A Patient’s Guide to 340B: Why Accountability Matters to You

***This is the third report in a six-part series to educate patients about the 340B Drug Pricing Program***

The word accountable is defined as “being required or expect to justify actions or decisions.” Accountability is often broadly discussed on a variety of levels about governmental and social issues, and the 340B Drug Pricing Program is certainly no exception. The 340B program exists to address the health care needs of a segment of society – social needs. As such, program accountability is of paramount importance since patient health depends on it.

Accountability in use of 340B dollars follows the benchmarks of transparency in reporting: federal grantees are required by contract to demonstrate patient benefit in use of program dollars and non-grantee covered entities are held to no such standard. Without fiscal transparency, non-grantee entities cannot be held accountable for their use of these revenues. The Health Resources Services Administration (HRSA) largely selects covered entities for audit based on a selection of “risk” characteristics. While some criticism of manufacturers is warranted in terms of accountability, manufacturers have only one statutory requirement. That requirement is to provide discounts or rebates on qualifying medications to covered entities. HRSA selects manufacturers for audit based on complaints from covered entities. Areas of complaint about manufacturers typically consist of overcharging a covered entity, not making a particular medication available, or not being transparent about the “ceiling price” of a drug.

To be fair, the statutory accountability requirements of 340B program are…limited and…vague. However, according to a 2020 report by the Government Accountability Office (GAO-20-108), the Health Resources and Services Administration (HRSA) severely lacks meaningful oversight, uniform assessment and request standards, and, as with many other reports, finds HRSA’s administration of the program to be largely inadequate.

As an example, GAO identified HRSA audits from 2017 and 2018 reviewed less than 10% of all non-governmental hospitals enrolled in the program. HRSA primarily relies upon hospitals to self-attest their eligibility. Of the selected hospitals participating in the GAO review, 18 submitted documents that would constitute a government contract – any description of a community program – and when HRSA found these instances, allowed the hospitals to avoid getting in trouble by acquiring contracts with retroactive applicability. All of that meaning, these hospitals in question did not experience any reprimand for failing to provide programming to low-income people but they got to enjoy the perks of unaccountable 340B dollars until they got caught. At the rate HRSA reviews these entities, it’s possible for a non-compliant or otherwise non-qualifying entity could go an entire decade soaking up dollars meant for patients in needs.

While HRSA’s annual 340B audits are primarily targeted toward covered entities, drug manufacturers are also audited to ensure they’re not charging covered entities more than they should be for 340B medications, to ensure drug manufacturers are not discriminating against covered entities, and make sure drug manufacturers are making sure their products are made available in compliance with the 340B program. Manufacturers represent about ten percent of annual audits, while covered entities represent about 90 percent and there are about 900 drug manufacturers participating in the program (dramatically less than covered entities). To be fair, GAO concluded HRSA also needed to provide clearer guidance to drug manufacturers regarding what qualifies as an acceptable distribution restriction due to anticipated or actual supply shortages and to provide specific guidance as to what constitutes “discrimination” of covered entity participants.

This issue of defining discrimination is developing and playing out in “real-time”. In May of 2021, HRSA announced notification letters sent to 6 manufacturers regarding their new policies requiring additional reporting from covered entities with contract pharmacies (as opposed to in-house pharmacies). HRSA’s interpretation of statutory language (“…shall…each covered entity…”) as non-discretionary on the part of manufacturers. In essence, if an entity is registered with HRSA for the program, a manufacturer is required by law to offer medications at ceiling price or below to that entity, regardless of any potential for a covered entity to use program dollars outside of the intent of the program. While skepticism of non-grantee use of these dollars may be warranted due to lack of transparency in use of these dollars, diversion, or duplicate discount concerns, given that federal grantees are already required to report use of these dollars to their federal funders, a more narrowly tailored policy directed exclusively at non-grantee covered entities would be more appropriate to address the interest needs of manufacturers, the public, and program stability. However, given HRSA’s interpretation of the statutory language, even such a proposal might run the risk of rubbing regulators wrong. At the time of this writing, at least one of the manufacturers has sued the Department of Health and Human Services to prevent any monetary penalties related to these letters from being imposed. A judge has dismissed the government’s opposition to the suit in June of 2021. And on September 22, 2021 HRSA issued letters to the manufacturers in question, stating the issue had been referred to the Office of the Inspector General.

