TAPP Applauds Release of U.S. Senate HELP Committee Report Highlighting Need for 340B Program Reform
The Trade Alliance to Promote Prosperity applauds a newly released report from the U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee which highlights the need for 340B program reform.
Earlier this week, U.S. Senator Bill Cassidy, M.D., Republican of Louisiana and chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, released the report detailing findings from his years’ long investigation into how covered entities (certain health care facilities or programs that serve low-income patients, as designated in law) use and generate revenue from the 340B Drug Pricing Program. Cassidy also outlined potential reforms needed to improve the program to better serve patients.
Congress created the 340B Program in 1992 to allow covered entities to purchase outpatient drugs at a discounted rate “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Drug manufacturers are required to provide these discounts as a condition of participation in the Medicaid Drug Rebate Program.
The Trade Alliance to Promote Prosperity has long expressed concerns that the 340B program is failing to benefit vulnerable populations of patients as it was intended to do, and studies have backed up our concerns.
According to a press release issued by his office, as part of his investigation into the 340B Program, Cassidy requested information from hospitals, Federally Qualified Health Centers (FQHCs), contract pharmacies, and drug manufacturers to better understand how revenue flows throughout the 340B Program and how covered entities use 340B revenue to benefit patients. He found:
Bon Secours Mercy Health and Cleveland Clinic, both of which are covered entities, generated hundreds of millions of dollars in 340B revenue, but do not pass 340B discounts directly to their patients. Shockingly, the two investigated hospitals saved hundreds of millions of dollars from 340B, and their executives stated that the 340B program was not designed to provide direct savings to patients. Additionally, these hospitals report using 340B revenue on “capital improvement projects” and “community benefit programs,” but do not account for what specific expenses 340B revenue goes towards.
CVS Health and Walgreens charge covered entities a complex range of fees for using their pharmacy services to dispense 340B drugs to patients. They also charge additional administrative fees for Third Party Administrator (TPA) services. These fees, which generally increase each year, divert resources from the 340B program’s intended purpose.
Drug manufacturers report significantly increasing 340B sales to contract pharmacies compared to direct sales to hospitals and grantees. Additionally, they report having difficulty taking actions that ensure 340B program integrity, such as preventing unlawful diversion to ineligible patients and duplicate discounts.
Because of a lack of oversight of the 340B program, big healthcare systems, pharmacy chains, and TPAs are gaming the system with abandon to line their pockets. This happens 1) at the expense of the underserved patients for whom Congress meant to provide price relief, 2) at the expense of taxpayers who are footing the bill for the public employees’ insurance plans that are being fleeced, and 3) at the expense of the cutting-edge biopharmaceutical research and development and innovation that Americans have come to expect.
In light of the report’s findings, Senator Cassidy laid out potential reforms for Congress to improve transparency in the 340B Program and ensure vulnerable patients directly benefit from revenue created by discounted drugs:
Require covered entities to provide detailed annual reporting on how 340B revenue is used to ensure direct savings for patients, providing a more transparent link between program savings and patient benefit.
Address potential logistical challenges caused by increased administrative complexity, leading to burdens that may impede patient benefit from the program.
Investigate the types of financial benefits contract pharmacies and TPAs receive for administering the 340B Program to ensure that increasing fees do not disadvantage covered entities and patients.
Require transparency and data reporting for entities supporting participants in the 340B Program (i.e., contract pharmacies and TPAs).
Provide clear guidelines to ensure that manufacturer discounts actually benefit 340B-eligible patients, including examining legislative changes to the definition of eligible patient and contract pharmacies’ use of the inventory replenishment model.
Clearly, these reforms are needed, as is further investigation into the 340B program, because as Senator Cassidy has shown, transparency and accountability have been shockingly absent.
We are grateful to Senator Cassidy for the compilation and release of this report.
We also applaud Senator Cassidy’s willingness to apply his professional perspective in the quest to bring transparency and accountability into the 340B program, to get the program on track to fulfill its intended purpose of providing savings for patients, and to help preserve the USA’s global preeminence in biopharmaceutical research and development.