The Future of the 340B Drug Pricing Program in Modern Health Care

The 340B Drug Pricing Program, established by Congress in 1992, has become a critical component of the US health care system.¹ This federal program requires pharmaceutical manufacturers to provide outpatient drugs at significantly discounted prices to eligible health care organizations, known as covered entities.² As the program enters its fourth decade, it faces numerous challenges that threaten its original mission and impact pharmacy practice.³

Original Intent of the 340B Statute

The 340B Drug Pricing Program, established by Congress in 1992, has become a critical component of the US health care system. Image Credit: © Virtual Art Studio - stock.adobe.com

To understand these challenges, it's crucial to first examine the original intent behind the 340B statute. Congress created the program with the primary goal of enabling covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.⁴ The program was designed to support safety-net providers serving vulnerable populations, including low-income, uninsured, and underinsured patients. By requiring drug manufacturers to offer discounts, the program aimed to lower drug costs for these providers, allowing them to reinvest savings into patient care. This mechanism was intended to improve access to medications and enhance the quality of care for populations that often struggle to afford health care.⁵

340B Program Structure

The structure of the 340B program is built on several key elements that define its operation and scope. At its core, the program serves a diverse array of health care providers known as covered entities. These include certain categories of hospitals, such as disproportionate share hospitals, children's hospitals, and rural referral centers, as well as federal grantees like federally qualified health centers and Ryan White HIV/AIDS clinics.⁶ This broad range of covered entities ensures that the program's benefits reach a wide spectrum of vulnerable populations across different health care settings.

Central to the program's function is its drug pricing mechanism. Pharmaceutical manufacturers participating in Medicaid are required to enter into an agreement with the Secretary of Health and Human Services. This agreement stipulates that the manufacturer must offer covered outpatient drugs to eligible entities at prices that cannot exceed a statutorily defined ceiling price.⁷ These discounts are substantial, typically ranging from 25% to 50% off the average manufacturer price. This pricing structure allows covered entities to stretch their limited resources further, potentially serving more patients or offering more comprehensive services.

Another crucial element of the 340B program is the definition and determination of patient eligibility. According to program guidelines, an eligible patient is generally defined as an individual who receives health care services from a covered entity, with the covered entity maintaining records of the individual's health care.⁸ This definition has been a point of ongoing discussion and debate, as it impacts which prescriptions are eligible for 340B pricing and, consequently, the scope and impact of the program.

The 340B Program Faces Ongoing Challenges

As the 340B program has evolved over the years, it has encountered several significant challenges that threaten its effectiveness and sustainability. One of the primary issues is the rapid expansion of the program, particularly among hospitals. This growth has sparked debates about whether the program has strayed from its original intent of supporting safety-net providers and their vulnerable patients.⁹ Critics argue that some participating entities may be using the program to generate profits rather than to expand care for underserved populations. A notable example of this concern was highlighted in a 2022 New York Times investigation into the 340B program management at the Bon Secours Mercy Health system; the New York Times investigation revealed that the health system used 340B program savings from a poor Richmond neighborhood to fuel expansion into more affluent areas.²³

Another contentious issue revolves around contract pharmacy arrangements. A contract pharmacy is a retail pharmacy that has entered into an agreement with a 340B covered entity to dispense drugs on its behalf to eligible patients.²⁴ The use of contract pharmacies to dispense 340B drugs has become a point of conflict, with some manufacturers restricting 340B pricing for drugs dispensed through these arrangements.10 This has led to significant legal battles, most notably in cases such as Sanofi-Aventis US, LLC v US Department of Health and Human Services (HHS) and Eli Lilly & Co v Becerra.^18,19 In these cases, pharmaceutical companies challenged the government's interpretation that the 340B statute requires them to offer discounted drugs to an unlimited number of contract pharmacies. The outcomes of these cases have been mixed, with some courts upholding manufacturer restrictions and others siding with HHS's interpretation, highlighting the complex legal landscape surrounding the program.²⁰

Program integrity and oversight have also come under scrutiny. Concerns have been raised about potential abuse of the program and the need for more robust oversight mechanisms.¹¹ The Government Accountability Office and the Office of the Inspector General have both called for improved oversight to ensure that the program is being used as intended and that benefits are reaching the intended recipients.

