House Energy and Commerce Report Calls for 340B Discount Drug Program Overhaul

Republicans on the House Energy and Commerce Committee are calling for an overhaul of a drug discount program for providers that serve poorer populations, arguing in a new report that it has ballooned in size in recent years without proper government oversight.

The 77-page "Review of the 340B Drug Pricing Program," which was released Wednesday by committee Republicans, is the culmination of a two-year committee investigation in the 340B drug discount program, which provides large discounts on outpatient drugs for so-called safety net providers -- including children’s hospitals and critical-access hospitals.

The program has been a boon for participants: The Health Resources and Services Administration estimates that 340B hospitals saved in total about $6 billion in 2015, during which they bought $12 billion in discounted drugs, according to the report. 

Though the program enjoys broad bipartisan support, some House GOP lawmakers have criticized it for what they see as a lack of transparency and a lack of clarity regarding the program's intent.

The report reiterates these objections, but it goes one step further in recommending a series of changes, including more clearly defining the program's purpose and adding reporting requirements for participating hospitals. The report also proposes Congress approve more resources for the Health Resources and Services Administration, as well as give the office authority to “clarify program requirements” and “monitor and track program use.”

“We understand this is a very important program in many of our communities, it does amazing work and helps a vulnerable population,” House Energy and Commerce Committee Chairman Greg Walden (R-Ore.) told reporters on a conference call Tuesday. “But clearly when you have this many participants and the growth rate at the pace it’s on, the lack of audits, the lack of transparency, the lack of accountability and the lack of consistent reporting, it’s time for Congress to do its job.”

Walden said he expects the committee to discuss overhauling the program in the coming months.

Committee members and the majority staff interviewed more than 50 stakeholders in the program, including government offices, providers and drug manufacturers. The report also includes findings from previous investigations by the Government Accountability Office and the Department of Health and Human Services’ Office of Inspector General.

The report’s release comes as the program faces an uncertain future. Hospital groups are fighting a $1.6 billion payment cut to the 340B program, which was initiated by the Centers for Medicare and Medicaid Services and took effect Jan. 1. More than 100 members of Congress of both parties signed letters last year opposing the cuts.

Any congressional action on the CMS cuts is likely to include an overhaul of the 340B program, Walden said.

"We support having a thoughtful conversation about the transparency of the 340B program," said Ted Slafsky, president and CEO of 340B Health, an organization that represents hospitals participating in the program, in a statement to Morning Consult. "We are concerned, however, by recommendations that could limit the scope of the program, cause unnecessary burdens, and hinder the ability of hospitals to provide care to low-income and rural Americans. We look forward to reviewing the report in detail and discussing its findings and recommendations with policymakers from both parties."

Slafsky added that his organization appreciated the finding in the report that the 340B program “is an important program that enjoys strong bipartisan support in Congress,” and praised the recommendation that Congress ensure hospitals have access to ceiling prices for discounted drugs.

Drugmakers, who must agree to sell the discounted drugs to covered entities in order to participate in Medicaid, have long sought more transparency and other changes to the 340B program. Nicole Longo, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, said Wednesday by email that the committee’s report has confirmed what the pharmaceutical industry has long argued: that the 340B program and "its perverse incentives" are distorting the entire health care marketplace, leading to higher costs for patients.

The legislation Congress passed in 1992 establishing the 340B program says participating entities should use the savings to “stretch scarce federal resources as far as possible” -- but federal law doesn’t clearly state the intent of the program or specify how the savings should be used. Participating hospitals are also not required under federal law to track or report how they use the savings.

The 340B review found that providers did not use a standard method to report their savings, with some of the hospitals interviewed indicating the committee’s request was the first time they calculated savings for the program. Some provided committee staff with “an estimate most accurately characterized as program revenue,” the report noted.

Committee Democrats were not involved in drafting the report, but they participated in committee oversight hearings and attended briefings with stakeholders who received letters from the committee and received the stakeholders' responses to the letters.

Rep. Frank Pallone (D-N.J.), the committee's ranking member, said Wednesday in an emailed statement that the report “provides additional evidence that all around the country, providers make good use of their 340B savings to provide extremely important healthcare services to the most vulnerable among us.”