Lack of transparency means less accountability. Patients are better served when 340B-related dollars remain within the same geographic area they were generated by the covered entities. After all, if serving low-income patients means serving community and getting usable revenue required to be used on low-income patients, those dollars should be put back into the same community in which they were generated, right? But covered entities with large networks and multiple covered entity sites aren’t required to show those revenues are reinvested in the same area they were generated. For instance, monies made off the health and illness of an Atlanta community should not be spent to buy up profit generating imaging machines in a well-to-do suburban area outside of Los Angeles. But, without both transparency and accountability, 340B dollars can easily become a slush fund of revenues for any industrious non-grantee covered entity.

Indeed, many large contract pharmacies offer software programs to covered entities as a measure of their own “transparency” with internal reporting but the real goal is to show the covered entities “here’s how you can make more 340B dollars” – but at a cost of providing the service and without uniform assessment metrics. That means the contract pharmacy can tilt the experience of a patient by applying pressure to the covered entities very subtly through software programs telling the provider, “You can make more money off this patient by prescribing…”. Advocates have very good reason to be suspicious of contract pharmacies associated with (or even owning) pharmacy benefit managers who, then, can very easily provide programming that targets their profits over ensuring rebate dollars make it back to a patient.

Statutory clarification could greatly benefit the intended purpose of the 340B program – ensuring low-income patients get the care they need by taking a few, simple steps, specifying reporting requirements that mirror existing transparency and accountability found among grantees. Additional oversight is needed in numerous areas, all designed to further benefit patient access to care and medications. Among them, non-grantee entities should be required to report how 340B dollars are being used, by which payer source a claim is generated, how much charity care a non-grantee entity provides, and how much revenue is generated from pharmacy sales (and how much is generated from 340B sales). Patients might not understand the nuances behind the program complexities, but they do understand when they cannot access the care they need and deserve. If the purpose of the 340B program is to expand access to care and medications, then why not go that extra mile?

Congress could go a great deal further to ensure these billions of dollars serve patients, rather than the interests of shareholders in private hospital systems or propping-up senior management compensation packages, or other non-medically-related expenses. Congress could also opt to provide for additional minimum requirements in order to qualify as a covered entity – especially with regard to private hospitals providing a certain percentage of charity care.  

For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.

Sources:

• Community Access National Network (February 2019). 340B DRUG DISCOUNT PROGRAM: The Issues Spurring Discussion, Stakeholder Stances and Possible Resolutions. 340B Commission Final Report. Retrieved online at https://docs.google.com/gview?url=http://www.tiicann.org/pdf-docs/2019_CANN_340B_Commission_Final-Report-v5_03-07-19.pdf&embedded=true

• Health Resources Services Administration (September 2021). 340B Drug Pricing Program – Program Integrity. HRSA Correspondence to Stakeholders 2021. U.S. Department of Health & Human Resources. Retrieved online at https://www.hrsa.gov/opa/program-integrity/index.html

• Lagasse, Jeff (June 2021). Judge dismisses HHS Challenge of AstraZeneca's 340B Contract Pharmacies Lawsuit. HealthCare Finance. Retrieved online at https://www.healthcarefinancenews.com/news/judge-dismisses-hhs-challenge-astrazenecas-340b-contract-pharmacies-lawsuit

• U.S. Government Accountability Office (December 2019). 340B DRUG DISCOUNT PROGRAM: Increased Oversight Needed to Ensure Nongovernmental Hospitals Meet Eligibility Requirements. GAO-20-108. Retrieved online at https://www.gao.gov/assets/gao-20-108.pdf