program. Hospitals, health systems, and related lobbying groups caught wind of these changes and swiftly drafted letters to Chairman Upton and leaders in the U.S. House and Senate.

This Discussion Draft sought to modify the 340B Program in several significant ways.

  • It renamed the Program and changed its purpose from permitting “covered entities to stretch scarce Federal resources as far as possible” to enabling “covered entities who serve as safety net providers for uninsured, underinsured, underserved, and medically vulnerable patients to utilize scarce resources to the maximum extent practicable.” The Discussion Draft failed to define any of these words. This change would have both restricted covered entities and recipients of 340B drugs, while also tempering the breadth of resource utilization.
  • It redefined “patient” in several ways that may have narrowed the definition. For example, it modified the definition of patient to only include those individuals “with whom a covered entity has established a clinical or medical relationship, such that the individual has had an in-person clinical or medical visit at the covered entity and the covered entity maintains records of the individual’s health care.”
  • It expanded HRSA’s penalty authority by allowing action by HRSA when there was routine non-compliance, versus egregious non-compliance. It mandated that violators must be disqualified from re-entry into the Program for a period of not less than five years; whereas, before, the Secretary of Health and Human Services (“Secretary”) needed only to exclude violators for a “reasonable period of time.” The Discussion Draft gave HRSA authority to impose penalties on those who violated the orphan drug provision and those who failed to take corrective action for any violation in a “timely manner.”
  • It increased auditing and reporting requirements. Covered entities and manufacturers would have had to maintain auditable records for at least five years. Covered entities, except for Critical Access Hospitals, would have had to submit a detailed annual report, including data elements that were not defined and the payer type per 340B drug.
  • It imposed additional reporting burdens on covered entities with a high volume of 340B purchases. These covered entities would have had to conduct an independent audit and submit it on recertification. The Secretary was responsible for determining exactly which covered entities would be subject to this additional report. But, at a minimum, the Secretary had to require reports from covered entities whose annual purchase volume placed them in the top 10% of annual purchase volumes of all covered entities.

The Discussion Draft also regulated contract pharmacy arrangements, required the Secretary to provide State Medicaid agencies access to ceiling prices, and imposed user fees on 340B covered entities, but not on manufacturers.

What’s the lesson here? 340B issues are clearly in the forefront of some legislators’ minds; and, those who seek to rein in the Program are prepared to move quickly. Given the high level of concern, it will be important to keep a watchful eye on any piece of legislation which might serve as a vehicle for 340B Program changes. Stay tuned to this blog as we keep an eye on the legislative horizon.

Resources