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Hospitals to See More 340B Drug Pricing Program Oversight, Azar Says

Greater oversight is needed to ensure hospitals use discounted prices in the 340B Drug Pricing Program for their intended purposes, the HHS Secretary explained.

340B Drug Pricing Program

Source: Xtelligent Media

By Jacqueline LaPointe

- According to HHS Secretary Alex Azar, hospitals should expect greater transparency and oversight of the 340B Drug Pricing Program to track how the program’s benefits are used to improve care for low-income and vulnerable populations.

“Its creation in 1992 was a bipartisan accomplishment, an innovative way to have stakeholders augment federal support for the provision of healthcare to low-income Americans,” he recently said at the annual 340B Coalition meeting.

“Since then, billions of dollars of drug savings have been applied to charity care by entities covered by the program. We know that because of the sheer scale of the program. But at the same time, we simply do not know the scale of benefits that have been delivered.”

Azar reported that discounted drug purchases under the 340B drug program totaled approximately $16 billion in 2016, representing a four-fold increase since 2009. Discounted purchases also increased 30 percent between 2015 and 2016 alone.

“Government programs can grow pretty fast, but they usually don’t grow that fast,” he explained to attendees. “This growth has occurred without any increase in statutory oversight.”

“HHS works hard within the powers we have to oversee the program. But a comprehensive system for reporting on the distribution and use of the program’s benefits does not exist,” he continued.

READ MORE: Prescription Drug Rates Remain Top Healthcare Supply Chain Issue

Without greater oversight of the 340B Drug Pricing Program, hospitals and other stakeholders can use the program’s benefits for unintended purposes, such as supporting care for patients who are not considered low-income, which is a main tenet of the drug discount program.

For example, “the acquisition of outpatient clinics by 340B entities has meant that a Medicare patient could pay cost-sharing on the full price of a Part B drug administered in their doctor’s office, while the doctor’s office gets the drug at a large discount that will never be known to the patient, was never intended to support care for that kind of patient, and may not be used to support care for low-income patients at all,” Azar stated.

Recent research also claimed 340B hospitals are acquiring more outpatient facilities to up profits. A recent New England Journal of Medicine study showed that the 340B Drug Pricing Program encouraged participating hospitals to increase their outpatient capacities and acquire oncology practices or hire additional oncologists at hospital outpatient facilities.

The study’s authors stated that they found evidence that 340B hospitals leveraged drug discounts to produce a greater profit, rather than improve care for vulnerable patients.

However, 340B advocates maintain that participating hospitals use the discounted drug prices to provide high-quality care to low-income and uninsured patients. A recent 340B Health survey uncovered that services for low-income and rural patients would suffer if the drug discount program cut hospital payments.

READ MORE: Prescription Drug Rate Growth Slows, But Prices Still Rising 7.35%

Nevertheless, Azar called for greater transparency and oversight of the 340B Drug Pricing Program to ensure participating hospitals are using program benefits according to the program’s rules and goals.

President Trump’s 2019 Budget proposes broad regulatory authority to help HHS ensure the 340B benefits reach the intended recipients, and proposes new funding to support more oversight activities,” he elaborated. “Covered entities that are responsibly investing their 340B savings have nothing to fear from such measures. Indeed, the results they have to show will help bolster the program’s reputation—and the sterling reputation already enjoyed by so many generous providers of charity care.”

He also explained that reducing the gap between discounted prices and hospital reimbursement in government programs would help.

“[T]he gap between prices paid by 340B entities and the compensation they receive has, in many cases, grown far too wide. That was the reason why the administration restructured reimbursement under Part B for 340B drugs—the first-ever major reform to reimbursement under 340B,” he said.

In late 2017, the Trump Administration finalized a rule that changed the 340B payment formula for hospitals. The rule abandoned the average sales price plus six percent methodology and replaced it with the average sales price less 22.5 percent formula.

READ MORE: Prescription Drug Rates Continue to Challenge Cancer Centers

The new hospital payment methodology will reduce hospital reimbursement by $1.6 billion.

The American Hospital Association and several other stakeholders are suing HHS over the 340B drug payment cuts, and other industry groups are calling on HHS to abandon the reimbursement reductions.

But Azar stood behind the new payment methodology. “The new payment level is still above the average price actually paid by 340B entities, but it is closer to reality. Importantly, it will help many seniors pay less for their drugs, avoiding situations where they may have owed more in cost-sharing than the provider paid for a drug,” he said at the meeting.

“We believe changes along these lines are essential to the future of the 340B program,” he continued. “Leaving a program as it is, within the rapidly changing context of healthcare, quickly renders it outdated. Worse, it often opens up new opportunities for a program’s benefits to be captured by powerful interests.”

Additionally, Azar commented on the federal department’s delay with finalizing penny pricing regulations for the 340B Drug Pricing Program.

The Health Resources and Service Administration (HRSA) has repeatedly postponed the implementation of 340D drug pricing rules that would require drug manufacturers to charge a penny for each unit of drug which has a ceiling price of zero. The original implementation date for the pricing rule was March 6. 2017.

“Some in the 340B community believe our delay of the penny pricing regulations is in deference to the pharmaceutical industry,” Azar explained. “That couldn’t be further from the truth. We will address this, and propose other changes to the 340B program, as part of our comprehensive approach to lowering drug prices and reducing out-of-pocket costs. The only people we defer to are the American people, and they are tired of paying so much for their prescriptions.”
A notable potential change he suggested was the end of using rebates to buy formulary access.

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