The definition of patient eligibility continues to be a subject of debate as well. There is ongoing discussion about whether the current patient definition is too broad, potentially allowing covered entities to generate profits from patients who are not truly vulnerable and a similar but opposite opinion that the definition is too narrow, which could affect patient care. This debate touches on the core mission of the program and raises questions about how to balance expanding access with maintaining program integrity.

Further complicating matters, some drug manufacturers have implemented policies limiting 340B discounts, particularly for drugs dispensed through contract pharmacies. These actions have led to legal challenges and heightened tensions between manufacturers, covered entities, and government regulators.¹² The resolution of these disputes will likely have far-reaching implications for the future of the program.

The Future of the 340B Program

In light of these challenges, stakeholders are exploring several potential paths forward for the 340B program. Legislative reform is one avenue being pursued, with various bills proposed in Congress to address issues pertaining to program transparency, patient definition, and contract pharmacy arrangements.13 Two significant pieces of legislation currently being lobbied are the 340B Accountability and Compliance Criteria Enforcement Safeguards and Safety (ACCESS) Act and the 340B Saving Underserved Communities, Clinics, and Essential Services for Safety Nets (SUCCESS) Act.^21,22 The 340B ACCESS Act aims to enhance program integrity through increased reporting requirements and audits, while the 340B SUCCESS Act seeks to protect and expand the program, particularly in relation to contract pharmacy arrangements. These legislative efforts aim to clarify the program's parameters and ensure it aligns with its original intent, though they represent differing approaches to addressing the program's challenges.

Improved transparency is another key area of focus for potential reforms. There are increasing calls for better data reporting and auditing to ensure program integrity and demonstrate its impact on patient care.¹⁵ Enhanced transparency could help address concerns about program abuse and provide clearer evidence of the program's benefits to vulnerable populations.

Looking ahead, the resolution of the 340B program's challenges will likely require compromise among various stakeholders. Future solutions may involve finding middle ground between manufacturers, covered entities, and policymakers to ensure program sustainability.¹⁶ This could include clearer guidelines on program participation, more robust oversight mechanisms, and potentially a redefinition of patient eligibility criteria.

The impact of these challenges and potential reforms extends beyond policy considerations to directly affect pharmacy practice. Pharmacies, particularly those serving as contract pharmacies for 340B entities, face increased administrative burdens in tracking 340B eligibility and managing multiple inventories. Impending legislation could potentially make this problem worse if not correctly implemented.The uncertainty surrounding the program's future may impact long-term planning and resource allocation for many pharmacies who have not only supported the program over the years but possibly relied on it.

As the 340B Drug Pricing Program stands at this critical juncture, it's clear that the decisions made in the coming years will shape not only the future of the program itself but also its impact on health care access for vulnerable populations and the broader landscape of pharmaceutical pricing in the United States. Balancing program integrity with the original mission of supporting vulnerable populations remains crucial as stakeholders debate the program's future. The resolution of current challenges will significantly influence the role of 340B in America's health care system and its impact on pharmacy practice for years to come.¹⁷

REFERENCES

1. Public Health Service Act, 42 USC §256b (1992). https://uscode.house.gov/view.xhtml?req=granuleid:USC-1994-title42-section256b&num=0&edition=1994

2. Health Resources and Services Administration. 340B Drug Pricing Program. Updated February 26, 2024. Accessed April 15, 2024. https://www.hrsa.gov/opa

3. Mulcahy AW, Armstrong C, Lewis J, Mattke S. The 340B Prescription Drug Discount Program: Origins, Implementation, and Post-Reform Future. RAND Corporation; 2014. Accessed April 15, 2024. https://www.rand.org/pubs/perspectives/PE121.html

4. H.R. Rep. No. 102-384, pt. 2, at 12 (1992).

5. Government Accountability Office. Drug Pricing: Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement. GAO-11-836; September 2011. Accessed April 15, 2024. https://www.gao.gov/products/gao-11-836

