LUGPA Policy Update on the 340B Program

Feb. 2024

As the healthcare landscape evolves, LUGPA remains committed to advocating for policies that ensure accessible, high-quality care for all patients, particularly those in underserved communities. The 340B Program, designed to provide discounted medications to safety-net hospitals and clinics, has seen rapid uptake. However, recent developments and proposed reforms demand careful consideration to uphold the program's integrity and effectiveness.

The 340B Program has witnessed significant growth since its inception in 1992, with an expanding number of participating providers, particularly hospitals. While the program has been instrumental in delivering essential care to vulnerable populations, concerns have emerged regarding potential misuse by some hospitals, leading to potentially unintended consequences such as market consolidation and increased costs.

In response to these concerns, the Trump and Biden administrations have taken steps to address issues surrounding the 340B Program. However, these efforts have sparked controversy and highlighted the need for comprehensive reform to ensure the program's sustainability and equitable distribution of benefits.

Key developments include:

The Supreme Court ruling in favor of hospitals challenging payment reductions by CMS.
CMS's $9 billion plan to reimburse 340B providers, which involved controversial funding clawbacks from other hospitals.
Legal challenges against drugmakers' restrictions on 340B discounts.
The introduction of bipartisan reform legislation, such as the SUSTAIN 340B Act, aimed at enhancing program transparency, accountability, and patient access.

LUGPA has actively advocated for significant 340B Program reform to address concerns regarding hospital consolidation, increased costs, and program integrity. Our recommendations include:

Restricting 340B eligibility for hospital-acquired physician practices.
Linking Medicare payments to acquisition costs.
Enforcing charity care minimums and refining patient definitions to ensure targeted assistance to vulnerable populations.

On February 2, a bipartisan group of six U.S. Senators issued a "discussion draft" 340B reform bill, the bipartisan SUSTAIN 340B Act, which aims to clarify and strengthen the 340B program. It emphasizes Congress's intent to help safety net providers expand healthcare access for underserved patients.

The draft Act addresses various aspects, including contract pharmacy arrangements, patient definitions, and child site eligibility, seeking stakeholder feedback for balance and integrity. It emphasizes transparency in reporting, enhances program integrity through audits, and prevents duplicate discounts.

The explanatory document and the related discussion draft propose several critical reforms, including:

Permitting the use of contract pharmacies and prohibiting manufacturers from imposing conditions on their use.
Establishing requirements for child sites to ensure their alignment with covered entities.
Enhancing transparency through reporting requirements and program integrity through audits and establishing a national clearinghouse to prevent duplicate discounts.

LUGPA remains committed to advocating for policies prioritizing patient access, program integrity, and transparency. We will continue to monitor legislative developments and work collaboratively with policymakers to shape practical and sustainable reforms that support the mission of the 340B Program.

LUGPA Brief: 340B Program Reforms and Concerns

September 7, 2023

As America grapples with escalating costs and the need to reduce overall healthcare expenses, the significance of the 340B Program has come to the forefront. This program has proven to be a potent tool in curbing costs while delivering essential care to financially vulnerable patients. Under this program, safety-net hospitals, health centers, and clinics can purchase prescription medications at reduced rates and receive reimbursement at significantly higher rates than their acquisition costs.

Since its inception in 1992, the 340B Program has seen remarkable growth in the number of participating providers and the volume of drugs provided through its discounted rates. While smaller community clinics have historically used the program, an increasing number of hospitals have joined the ranks. Approximately 87 percent of drug sales at 340B prices within the program are attributed to hospitals.

Recent concerns have surfaced regarding hospitals' potential misuse of the 340B Program, diverting excess profits from their intended purpose of serving underserved populations.

This issue is further complicated within larger hospital systems. A central hospital that fulfills the minimum Medicaid and low-income Medicare inpatient requirement can then extend the 340B discount to all its clinics, even if these clinics don't primarily serve Medicaid patients. This creates a competitive advantage for these clinics over independent practices, driving further consolidation as financially strained independent practices are acquired by hospitals.

Last year, the Supreme Court ruled in favor of hospitals challenging a nearly 30 percent reduction in their 340B payments by the Centers for Medicare and Medicaid Services (CMS) under the Trump administration. In response, CMS announced a $9 billion plan to reimburse 340B providers, which has sparked controversy as it involves recovering funds from other hospitals (“clawbacks”). Simultaneously, the Biden administration is confronting drugmakers in court over their restrictions on where hospitals can utilize 340B discounts.

Rural hospitals, heavily reliant on 340B to offset financial losses, express concerns about CMS' proposed funding clawbacks. These developments are expected to continue shaping the discourse around the 340B program. CMS is finalizing repayment plans, appellate courts are deliberating on drugmaker restrictions, and Congress is exploring potential reforms.

In response to a request for information from the U.S. Senate, LUGPA provided feedback to Senators Thune, Stabenow, Capito, Baldwin, Moran, and Cardin on the 340B Program. Our feedback highlighted the unintended consequences of the program, including hospital consolidation and increased costs. LUGPA proposed reforms such as restricting 340B eligibility for hospital-acquired physician practices, linking Medicare payments to acquisition costs, enforcing charity care minimums, and refining patient definitions.

We emphasized that the program's rapid expansion has led to hospitals acquiring physician practices, adversely affecting competition and potentially raising healthcare costs. LUGPA advocated for a more targeted approach to ensure the program effectively aids financially vulnerable patients in safety-net hospitals.

Our recommendations encompassed clarifying patient definitions, limiting the use of contract pharmacies, and enforcing minimum charity care requirements for hospitals to maintain non-profit status and access 340B discounts. We are committed to working with Congress to address these issues and enhance the program's effectiveness in providing affordable healthcare access.

This marks LUGPA’s second major advocacy effort in 2023 regarding the 340B program. On March 28, 2023, LUGPA submitted testimony to the House Energy & Commerce Health Subcommittee with suggestions for reform. These included implementing reporting requirements for participating hospitals to enhance transparency and oversight, thereby preserving the program's focus on assisting low-income patients. We will closely monitor the progress of H.R. 3290, a bill aimed at implementing such reporting requirements.

LUGPA remains steadfast in safeguarding the quality and cost-efficiency of care delivered through independent medical practices to Medicare beneficiaries while preventing the consolidation of physician services within hospital settings. We will continue closely following the progression of 340B reform proposals as they evolve.