Payment Trends

Hospitals push back against a coordinated effort to revamp the 340B program

A new alliance says 340B should become a truer safety-net program, while hospitals say profits are the driving force behind the initiative.

March 23, 2023 7:36 am

A lobbying fight has started over the future of the 340B Drug Pricing Program, with hospitals seeking to protect what they view as an essential source of cost savings.

The advocacy group 340B Health and prominent hospital associations are seeking to repel an effort led by the Pharmaceutical Research and Manufacturers of America (PhRMA) to drive 340B legislative changes.

Members of Congress reportedly have been hearing from the new coalition, which also includes the National Association of Community Health Centers (NACHC), about proposed 340B reforms.

“It’s time for the true safety net to work together to restore integrity back into the vital program,” according to a statement on the website of the coalition, known as the Alliance to Save America’s 340B Program (ASAP 340B).

While PhRMA’s motivation for striving to enact changes may be self-evident, given that 340B discounts affect its members’ finances, coalition members such as the NACHC and the National Hispanic Medical Association hope a greater share of 340B funding can be directed to their constituents.

Aiming for big changes

One of the group’s 10 proposals is that participating hospitals should have to implement a sliding fee scale for medications purchased through the 340B program. The scale should apply “at a minimum” to patients who are uninsured and to those who have commercial insurance but whose incomes are under 200% of the federal poverty level.

Eligibility criteria for 340B should incorporate “quantitative metrics that appropriately identify hospitals treating a disproportionately large share of low-income patients on an outpatient basis.” The criteria would not apply to critical access hospitals (CAHs) or sole community hospitals. CAHs that convert to the new rural emergency hospital designation should retain their 340B eligibility, according to the proposals.

In addition, “340B hospitals should have policies that increase access to affordable health services, and their participation in the 340B program should be conditioned on them not engaging in aggressive debt collection practices that penalize the most at-risk communities.”

Another proposal would restrict hospitals’ ability to launch offsite clinics that are eligible for 340B pricing. 

The group also says modified criteria are needed to determine the categories of patients for whom providers can receive discounts on prescription drugs. For example, a provider should be eligible for discounts only for patients who have periodic in-person visits and whose care is the “consistent responsibility” of the provider.

Wading into a legal morass

The proposals also address contract pharmacies, a subject of controversy in relation to 340B in recent years. Drug companies have acted to restrict the availability of 340B discounts for drugs dispensed through hospitals’ contract pharmacies.

After the U.S. Department of Health and Human Services backed providers in the dispute, manufacturers took the issue to court. The drug companies won a decision at the appeals-court level in January, with two more appellate cases pending after the sides split four decisions in district court.

The ASAP 340B proposals state that contract pharmacy arrangements should be limited to providers serving a medically underserved population or operating in a medically underserved area, as well as to 340B-covered entities serving specific populations such as patients with HIV or chronic illness.

Fending off calls for change

A counter-effort has been formed by 340B Health, the American Hospital Association (AHA), the American Society of Health-System Pharmacists, America’s Essential Hospitals, the Association of American Medical Colleges, the Catholic Health Association of the United States, and the Children’s Hospital Association.

In a statement, the groups said the proposed changes would “cause massive harm for patients who rely on hospitals that use 340B savings to provide crucial care, services and programs to their communities.” They also implied profits are the impetus for the new coalition’s efforts, at least in the case of PhRMA.

“The proposal would only save drug company profits by reducing their already modest financial contribution to the healthcare safety net,” the groups said.

Ultimately, they added, the changes would curtail patient access by affecting the resources hospitals can devote to caring for underserved populations.

“Without [hospital] access to 340B discounts, it will be more difficult for patients to receive the same level of care from their community health providers,” the groups wrote. “These include patients whose health conditions have advanced to the point of requiring the specialized, complex care only hospitals can provide.

“Because 340B cuts would leave fewer hospital resources to help pay for uncompensated and unreimbursed care, this proposal would be especially harmful to patients who are uninsured, underinsured and dependent on public health programs, such as Medicaid.”

In a blog post, Joshua Free, founder and president of Nelco Advisory, a pharmacy and healthcare solutions firm, wrote, “Stating the obvious, PhRMA is in charge of this alliance and is paying for the whole thing. … What they’ve done here is pulled in other organizations that don’t have the same stigma in order to put a shiny altruistic face on this thing.”

Congress holds the cards

As the ASAP 340B coalition ramps up lobbying activities, eyes will turn to Capitol Hill to gauge whether Congress is receptive to the ideas.

At a Senate Health, Education, Labor & Pensions (HELP) Committee hearing this month on community health centers, the 340B program was part of the discussion (the ASAP 340B group had not released its proposals at the time).

Sen. Bill Cassidy (R-La.), ranking member of the committee, alluded to the possible need for “reforms to the program” to make sure funds aren’t used to “build a chandelier in a hospital.”

Amanda Pears Kelly, CEO of Advocates for Community Health and executive director of the Association of Clinicians for the Underserved, said community health centers “invest every single dollar back into patient access and community, and we can verify that.”

“I think it does distinguish health centers that the intention of the 340B program as it was designed is being used and executed by health centers extremely accurately and properly,” she added.

In the days after the formation of ASAP 340B, the lone federal legislator to put out a statement was Rep. Doris Matsui (D-Calif.), a member of the House Energy and Commerce Committee, which likely would have a role in writing prospective 340B legislation. She opposes the new coalition’s proposals.

“This new proposal from ASAP 340B would play right into the hands of its authors, the drug manufacturers, and put money back into the pockets of Big Pharma,” Matsui said.

“While we don’t yet have all the details about this deal, I am very concerned about any potential proposal that would undercut the efficacy of the program by excluding people who rely on these drugs and critical safety-net providers, who play an essential role in providing care to low-income and underserved populations,” she added.

A common adversary

One area in which providers on both sides of the debate may agree is the need to assess the role of pharmacy benefit managers (PBMs) in the 340B program.

Sue Veer, CEO of Greenwood, South Carolina-based Carolina Health Centers, said PBMs benefit from the drug pricing data that community health centers submit to manufacturers as a condition of receiving 340B discounts at contract pharmacies.

“When we submit data, that becomes transparent to the PBMs who then, in order to recoup the rebates that they’ve lost, reimburse for less than what they would for a retail pharmacy,” Veer said during the HELP Committee hearing.

She said reimbursement might be average wholesale price (AWP) minus 4% in the organization’s retail pharmacy, compared with AWP minus 32.5% for the same drug in 340B.

ASAP 340B states, “Protections are needed to prevent for-profit companies, like pharmacy benefit managers, from siphoning off 340B savings intended to help patients by reducing reimbursement for 340B-qualifying prescriptions.”

Similarly, the AHA has asked the Federal Trade Commission to examine “the impact of PBM-negotiated rebates and other business practices” on 340B. “PBMs require 340B hospitals to accept unfair terms and policies in order to participate in their pharmacy networks, which are needed to give hospital patients greater access to those drugs,” according to a 2022 comment letter.


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