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Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

Washington Highlights

House Energy and Commerce Subcommittee Holds Hearing on 340B Program

July 21, 2017—The House Energy and Commerce Oversight and Investigations Subcommittee July 18 held a hearing on the 340B Drug Pricing Program. During the hearing, members from both parties expressed support for the program, while some also encouraged the Health Resources and Services Administration (HRSA), which administers the program, to increase its oversight and transparency.

Congress created the 340B program in 1992 to allow certain safety-net hospitals and other covered entities to purchase outpatient drugs at a discount from drug manufacturers and use the savings to provide services and programs to vulnerable populations. The rapid growth in the number of covered entities in recent years and ongoing criticism of the program by pharmaceutical manufacturers whose revenues are reduced by the 340B mandated discounts have sparked Congressional concern about the program.

Witnesses included: Captain Krista Pedley, PharmD, director, Office of Pharmacy Affairs, HRSA; Debra Draper, PhD, director, health care, Government Accountability Office (GAO); and Erin Bliss, assistant inspector general, Office of Evaluation and Inspections, Office of Inspector General (OIG).

While the focus of the hearing was on program oversight, several Democratic members took advantage of the opportunity to express publicly their concern about the Medicare payment reduction to 340B eligible hospitals in the July 13 Centers for Medicare and Medicaid Services’ (CMS) Hospital Outpatient Prospective Payment System (OPPS) proposed rule [see Washington Highlights, July 14].

In her opening remarks, Subcommittee Ranking Member Diana DeGette (D-Colo.) stated, “I'm troubled by the rule that the Centers for Medicare and Medicaid proposed last week, which would dramatically reduce reimbursements to Medicare Part B drugs for 340B hospitals. The Trump administration claimed that this proposed rule was an important step to lower the cost of drugs for the American people. Unfortunately, that statement seems more fantasy than reality. The proposed rule will do nothing to achieve the goal of making prescription drugs more affordable to the general population.”

Representative Kathy Castor (D-Fla.) also expressed her support for the 340B program to help alleviate rising drug costs for safety net hospitals and clinics. She added, “I just wanted to say that at a time when high and escalating drug prices are a top concern for all Americans, the 340B Drug Discount Program is a real winner. It’s a very modest government initiative that has huge benefits.”

Subcommittee Chairman Tim Murphy (R-Penn.) highlighted the benefits of the program, as well as some concerns, in his opening statement, “For many of these covered entities, those savings are vital to the entity’s survival, particularly those that serve a large percentage of indigent patients and operate at a loss each year.” However, he added “as with so many federal programs, there are instances of errors and misuse.”

Captain Pedley provided an overview of HRSA’s program integrity efforts in her testimony, noting, “HRSA places the highest priority on the integrity of the 340B Program and has strengthened oversight of this program.” She also outlined HRSA’s auditing process and highlighted that the agency has completed 805 covered entity audits since auditing began in 2012 as well as seven audits of manufacturers.

In her testimony, Dr. Draper summarized the results of a 2011 GAO report on the oversight of the 340B program. She pointed out that while HRSA has addressed two of GAO’s recommendations – initiating audits of covered entities and clarifying guidance of manufacturers – the agency has been unsuccessful in clarifying guidance on the definition of an eligible patient and hospital eligibility criteria. Dr. Draper noted that HRSA did attempt to address these issues in its 2015 proposed guidance, but it was ultimately withdrawn [see Washington Highlights, Feb. 3].

Bliss reviewed OIG’s previous findings on 340B program integrity. She noted that HRSA “has taken some steps to address these concerns” but highlighted OIG’s recommendations for HRSA to increase transparency to allow payment accuracy and clarify rules to ensure that the program operates as intended, including clarifying the definition of eligible patient.

Captain Pedley responded to these issues in her testimony throughout the hearing, stating, “Specific legislative authority to conduct rulemaking for all provisions in the 340B statute would be more effective for facilitating HRSA’s oversight over, and management of, the 340B Program. In addition, specific regulatory authority would allow HRSA to provide greater clarity and specificity to Program requirements.”

The hearing followed a June 2 letter to HRSA from House Energy and Commerce Republican leaders that expressed concern about 340B program oversight and requested audits documents from the last two fiscal years.

Contact:

Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org