6. 42 USC §256b(a)(4). https://www.law.cornell.edu/uscode/text/42/256b

7. 42 USC §256b(a)(1). https://www.law.cornell.edu/uscode/text/42/256b

8. Health Resources and Services Administration. 340B Drug Pricing Program Omnibus Guidance. Fed Regist. 2015;80(167):52300-52324. Accessed April 15, 2024. https://www.federalregister.gov/documents/2015/08/28/2015-21246/340b-drug-pricing-program-omnibus-guidance

9. Government Accountability Office. 340B Drug Discount Program: Increased Oversight Needed to Ensure Nongovernmental Hospitals Meet Eligibility Requirements. GAO-20-108; December 2019. Accessed April 15, 2024. https://www.gao.gov/products/gao-20-108

10. Conti RM, Bach PB. The 340B Drug Discount Program: Hospitals Generate Profits by Expanding to Reach More Affluent Communities. Health Aff (Millwood). 2014;33(10):1786-1792. doi:10.1377/hlthaff.2014.0540

11. Office of Inspector General, U.S. Department of Health and Human Services. Contract Pharmacy Arrangements in the 340B Program. OEI-05-13-00431; February 2014. Accessed April 15, 2024. https://oig.hhs.gov/oei/reports/oei-05-13-00431.asp

12. Silverman E. Pharma companies are still restricting 340B discounts. Now, hospitals are fighting back. STAT. June 15, 2023. Accessed April 15, 2024. https://www.statnews.com/pharmalot/2023/01/30/hospitals-pharmaceuticals-340b-pharmacies-appeal/

13. H.R.3290 - 340B Saving Access to Essential Resources Act, 117th Congress (2021-2022). Accessed April 15, 2024. https://www.congress.gov/bill/117th-congress/house-bill/3290

14. American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022). https://www.supremecourt.gov/opinions/21pdf/20-1114_09m1.pdf

15. Medicare Payment Advisory Commission. Report to the Congress: Overview of the 340B Drug Pricing Program. May 2015. Accessed April 15, 2024. https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/may-2015-report-to-the-congress-overview-of-the-340b-drug-pricing-program.pdf

16. Pollack A. Dispute develops over discount drug program. New York Times. February 12, 2013:B1. https://www.nytimes.com/2013/02/13/business/dispute-develops-over-340b-discount-drug-program.html

17. Dickson V. 340B hospitals fear further restrictions as Supreme Court weighs in. Modern Healthcare. January 10, 2024. Accessed April 15, 2024. https://www.modernhealthcare.com/legal/340b-hospitals-await-supreme-court-decision

18. Sanofi-Aventis U.S., LLC v. U.S. Dep't of Health & Hum. Servs., 570 F. Supp. 3d 129 (D.N.J. 2021). https://casetext.com/case/sanofi-aventis-us-llc-v-us-dept-of-health-human-servs

19. Eli Lilly & Co. v. Becerra, 650 F. Supp. 3d 733 (S.D. Ind. 2022). https://casetext.com/case/eli-lilly-co-v-united-states-dept-of-health-human-servs

20. Astra Zeneca Pharmaceuticals LP v. Becerra, 543 F. Supp. 3d 105 (D. Del. 2021). https://casetext.com/case/astrazeneca-pharm-lp-v-becerra

21. H.R.4398 - 340B Accountability and Compliance Criteria Enforcement Safeguards and Safety (ACCESS) Act, 118th Congress (2023-2024). Accessed April 15, 2024. https://www.congress.gov/bill/118th-congress/house-bill/4398

22. H.R.3263 - 340B Saving Underserved Communities, Clinics, and Essential Services for Safety Nets (SUCCESS) Act, 118th Congress (2023-2024). Accessed April 15, 2024. https://www.congress.gov/bill/118th-congress/house-bill/3263

23. Ornstein C, Thomas K. How a Hospital Chain Used a Poor Neighborhood to Turn Huge Profits. The New York Times. September 24, 2022. Accessed April 15, 2024. https://www.nytimes.com/2022/09/24/health/bon-secours-mercy-health-profit-poor-neighborhood.html

24. Health Resources and Services Administration. Contract Pharmacy Services. Updated May 18, 2023. Accessed April 15, 2024. https://www.hrsa.gov/opa/implementation-contract