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Congress eyes another pass at 340B reform

Feb 21, 2024
Illustration of a pill capsule splitting, and dollar signs pouring out of it.

Illustration: Brendan Lynch/Axios

An overhaul of the 340B drug discount program is again tempting some lawmakers on the Hill, despite an already formidable health care to-do list.

Why it matters: The program has been a magnet for conflict, drawing drugmakers, hospitals and other providers into a thicket of litigation and state legislative fights.

  • Congress could have an opening to set new guardrails for dispensing discounted drugs and clarify reporting requirements and federal enforcement powers.

Yes, but: The lawmakers still haven't settled on basics like the definition of a 340B patient, and they face the same gridlock that's stalled numerous other health bills.

Driving the news: A recent legislative draft by six senators — John Thune, Debbie Stabenow, Shelley Moore Capito, Tammy Baldwin, Jerry Moran and Ben Cardin — seeks to resolve some of the biggest friction points in 340B.

  • By stipulating that pharma companies must provide discounted prices wherever the drugs are dispensed, it would respond to the growing number of drugmakers that have restricted when providers can use 340B discounts at contract pharmacies.
  • Hospitals, community health centers and other 340B entities maintain that the drugmakers' actions are unlawful and threaten patient access. The drugmakers say the limits enhance program integrity.
  • The draft also clarifies that off-site outpatient facilities, or "child sites," must be wholly owned by and clinically and financially integrated with an affiliated hospital to be eligible for 340B discounts.
  • And it would require 340B facilities to detail the number of people who received drugs at a discounted price and how the savings are used, along with other oversight measures.

What the draft doesn't contain is a definition of a 340B patient. That's crucial, because critics in the pharmaceutical industry say the program has strayed from its safety net purpose and is exploited to pad hospitals' bottom lines.

  • Drugmakers say the current patient definition is too expansive, while providers maintain they're using language in the 1996 law that established the program.
  • A federal court ruled in November that the definition was too narrow, which could potentially limit the volume of drugs purchased at discounted prices.
  • "Patient definition is going to matter a lot," said Peggy Tighe, a principal at Powers Pyles Sutter & Verville and a 340B lobbyist for Ryan White clinics. "The senators left an intentional hole because they know they need more information to sort out if there's a reason to change patient definition."

Go deeper: The congressional efforts are running parallel with those in state legislatures, with several recently passing bills requiring drugmakers to provide discounts to contract pharmacies.

  • There's also a tangle of court cases that take up how the Health Resources and Services Administration polices the program — including whether the agency can require delivery of discounted drugs to an unlimited number of contract pharmacies.

What they're saying: The six senators say they want to release a final bill and take action in this Congress.

  • "We believe it is necessary to pass legislation in the 118th Congress that provides clarity, transparency and accountability in the 340B program in order to ensure the program remains strong, long into the future," the group said in a letter to 340B stakeholders.
  • "With the courts moving slowly, and the amount of financial losses continuing to grow, there's a feeling among the providers that we need Congress to intervene because this is taking way too long," said Ted Slafsky, former CEO of 340B Health, a group representing hospitals in the program, who now runs a news service covering the program.

Flashback: Providers were divided on the need for a legislative fix at the start of this Congress, with community health centers in favor, to stop drugmakers' restrictions at contract pharmacies. But hospitals weren't convinced a legislative solution was needed.

  • But scrutiny of the program picked up last year, when Senate HELP Committee Ranking Member Bill Cassidy opened an investigation into how two hospitals in the program are using drug savings and whether funds are being put back toward patients' health expenses. Cassidy has also recently sent letters to contract pharmacies and community health centers on 340B.
  • The House Energy and Commerce Committee also advanced a 340B transparency bill in May.

Some on the Hill believe the latest Senate draft doesn't go far enough in demanding accountability from hospitals.

  • "Just on the surface, from what my staff has said, and what we've heard from other stakeholders, is that it doesn't really change much," Rep. Larry Bucshon, who sponsored the House bill, told Axios. "We need really full transparency in 340B [for hospitals]."
  • Nicole Longo, deputy vice president of public affairs at PhRMA, said the drug industry trade group wants to work with Congress on "patient affordability requirements, enforceable accountability measures and policies refocusing the program on true safety-net providers."

What we're watching: The Senate working group set April 1 as the deadline for stakeholders to submit feedback on the draft legislation.

  • Meanwhile, more state legislatures are working on their own 340B fixes, which largely pivot around contract pharmacies.
  • "There's more than a dozen states that are advancing laws that say 'No, pharma' [to the contract pharmacy restrictions]," Tighe said. "It's a movement. It feels like when PBM reform started at the state level and bubbled up."
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