New 340B Draft Guidance May Increase Bureaucracy

The 340B Drug Pricing Program has long been enveloped in controversy, and new draft guidance issued by the federal government is expected to clarify some of the ambiguity that currently exists. The program—created by Congress in 1992 to assist disproportionate share hospitals (DSH), which serve a large number of low-income patients—needs pharmaceutical manufacturers to provide 20% to 50% discounts to hospitals and clinics for outpatient drugs.

Problems arose after financial discrepancies by some of the covered hospitals came to light—Duke University Hospital, for example, was reported to have profited a staggering $69.7 million after having purchased the drugs at discounted rates and selling it to patients without the discount. The original purpose of the program to serve as a safety-net hospital is severely compromised in this and similar cases. A report by the Government Accountability Office (GAO) released earlier this year found that while 340B DSH hospitals had lower overall margins, compared with non-340B hospitals, per beneficiary Medicare Part B drug spending, including for oncology medications, was substantially higher at 340 B DSH hospitals, which could indicate more expensive drugs being prescribed for Medicare enrollees.

The new guidance seeks to increase oversight for the program and has raised the number of conditions for a patient to be covered by a 340B clinic or hospital from 3 to 6. But would this really tackle the problem or make things harder for the patient? One of the rules in the proposed guidance suggests that a patient's drugs are considered eligible for 340B discounts if they are billed as outpatient prescriptions to an insurer. By that measure, a hospital that orders prescriptions for a patient being discharged from the hospital to fill at a pharmacy would not be eligible for a discount. Such rules could have a significant impact on patient access.

“The 340B program is very administratively complex and costly to administer now,” said Beth Feldpush, senior vice president of advocacy and policy for America’s Essential Hospitals. “For our members that rely on the savings, I could see where if HRSA (Health Resources and Services Administration) narrowed the program so much, a hospital could say the costs to run this program may outweigh (the benefit of) participation in it.”

Several organizations are currently reviewing the document. Ashley Thompson, acting senior executive for policy with the American Hospital Association, said in a statement, “We want to make certain that the new requirements do not over-burden hospitals and strike a balance between hospitals and pharmaceutical companies for ensuring program integrity. More importantly, we want to ensure the stability of this program, which has a track record of improving access to care for poor patients and vulnerable communities.”

Released by the HRSA on August 28, 2015, the guidance is open for comments and feedback till October 27, 2015.