Hospital advocates also are watching efforts to repeal and replace the ACA, which authorized an expansion of 340B that has benefited many rural hospitals.


Feb. 3—The Trump administration this week withdrew new guidance—which had been opposed by many hospital advocates—for the 340B Drug Pricing Program.

In August 2015 the Health Resources and Services Administration (HRSA) proposed omnibus guidance for the 340B program, which requires steep discounts on drugs for safety net providers that treat a disproportionate share of low-income patients. The guidance aimed to clarify program rules first issued in 1992. But 340B Health, which represents more than 1,100 hospitals in the program, said about one-third of its members reported they would leave the program if the proposed rule changes were finalized.

Hospital advocates hailed the withdrawal of the rule changes.

“We are pleased that the administration chose not to finalize the Health Resources and Services Administration’s guidance, which, if enacted would have jeopardized hospitals’ ability to serve vulnerable populations, including low-income and uninsured individuals and patients receiving cancer treatments,” Tom Nickels, executive vice president of the American Hospital Association (AHA), said in a written statement.

Critics warned hospitals would be motivated to leave the program because the changes would greatly reduce the return on participation, which carries high administrative costs. Participating 340B hospitals had an average operating margin of 3.9 percent in 2013, and one out of three had a negative margin, according to an AHA survey.

“Today’s decision preserves the 340B program’s valuable benefits to low-income and other disadvantaged people, and the hospitals on which they depend,” Bruce Siegel, MD, president and CEO of America’s Essential Hospitals, said in a written statement.

AHA warned that the rule’s updated definition of 340B patient eligibility would have narrowed inappropriately the number of drugs that qualify for 340B pricing and threatened access to care for patients who need it the most.

Additionally, AHA objected to HRSA’s proposals regarding infusion services, urging that patients receiving infusion services at 340B hospitals or affiliated outpatient sites be allowed to continue to qualify for 340B pricing.

Critics of the 340B program—including many drug manufacturers—said the changes were needed because the program had become too expansive.

An overhaul that would have tightened eligibility criteria and required participating hospitals to track how 340B discounts are spent was dropped from the 21st Century Cures Act before passage.

Rule Changes

The retreat from the proposed omnibus rules followed the release in January of a final rule that established penalties of up to $5,000 each time pharmaceutical manufacturers intentionally charge a 340B hospital more than the program’s ceiling price.

The final rule, issued Jan. 5 by HRSA, outlined how the ceiling price is calculated for drug companies participating in the 340B program.

Important to hospitals, that January rule cited data showing that in 2015, the $12 billion in 340B sales continued to comprise a small share (2.6 percent) of the overall U.S. drug market. The U.S. Department of Health and Human Services estimated that 340B participants saved $6 billion on those purchases.

A report by the Alliance for Integrity and Reform of 340B, a coalition of patient advocacy groups, providers, and pharmaceutical manufacturers, estimated that 340B sales increased to $16.1 billion in 2016.

Hospital advocates have said they expect more legislative attempts to curtail the program in the coming year.

The Alliance for Integrity and Reform of 340B, a coalition of patient advocacy groups, clinical care providers, and pharmaceutical companies, was among groups planning such efforts.

“The patient, clinical specialty and innovator stakeholders in AIR340B see strong and clear interest in legislative and regulatory action this year to address the very serious challenges that have hampered the 340B program and its ability to serve the uninsured, indigent patients who are its intended beneficiaries,” Stephanie Silverman, a spokeswoman for AIR340B, said in a written statement. “We look forward to partnering with policy makers on thoughtful measures that will help the program get back to its focus and be sustainable for the long term.”

Such initiatives will likely highlight analyses such as a 2016 report by Avalere Health that found 37 percent of 340B hospitals provided charity care amounting to less than 1 percent of total patient costs in 2014. By comparison, 24 percent of hospitals provided that proportion of charity care in 2011.

ACA Impact

Republican initiatives to repeal or modify the ACA also are being closely watched by 340B stakeholders because that law contains provisions authorizing expansion of 340B eligibility.

Specifically, the ACA expanded eligibility to include 1,100 rural hospitals, according to the National Rural Health Association (NRHA). Economic challenges have led 80 rural hospitals to close since 2010, and 673—one-third of such hospitals—operate at a loss and are at risk of closure, according to NRHA. Hospital advocates said the 340B discounts are passed along to patients who cannot afford expensive medications or are used to help fund essential medical services provided by rural hospitals, such as emergency care and labor and delivery services.

Also unresolved is the status of a final rule implementing formal regulations of the administrative dispute resolution process for reviewing claims and resolving disputes in the 340B program. HRSA issued a notice of proposed rulemaking for the process in August 2016.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Friday, February 03, 2017