SUSTAIN 340B Act proposes major changes for hospitals and pharmacies

A bipartisan working group in Congress released a preliminary legislative draft that attempts to resolve some of the most disputed aspects of the 340B Drug Pricing Program.

One noteworthy provision in the legislation would curtail the 340B rebate model, which was finalized by the Health Resources and Services Administration on July 31 and is scheduled to begin Jan. 1, 2027. The pilot would be terminated within one year of the bill’s enactment.

In its place would be a third-party clearinghouse to collect claims-level data. Supporters of a clearinghouse approach say it would allow 340B covered entities to retain upfront discounts while centralizing the claims data used to identify duplicate discounts and diversion (i.e., 340B discounts on drugs furnished to ineligible patients).

A news release from the working group, which consists of three Democrats and three Republicans, stated that the bill draft “reflected the group’s belief that the program provides a critical benefit to eligible providers by helping them stretch federal resources to deliver healthcare services to the patients they serve, while also addressing concerns about program ambiguity and the need for greater transparency and accountability.”

Known as the Supporting Underserved and Strengthening Transparency, Accountability and Integrity Now and for the Future of 340B (SUSTAIN 340B) Act, the legislative draft has a long way to go before becoming law. A draft by the same name, with many similar provisions, was introduced in February 2024 but did not advance in Congress. The new draft incorporates stakeholder feedback on the prior version.

Contract pharmacy and child-site rules would be codified

The provisions would address statutory questions at the center of litigation over manufacturer restrictions on contract pharmacy arrangements. Covered entities (i.e., providers) would be authorized to use one or more contract pharmacies, with no numerical cap.

Covered entities generally would need to cancel 340B contracts with pharmacies that have not dispensed 340B drugs in the preceding 12 months. The bill draft sets up new requirements for registration and annual recertification of contract pharmacies, and HHS would establish standardized contractual provisions and processes for reviewing contracts.

Child sites (e.g., off-campus outpatient departments) would be eligible for 340B discounts based on criteria used to evaluate whether a facility meets the definition of provider-based. The covered entity would have to demonstrate that the child site is wholly owned and operated by the entity and meets requirements involving licensure, governance, operational control, and clinical and financial integration.

A newly acquired child site that was not already eligible for 340B generally would face a three-year waiting period.

Bill would establish a statutory 340B patient definition

While the definition of a 340B patient has been set in longstanding sub-regulatory guidance from the Health Resources and Services Administration (HRSA), the SUSTAIN 340B Act would add criteria and codify the definition.

Per the legislative draft, 340B discounts would be authorized for drugs dispensed to patients who have received an outpatient service from the provider within the prior two years and have an auditable medical record demonstrating the relationship. Patients would need a resulting prescription or other qualifying referral from a practitioner at the covered entity.

Patients would not qualify as 340B patients if the only service they received from the covered entity was drug administration, drug dispensing for self-administration, or a drug infusion.An exception would permit 340B eligibility if the prescription is provided at discharge from an emergency department visit or inpatient admission.

Covered entities that are found to have violated the patient definition could face 340B disenrollment lasting up to three years, along with fines, if they fail to abide by a corrective action plan.

Covered entities would face user fees and expanded reporting

The bill draft would implement mandatory user fees for covered entities, starting with $50 million in total fees in FY31. From there, annual fees would be indexed to inflation, and each entity’s share would be based on its total number of 340B prescriptions dispensed.

Participants in 340B also would need to have a transparent, publicly reported financial assistance policy and report extensively on how their 340B savings are applied. Required reporting would take place through Medicare cost reports and include insurance coverage categories, patient financial demographics and charity care as a share of operating costs.

A protective measure for providers would prohibit health plans and pharmacy benefit managers from using differential reimbursement rates or contract terms based on a covered entity’s 340B status.

Competing proposals highlight divisions over 340B

Another bill draft, released in June by Sen. Bill Cassidy (R-La.), chair of the Health, Education, Labor and Pensions (HELP) Committee, would allow rebates as a valid form of 340B discounts for all drugs and would require a portion of 340B savings to be passed down to patients. It also would limit contract pharmacies to five per covered entity, with geographic restrictions.

“I appreciate my colleagues’ efforts and will continue working with them to deliver bipartisan 340B reforms and lower healthcare costs for families,” Cassidy, who is set to depart the Senate at year’s end after losing in the Louisiana primary election, said in a statement regarding the SUSTAIN 340B Act.

A recently introduced bipartisan House bill has similar provisions to the SUSTAIN 340B Act but would allow HHS and HRSA to implement a rebate model within four years. It also calls for user fees to begin four years sooner, in FY27 (at 0.1% of an entity’s prior-year 340B purchases).

Dueling early perspectives on the SUSTAIN 340B Act are seen in initial responses by advocates for hospitals and independent community oncology practices.

While not commenting on the bill draft’s merits or specific provisions, the American Hospital Association expressed appreciation for the working group’s efforts on the draft. Ted Okon, executive director of the Community Oncology Alliance (COA), wrote in a social media post that the SUSTAIN 340B Act “does not reform the abuses driving 340B’s explosive growth.”

The COA has articulated concerns that 340B financially incentivizes larger entities to buy up smaller practices.