340B: Health System Execs Push Back on Narrowing of Drug Discount Program

The House Energy & Commerce's subcommittee on Oversight and Investigations on Wednesday discussed the federal 340B drug discount program, which provides participating hospitals and other medical providers deep discounts on outpatient drugs. 

Background

In 1992, Congress created the 340B program to mandate that pharmaceutical manufacturers provide discounts for certain drugs, which can range between 25% and 50% for average wholesale prices.

The Health Services and Resources Administration, which oversees the program, has said that participants collectively save more than $5 billion because of the program and that the savings should be spent to help the poorest populations. About 2% of the nation's drug spend is attributed to the program.

Proponents say that the discounts help offset the cost of care for uninsured and low-income patients, while critics have charged that the program has swelled and can be abused when savings are accrued but not passed on to patients.

The Government Accountability Office (GAO) has estimated that per beneficiary Medicare Part B drug spending was substantially higher at 340B hospitals compared with hospitals that do not participate. And companies have begun investigating. For instance, Genentech has outlined how it audits 340B participants and seeks to detect duplicate discounts.

A study from 2014 found that 340B hospitals are expanding their base into communities that tend to be affluent and well-insured, which runs counter to the objectives of the program. Earlier this week, the Alliance for Integrity and Reform of 340B, backed by the biopharma industry and other groups, also released a new report that found in 2015, 61% of participants spent less on charity care compared to both 2014 and 2013 despite additional revenue received.

Sayeh Nikpay, an assistant professor in the Department of Health Policy at Vanderbilt University, who wrote about possible changes to 340B in Health Affairs, told Focus in a phone interview that, "Discussion on increased reporting may develop as a result of these conversations... and asking hospitals to report a little more on what they do is reasonable."

Hearing

But health system executives pushed back on Wednesday on the idea that the 340B program should be narrowed or eliminated.

When asked what his hospital does with the savings from the program, Charles Reuland, executive VP and COO of Johns Hopkins Hospital, told the subcommittee that, "There isn't a check that comes back, it's a lower price paid … so there is not a budgeted amount that you can put in a bucket." He mentioned the savings often go to services for low-income patients and noted a program where those with substance abuse problems can obtain alternative housing.

Rep. Diana DeGette (D-CO) said that all the health systems represented on the panel spend significantly more on charity care than the savings provided from 340B and that the funds do not bring "a windfall that subsidizes bonuses for senior management." She asked the panel what would happen if Congress eliminated the 340B program, and all the witnesses said services would be cut.

Sue Veer, president and CEO of Carolina Health Centers, said specifically that her system's program of delivering prescription drugs to rural areas would have to be cut if 340B is eliminated.

But Rep. Greg Walden (R-OR) said, "No one is talking about eliminating 340B," and he questioned why none of the executives on the panel said that if the program were cut that overhead expenses would be cut rather than services.

Rep. Buddy Carter (R-GA) reiterated that he's never heard anyone say they want to cut the 340B program, but, "We have to make sure it's not being abused."

Rep. Chris Collins (R-NY), meanwhile, added that the program needs more government oversight and told the executives, "Maybe you are using the funds well, and that pharma makes too much money, yadda yadda yadda, but that's where the new drugs are coming from."

On the other side of the aisle, Rep. Jan Schakowsky (D-IL) questioned why pharmaceutical companies want more transparency on the 340B program but have spent millions to defeat state bills that seek to increase transparency on drug prices.

Rep. Kathy Castor (D-FL) added, "With drug prices skyrocketing, the 340B program is one bright light" to help the uninsured.

Hearing