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March 19, 2018

The top Senate proposals to reform Medicare's 340B drug discount program

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    Senators during a hearing Thursday signaled an interest in legislation that would require hospitals to report on how they spend savings generated under Medicare's 340B drug discount program.

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    The hearing represents the first action taken by the Senate to address concerns over the 340B program. Sen. Lamar Alexander (R-Tenn.)—who chairs the Senate Health, Education, Labor, and Pensions Committee, which held the hearing—said he will hold at least one more hearing on 340B with officials from the Health Resources and Services Administration, which oversees the program.

    Background on 340B

    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.

    However, the program has come under scrutiny, with some questioning the amount of charity care participating hospitals are providing. In addition, Republicans on the House Energy and Commerce Committee in January released a report in which they raised concerns about the federal government's lack of authority to adequately oversee the 340B program. The report authors said the 340B statute does not set requirements for how covered entities should report or use savings generated from the program.

    Lawmakers have introduced several bills to reform the program. For example, Sen. Bill Cassidy (R-La.) in January introduced a bill (S 2312) intended to increase accountability in and ensure patients benefit from savings hospitals receive under the program. Cassidy's bill would temporarily prevent certain new hospitals from enrolling in the program, tighten eligibility requirements, and establish reporting requirements for hospitals to disclose savings generated under the program.

    Sen. Chuck Grassley (R-Iowa) in February introduced a bill (S 2453) that would establish requirements intended to promote transparency in the program.

    Lawmakers' comments

    Lawmakers during the hearing floated ideas to reform the 340B program.

    Alexander said, "One thing that I would like to have more information on is how much of the discounted savings goes directly to the patient who walks in the door with a prescription." He continued, "We don't know how much goes directly to patients or how much is spent for other services that presumably benefit patients."

    Sen. Todd Young (R-Ind.) said hospitals should report directly to Congress how savings generated under the program are spent, while Cassidy suggested that Congress require hospitals to pass savings generated under the 340B program on to uninsured patients.

    Sen. Patty Murray (D-Wash.), the committee's ranking member, also called for more transparency from both hospitals and the pharmaceutical industry, adding, "Skyrocketing drug prices are a dire problem, they deserve our urgent attention and serious solutions." Murray continued, "Needless to say, rolling back rules to prevent overcharging from drug companies, and cutting back programs that help make drugs more affordable, is not going to get the job done."

    Sen. Elizabeth Warren (D-Mass.) said Congress must address the high cost of drugs overall. Warren cited a Government Accountability Office report that estimated drugmakers' annual profit margins are 17.1%, saying, "No matter what denominator you use, the loss they're kicking and screaming about is a tiny fraction of the many billions of profit."

    Sen. Maggie Hassan (D-N.H.) said the Pharmaceutical Research and Manufacturers of America (PhRMA) should advocate "for transparency in their own businesses as they advocate for it in 340B."

    Industry's comments

    Bruce Siegel, CEO of America's Essential Hospitals, raised concerns about legislation that would require hospitals to meet certain reporting requirements. "I would be concerned about legislation that only singles out hospitals and clinics rather than the full range of the program, including our partners in the drug manufacturing industry," Siegel said, adding that he did not expect the drug industry to lower prices if Congress passed legislation to restrict or roll back the 340B program.

    According to HealthCare Dive, the American Hospital Association in a written statement also pushed back on changes to the program. "The 340B program is working as intended. Under some transparency proposals, the program would not function better, it would simply reduce the number of 340B hospitals by increasing the burden of compliance. As a result, vulnerable communities could be harmed and implementation costs could increase for the federal government," the group said  (Luthi, Modern Healthcare, 3/15; Lim, Healthcare Dive, 3/15; Siddons, CQ News, 3/15 [subscription required]).

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