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Regulatory Focus™ > News Articles > House E&C Offers Recommendations to Improve 340B Drug Pricing Program

House E&C Offers Recommendations to Improve 340B Drug Pricing Program

Posted 10 January 2018 | By Zachary Brennan 

House E&C Offers Recommendations to Improve 340B Drug Pricing Program

The House Energy & Commerce (E&C) Committee on Wednesday released an 80-page report outlining issues and recommendations to improve the 340B drug pricing program, which helps reduce the prices of certain drugs for participating hospitals, health centers and other entities that provide care for vulnerable patients.

The 80-page report follows an October House E&C hearing in which hospital executives pushed back on the idea that the 340B program should be narrowed or eliminated, though concerns have been raised by the committee over the last two years on how some entities use the program and how the Health Resources and Services Administration (HRSA) administers and oversees it.

"Program participation has more than quadrupled over the past 10 years, yet HRSA has remained largely the same size," the report said. "This explosion in program growth has raised concerns about HRSA’s ability to effectively oversee the program with their limited resources."


Participation in the 340B program is voluntary, though there are incentives for covered entities and drug manufacturers to participate.

For instance, participating manufacturers remain eligible to have their pharmaceuticals covered by Medicaid, and covered entities are eligible to receive discounts on covered outpatient prescription drugs of between 25% and 50% of the average wholesale price.

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

As of 1 October 2017, 12,722 covered entities are participating in the program and, as of 2 January 2018, 743 pharmaceutical manufacturers are participating.


Chief among the issues brought up by the report is the financial incentive for 340B hospitals to prescribe more and more expensive drugs to Medicare Part B beneficiaries. In addition, the 340B statute does not require covered entities to report the level of charity care provided, so it’s unknown if the savings are being spent on those who need it.

But discounted drug purchases made by covered entities under the 340B program totaled more than $16 billion in 2016—a more than 30% increase in 340B purchases in one year, the report said.

"Key aspects of the program have remained vague, resulting in variation in the way covered entities use the 340B program," the report said, noting that HRSA lacks sufficient authority to adequately oversee the program and clarify requirements. 

The report also noted that HRSA audits manufacturers but to date have found none were out of compliance with the statute. "However, without access to ceiling prices, covered entities may not know that they should report to HRSA that they are not getting an accurate price," the report said.


The report makes 12 recommendations, including two for HRSA, one for covered entities and the rest for Congress.

"HRSA should soon finalize and begin enforcing regulations in each of the three areas in which it currently has regulatory authority, including the 340B Alternative Dispute Resolution process, the imposition of civil monetary penalties against manufacturers that knowingly and intentionally overcharge a covered entity for a 340B drug, and the calculation of ceiling prices," the report said.

Among recommendations for Congress include those to clarify the intent of the program, promote transparency, give HRSA sufficient regulatory authority to administer and oversee the program, conduct more rigorous oversight and effective management and to identify and reduce duplicate discounts for drugs paid for under Medicaid managed care.

Review of the 340B Drug Pricing Program


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