Mr. Becerra, Bring Back the Mega-Guidance. With Love, 340B

Last month, President Biden released details of his proposed budget, including a much needed 23% increase in discretionary spending for the Department of Health and Human Services. Among numerous proposals for these funds, including refilling supplies in the National Strategic Stockpile, expanding mental and behavioral health services, and advancing Ending the HIV Epidemic initiative, is a giant but quiet drug rebate program: 340B. Outside of health policy “wonk” circles, 340B doesn’t often get very much attention. However, inside of those circles an obsessive chant can be heard, “bring back the mega-guidance”.

Let us back up some.

In the early 90’s, another time when drug prices were nearing the height of health care conversations on the national level, Congress and pharmseutical manufacturers struck a balance: in order to ensure a manufacturer’s products were available to a ready purchaser (Medicaid, Ryan White, and other safety net programs), manufacturers would offer their products at exceptional discount based on use – or a rebate. The dollars received as rebates were expected to be used “to the benefit of patients”. The idea being a system-oriented effort to ensure poorer patient populations could get both the medicines and the care they need. Later, the definition of eligible entities for these discounts were expanded to include entities who were not necessarily federal grantees or subrecipients.

The problem, nearly 28 years later is regardless of Congressional intent, no one has definitions for what any of this means. Manufacturers argue non-federal grantee entities (including for-profit hospitals, contract pharmacies, and pharmacy benefit managers) are abusing the program and not just to the detriment of their own interests but to the detriment of patients by way of narrowed provider networks, skewing formularies, and buying up competing practices as examples. Indeed, these are the very examples Senators cited in 2018, the last time 340B was meaningfully discussed on the Hill. Senators then listened as representatives from the Government Accountability Office (GAO) and Health Resources Services Administration (HRSA) see-sawed between saying they either lacked the statutory authority or merely lacked the proper funding support to shore up to program, eliminate abuse, and more adequately perform audits.

The issue at hand was the result of the then-new Trump administration torpedoing the Obama administration’s “mega-guidance”, which would have defined “patient”, provided for a federal portal of products captured under 340B to extend transparency, and more. For context the Obama administration had given notice in 2010 of proposed rulemaking. Which ultimately didn’t manifest an actual proposed rule until August 2016, by which time it was too late to finalize as is the tradition for incoming administrations to pause or cancel late-made rules of the previous administration.

In that 2018 Senate committee hearing, Senators argued HRSA already had the authority necessary – pointing toward the abandoned mega-guidance – and ultimately came to no conclusions other than “things need to change”. That’s an understandable sentiment given the growth of the program. Even if the general public is to question the data of the Pharmaceutical Research Manufacturers of America (PhRMA) stating provider and pharmacy profit margins from 340B grew more than 900% from 2013 to 2018, instead of sharing those savings with patients. However, even HRSA’s own data now puts 340B at nearly the size of Medicaid’s outpatient drug program, up by 23% from 2018-2019 alone. If consumers considered the idea their medications might have been 23% lower in cost if those savings were shared with them instead of pocketed by other entities in the health care pipeline in one year alone, the rising anger shifts the blame quite readily.

There’s plenty to go around, though. The 340B can has gotten kicked down the road for far too long. In the absence of rulemaking, various players in industry have tried to fill the gaps. Last year, several manufacturers began implementing their own practices, primarily by imposing new, internal requirements on contract pharmacies to prove a patient actually qualified or merely refused to allow contract pharmacies to play middle men at all. HRSA responded by sending letters to 6 of the largest manufacturers implementing these programs and demanding they resume offering the discount program to the contract pharmacies – including a threat to penalize manufacturers who refused to cease these limiting activities. A particular manufacturer, Eli Lilly, sued to stop HRSA from enforcing this threat.

Ultimately, though, HRSA hasn’t been able to meaningfully explore its regulatory powers with regard to 340B. President Biden’s effort to fund oversight of 340B is necessary as market-based solutions are at best messy and slow and apparently needing judicial intervention. With sufficient funding for oversight and enforcement under the President’s proposed budget, all that’s left is the same, repeated call of patient advocates and “wonks” alike from the last 4 years: bring back the mega-guidance.

For a more detailed review of the variety of issues 340B faces, please review Community Access National Network’s 2019 report here.