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January 12, 2018

Feds lack authority to adequately oversee 340B program, House committee report finds

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    Republicans on the House Energy and Commerce Committee on Wednesday released a report in which they call on Congress to amend laws governing Medicare's 340B drug discount program to improve transparency and bolster government oversight.

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    The 340B program requires drug manufacturers to provide outpatient drugs to eligible health care providers at discounts ranging from 20% to 50%. About 40% of U.S. hospitals are eligible to participate in the program.

    Report details

    For the report, Republican lawmakers on the committee over the past two years examined the operation and oversight of the 340B program through:

    • Document requests;
    • Hearings;
    • Interviews with more than 50 stakeholders and federal officials; and
    • Stakeholder meetings.


    The lawmakers found that, when Congress established the 340B program in 1992, it did not identify a clear intent for the program or set specific parameters for the program.

    For instance, the report said the 340B statute does not set requirements for how covered entities should report or use program savings. As a result, the federal government lacks reliable data to measure and evaluate program savings, according to the report.

    The lawmakers also found some hospitals are not tracking how savings are used under the 340B program, which they said raises concerns over whether the program is benefiting low-income and uninsured individuals.

    In addition, the lawmakers found the Health Resources and Services Administration (HRSA):

    • Increased the number of audits it conducts annually on the program, but still needs to improve its audit process; and
    • Started, but has not completed, the process of issuing and enforcing regulations in areas where the agency has regulatory authority on the program.

    Overall, the lawmakers found HRSA does not have sufficient authority to adequately oversee the 340B drug program and clarify the program's requirements.


    The lawmakers in the report recommended that Congress:

    • Clarify the intent of the 340B program to ensure HRSA administers and oversees the program as intended;
    • Consider altering the qualifying metric for hospitals participating in the program from inpatient volumes to outpatient volumes;
    • Establish a mechanism to monitor the level of charity care provided by covered entities;
    • Grant HRSA the appropriate regulatory authority and resources to adequately administer and oversee the program, which would include the ability to "clarify program requirements" and "monitor and track program use;"
    • Standardize audit and reporting requirements for participating hospitals, particularly as they relate to uncompensated care; and
    • Promote program transparency, including ensuring that covered entities disclose information about annual program savings and that stakeholders, such as covered entities, have access to ceiling prices.

    The lawmakers also recommended that HRSA finalize and start enforcing regulations for the program within its current regulatory authority, as well as start promoting program transparency.


    Committee Chair Greg Walden (R-Ore.) said, "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 plans to introduce a bill on 340B program in the coming months after committee members have reviewed the report, and that he is "hopeful" the report's recommendations will receive bipartisan support.

    Ted Slafsky, president of 340B Health, in a statement Wednesday commended the committee members for conducting the investigation and recommending that HRSA finalize regulations that would penalize drug manufacturers that overcharge hospitals for the drugs. However, the group raised concerns about 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."

    Pharmaceutical Research and Manufacturers of America in a statement Wednesday said, "The committee's new report reaffirms much of what has been raised in recent years by independent economists, [the Government Accountability Office], and [the Office of Inspector General] who have looked at the program and determined that 340B and its perverse incentives are distorting the entire health care marketplace and, ultimately, contributing to higher costs for patients" (Hellmann, The Hill, 1/10; Reid, Morning Consult, 1/10; Diamond, "Pulse," Politico, 1/11; Siddons/Clason, CQ News [subscription required], 1/10; House Energy and Commerce Committee release, 1/10; House Energy and Commerce Committee report, 1/10).

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