Erin Bliss - Assistant Inspector General, Office of Evaluation and Inspections, Office of Inspector General, U.S. Department of Health and Human Services

Debra Draper – Director, Health Care, Government Accountability Office

Captain Krista M. Pedley - Director, Office of Pharmacy Affairs, Health Resources and Services Administration, U.S. Department of Health and Human Services


Erin Bliss - The 340B Program continues to experience some long-standing vulnerabilities that impede the effective oversight and operation of the program. Two in particular stand out: (1) the lack of transparency that prevents accurate payments by 340B providers, State Medicaid programs, and pharmaceutical manufacturers, and (2) a lack of clarity regarding program rules that creates uncertainty and results in uneven program implementation and limited accountability. In response to these vulnerabilities, OIG makes two recommendations: (1) increase transparency to allow payment accuracy and, (2) clarify rules to ensure that the program operates as intended. As to the first point, the lack of transparency in ceiling prices impedes 340B providers and Medicaid programs from ensuring that they have paid the correct amount for 340B-purchased drugs, and it also hinders States' efforts to pay providers correctly and to claim correct Medicaid rebates from manufacturers. With respect to 340B program rule clarifications, HRSA should clarify the definition of an "eligible patient" under the program in light of increasingly complex contract pharmacy arrangements, and the agency should also issue guidance clarifying how the program should apply to uninsured patients, as 340B providers are not currently required to use savings from the program for any particular purpose. To the extent HRSA does not have the regulatory authority to pursue these recommendations, Congress should provide authorizing legislation.

Debra Draper - HRSA has come a long way to improve its oversight of the 340B program, but there are two issues that the GAO believes have yet to be addressed. The first involves the definition of an eligible patient, and the second involves hospital eligibility criteria. Currently, HRSA lacks clear guidance on what is the appropriate definition of an eligible patient, giving leeway for covered entities to interpret the term too narrowly, or more troubling, too broadly so as to include loosely affiliated entities. Furthermore, HRSA has not provide guidance specifying the criteria under which hospitals that were not publicly owned or operated could qualify for the 340B program. This lack of guidance means that hospitals with contracts that provide only a small amount of care to low-income individuals not eligible for Medicare/Medicaid could claim 340B discounts, which may not fall within the program's purpose as originally intended.

Captain Krista Pedley - Following the D.C. District Court opinion issued in May 2014 that clarified the scope of HRSA's regulatory authority, HRSA withdrew its proposed "omnibus" regulation and has since prioritized rulemaking in those areas most clearly established as being within its regulatory authority. These include areas such as the calculation of ceiling prices and civil monetary penalties, and the development of the 340B alternative dispute resolution process. HRSA does not currently have the authority to ensure 340B covered entities spend savings generated by the program in a particular way, but HRSA would be open to working with Congress on establishing greater regulatory authority to enforce program requirements and increase transparency on how covered entities use the program to benefit low-income and uninsured patients.


Lack of Accountability Among Covered Entities - There was bipartisan concern among committee members that there was no way to "trace" how covered entities used the savings generated by the 340B program. This concern is compounded by the exponential growth of the program over recent years with the number of covered entities nearly quadrupling since 2011, and also the notably high levels of non-compliance with 340B requirements among audited covered entities. Rep. Murphy questioned Captain Pedley repeatedly on how HRSA could determine and evaluate whether the savings produced by the 340B program were being passed on to the indigent and uninsured. But Captain Pedley stated repeatedly that HRSA does not have the authority to investigate how a hospital manages funds under the 340B program. In related questions, the witnesses were generally not able to offer specific examples how 340B entities used savings from the program to help the uninsured. Rep. DeGette urged Chairman Murphy to hold another hearing on the subject and invite witnesses from the hospital industry to give their side of the story.

340B Program and Branded Drugs - Some committee members asked whether the 340B program encouraged the use of branded drugs over generic drugs. Debra Draper answered that based on previous GAO research into the relationship between Part B and the 340B program, disproportionate share hospitals (DSH) spent considerably more on Part B drugs than non-DSH hospitals, suggesting that providers prescribed more expensive (proxy for branded) Part B drugs through the 340B program. Oncology was cited as an example of this pattern.

340B Program and Provider Consolidation - Some committee members asked to what extent the growing levels of provider consolidation were attributable to the 340B program (i.e. the possible incentive for hospitals expand their 340B-eligible sites). Captain Pedley responded that acquired outpatient facilities and practices are still required to comply with 340B requirements, but she declined to specifically comment on whether provider consolidation was in part attributable to the 340B requirements. Debra Draper cited previous GAO research indicating higher levels of prescribing for Part B drugs among DSH hospitals, but she did not suggest that this pattern was driven by provider consolidation.

FY 2018 Physician Fee Schedule (PFS) Proposed Rule and 340B Drugs - Democratic representatives expressed concern that the proposal contained in the FY 2018 PFS Proposed Rule, which would reduce Medicare reimbursement for Part B drugs purchased by 340B hospitals, could severely undermine the valuable work that DSH hospitals perform for disadvantaged communities. In particular, Rep. DeGette and Rep. Pallone asserted that the PFS proposal does nothing to address the issue of rising prescription drug prices because it doesn't address why drug prices are high in the first place. Under the proposal, drug manufacturers are still free to set prices.

Additional Regulatory Authority - Committee members asked where HRSA believes it lacks regulatory authority to address the various issues presented to the agency. Captain Pedley offered the example of transparency regarding ceiling prices-currently HRSA is able to share the ceiling prices with covered entities, but not with state Medicaid programs. If it could share this information with state Medicaid programs, these programs could better prevent duplicate discounts under the 340B program. Captain Pedley also stated that HRSA would need more regulatory authority to enforce a clearer definition of an eligible patient under the program. Rep. Griffith asked Captain Pedley whether Congress should give HRSA authority to investigate in greater detail contract pharmacy arrangements. In particular, Rep. Griffith was interested in the alleged agreement between hospitals and contract pharmacies to "share" in the savings generated by the 340B program. Captain Pedley responded that HRSA would be willing to work with Congress on a proposal.

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