- 340B is Already a “True” Safety-net Program
Attempts by PhRMA to redefine “true” safety net providers is dangerously disingenuous. All 340B hospitals provide meaningful care to underserved patients. More than half of hospitals participating in the 340B program care for inherently underserved populations, including children, cancer patients or patients living in rural areas. The other half of hospitals participating in the 340B program, called disproportionate share hospitals (DSH), qualify because they care for high numbers of Medicaid and low-income Medicare patients. In fact, data show that 340B DSH hospitals account for nearly 77% of the care provided to Medicaid patients.i Taken together, these two categories of hospitals provide a majority of their care to underserved patients in the nation.
- Patients Already Directly Benefit from 340B Savings
Hospitals uses their 340B savings to furnish a variety of critical programs and services that directly benefit patients, such as free or discounted drugs to low income patients, medication therapy management programs, diabetes treatment programs and mobile treatment clinics targeted to serve rural communities. Hospitals also use 340B savings to offset the costs of care for patients covered by Medicaid and Medicare, both of which chronically underpay hospitals.ii The savings allow hospitals to care for more Medicaid and Medicare patients as a result. This is exactly the program’s intent. As Congress stated, the goal of the 340B program is to help providers “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Notably, Congress preserved flexibility for how 340B savings were to be used. And for good reason. Congress recognized that every hospital and its patients are unique and have unique needs, and in order for the program’s savings to truly benefit those unique needs, hospitals need to have the ability to determine how those savings are best used for its patients. For example, a rural hospital may use their savings to ensure they are able to keep their doors open in the face of inadequate reimbursement, while an academic medical center may use its savings to support a novel medication therapy management program to treat patients suffering from opioid addiction.
- 340B Patient Eligibility is Well-defined and Audited. Drug Companies are not
The Health Resources and Services Administration (HRSA), which oversees the 340B program, has put forward clear guidance defining which patients are eligible to receive drugs that can be purchased by the 340B hospital at the discounted price.iii In addition, HRSA performs approximately 200 rigorous audits every year of 340B providers, a majority of which are hospitals, to ensure that 340B hospitals are not diverting discounted drugs to ineligible patients. In contrast, HRSA performs only five manufacturer audits every year.
- Drug Companies have Taken the Law into their Own Hands to Undermine Contract Pharmacy Arrangements, which are a Critical Component of the 340B Program
This proposal would codify PhRMA’s unlawful actions restricting the use of contract pharmacies — something the Department of Health and Human Services has deemed unlawful. PhRMA objects to the use of these arrangements because they increase access to 340B medicines at the expense of PhRMA’s already-inflated profits. As a result, for the past three years, some of the largest drug companies have held the 340B provider community hostage, harming the needs of the very same underserved patients they now claim they want to “protect”. These actions have caused irreparable harm to all 340B covered entities, including federal grantees — like many community health centers — and hospitals, all of which rely on contract pharmacies to ensure access to lifesaving drugs for their patients. In fact, for many rural hospitals, the average impact of these actions is estimated to be over $500,000 annually, and for DSH hospitals, an average of nearly $3 million per year.iv
- Pharmacy Benefit Managers and Commercial Payers are Taking Advantage of 340B Savings
The savings 340B providers achieve through the 340B program have been a target of commercial payers and their pharmacy benefit managers for many years. Like many drug companies, the incentives for these middlemen in the pharmaceutical supply chain are to squeeze as much profit as possible from patients and providers, which is why 340B has been such an attractive target. Payers have instituted numerous policies, including those known as “whitebagging” and “brownbagging,” to steer patients away from hospital-based pharmacies or contracted community and specialty pharmacies; instead, they are pushed towards pharmacies that are owned and operated by the pharmacy benefit manager and/or the payer, at risk to patients.
- Hospital Eligibility Requirements are Well-defined
PhRMA does not hide the ball here: it seeks to drastically shrink hospital participation in 340B so drug companies can protect their profits. Their proposal would have a direct and negative impact on patients’ access to quality care. Congress has recognized the value of the program to patients and providers and has expanded the program over the years. It did so for good reason: hospitals eligible to participate in the 340B program serve high numbers of underserved patients, whether they be underinsured patients, rural patients or patients of specific populations such as cancer patients or children. For certain hospitals whose eligibility is conditioned on providing a certain amount of care to low-income patients, they often provide a disproportionate level of care to underserved populations compared to other providers.v In addition, these hospitals often care for the sickest, most complex and resource-intensive patients that other providers, like community health centers, are not equipped to care for. Congress understood this fact in 1992 when it created the 340B program, and continues to appreciate this fact through its repeated efforts to protect 340B for all eligible hospitals and ensure greater oversight of the program through tools like the Alternative Dispute Resolution process.
- 340B Child Sites Promote Access to Care for all Patients
Outpatient clinics, referred to as child sites, are critical sites of care for hospitals to ensure they can reach patients closer to where they live. These sites allow the hospital to extend a range of critical services, from chemotherapy infusions to obstetrics care, to ensure patients can get the care they need without having to travel far distances. The benefits from 340B savings, achieved through outpatient sites of care, are felt, by all patients served by the hospital through the programs and services supported by those savings. These sites of care, like the primary hospital, are included in hospital audits performed by HRSA and are therefore subject to rigorous oversight.
- 340B Claims Reporting should Minimize Provider Burden
For the past three years, many drug companies have made contract pharmacy access conditional on whether providers meet a list of strict requirements and hand over certain data directly to drug companies. All the while, drug companies have kept hidden important data about their own pricing and other activities. Despite these strong-arm tactics, hospitals are amenable to a national, independent clearinghouse of claims data that safeguards patient and provider confidentiality, and allows both 340B providers and manufacturers the ability to hold each other accountable. The process must minimize burden on providers to report the claims data. Hospitals recognize that in order to have a strong 340B program, accountability needs to be a two-way street.
- 340B Hospitals Already Report a Wide Range of Information. Drug Companies do not
340B hospitals report a variety of information to demonstrate their commitment to providing care to underserved populations. Hospitals report uncompensated care, charity care and other benefits provided to the communities they serve through both the Medicare cost reports and the IRS 990 form required for tax-exempt organizations. In fact, the most recently available IRS 990 data show that 340B hospitals alone provided nearly $68 billion in community benefits.vi At the same time, drug companies are not required to report information about how they set their prices or how much they decide to increase their prices. That type of information would be important in understanding drug companies’ pricing decisions and how we can mitigate arbitrary and egregious price increases for drugs that are critical and lifesaving for patients.
- Drug Companies have Thwarted 340B Oversight at Every Turn
The 340B program is already subject to rigorous oversight by HRSA, which has sufficient authority to ensure compliance with program rules and requirements. Meanwhile, drug companies have consistently stood in the way of HRSA’s ability to exercise that authority, including by their collective refusal to participate in good faith in the Alternative Dispute Resolution process. Drug companies should support the agency’s existing authority to oversee the program before making insincere demands for additional authorities that the government does not need. In addition, PhRMA’s statement that the 340B statute supersedes state law is equally self-serving. PhRMA fears legislation, like the Arkansas law recently upheld in federal court that would prevent it from placing restrictions on contract pharmacy arrangements. Having lost in court, PhRMA offers this proposal for the same reason as all the others: to fill its swollen coffers at the expense of patients and communities.
iv https://www.aha.org/system/files/media/file/2022/11/survey-brief-drug-companies-reduce-patients-access-to- care-by-limiting-340b-community-pharmacies.pdf