On March 24, 2015, the House of Representatives Energy and Commerce Health Subcommittee[1] (the “Subcommittee”) held a 340B Program hearing with testimony from the Deputy Administrator of Health Resources and Services Administration (“HRSA”), the Director of the Office of Pharmacy Affairs (“OPA”) of HRSA,[2] the Director of Health Care of the Government Accountability Office (“GAO”), and Assistant Inspector General of the Office of Evaluation and Inspection of the U.S. Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”).

The purpose of the hearing was to assess the functionality of the 340B Program, and, in particular, HRSA’s activities to address the findings in the GAO report, issued in September 2011, titled “Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement,”[3] and OIG report, issued in February, 2014, titled “Contract Pharmacy Arrangements in the 340B Program.”[4]

The GAO issued a follow-up report on March 24, 2015, titled “Drug Discount Program, Status of GAO Recommendations to Improve 340B Pricing Program Oversight.”  The follow-up report stated that HRSA had implemented two of the GAO’s four recommendations and that HRSA plans to address the remaining two recommendations to clarify the patient definition and hospital criteria for eligibility.  The OIG also recommended that HRSA clarify patient definition, particularly in to the context of contract pharmacies.  The OIG provided examples of how eligibility determinations in the contract pharmacy setting can result in diversion based on the lack of clarity in the patient definition.  Additionally, the OIG stated that HRSA could increase 340B Program transparency by sharing 340B ceiling prices with providers and Medicaid state agencies (though the OIG acknowledged that HRSA lacked the authority to share 340B prices with Medicaid state agencies).

Throughout the hearing, several members of the Subcommittee expressed their support for the Program and acknowledged that the 340B Program is necessary for hospitals, health centers, and other Covered Entities to serve underserved populations.  At the same time, Subcommittee members expressed concerns that the 340B Program needs greater clarity, oversight by HRSA, and transparency.  Subcommittee Chairman Joseph R. Pitts’ (R.-PA) opening statement sums up the message delivered by Congress:

“This program, designed to stretch scarce federal dollars, is critically important for indigent and low-income patients who may otherwise be unable to access needed drugs or afford treatment. . . . One thing I hope we can all agree on, is that to preserve the 340B program and ensure that it is serving those who most need help, greater oversight and transparency is needed to increase the program’s accountability. Today’s hearing marks the first step in that direction.”[5]

The following are several themes that were discussed during the hearing:

  • Chairman Pitts suggested that Medicaid expansion as a result of the Affordable Care Act may lead to more hospitals meeting the disproportionate share hospital (“DSH Hospitals”) percentage, and thus, becoming Covered Entities under the 340B Program. Chairman Pitts questioned whether the DSH percentage was an appropriate proxy for determining the extent to which a hospital serves low income populations and whether a different methodology would be more appropriate.
  • A few Subcommittee members expressed concern that DSH Hospitals have no obligation to report how 340B savings are used to benefit underserved patients. One member expressed the more specific concern that there was no transparency to determine the extent to which the 340B discount is passed on to uninsured individuals.   The Subcommittee members contrasted this with HRSA grantees, such as health centers, which are required to reinvest proceeds to advance grant purposes. HRSA’s Deputy Administrator noted that such reporting and use of 340B savings by DSH hospitals is not required by the statute and, in response, a member of the Subcommittee suggested that this was an issue being discussed among the members that could potentially require a legislative fix.
  • A few Subcommittee members broached the topic whether, in light of HRSA’s limited rulemaking authority, whether HRSA’s issuance of guidance was a “long term solution” and whether HRSA needed more expansive rulemaking authority. Although HRSA’s Deputy Administrator acknowledged that enforcement of rules would strengthen HRSA’s oversight, the Deputy Administrator did not explicitly request rulemaking authority or other legislative change and stated simply that HRSA would use all the tools at its disposal to enforce 340B Program compliance.
  • Certain Subcommittee members expressed concern over the lack of clarity surrounding the patient eligibility definition; noting that compliance cannot be enforced if the definition is unclear.
  • Several Subcommittee members expressed concern and asked questions regarding the transparency of 340B ceiling prices to Covered Entities and the length of time it has taken HRSA to implement the pricing database. HRSA noted that the secure website would be operational later this year. Other Subcommittee members posed questions regarding whether the ceiling prices needed to be shared with state Medicaid agencies, even though HRSA does not have such authority.

Based on the Subcommittee’s questions and the testimony, it appears that the Subcommittee is intent on “preserving” the 340B Program, and exploring whether legislative “fixes” are needed.  The Subcommittee discussed some areas that can only be addressed through the legislative process, such a change of methodology to 340B hospitals, and transparency requirements with respect to the utilization of 340B savings.

However, there currently does not appear to be any consensus on the scope of such legislation, or even whether legislation is needed.  Ultimately, legislation will likely depend on HRSA’s ability to ensure 340B Program compliance with its current tools, including Covered Entity and manufacturer audits, limited rulemaking authority, and the issuance of guidance.