House members generally expressed support Tuesday for the 340B drug discount program that serves hospitals and clinics treating low-income patients, but disagreed on whether the program needs tighter regulation.
“I am a supporter of the overall 340B program,” said Rep. Morgan Griffith (R-Va.), chairman of the House Energy & Commerce Oversight and Investigations Subcommittee, during a hearing on 340B. “There are many hospitals, including in my district, who are appropriately using the 340B dollars to keep their doors open and heavily rely on this program. Yet, we see reports about entities taking advantage of the system.”
He gave the example of one hospital system in his district which paid $3,000 for a cancer drug under the 340B program and then charged the patient’s insurer $25,000 for the drug. “When reports like [this] occur, it is Congress’s job to step in and provide oversight into this program,” Griffith said.
Rep. Frank Pallone (D-N.J.), ranking member of the full Energy & Commerce Committee, agreed that “We do need to ensure that covered entities are using the savings from the 340B program appropriately and that low-income patients are receiving the full benefits of these savings,” he said. However, he added, “the significant reworking of the 340B program that some of our Republican colleagues recently proposed will not reduce prescription drug costs or expand access to care … In fact, undermining 340B would severely weaken the healthcare safety net, creating greater obstacles for people who already struggle to receive accessible, affordable care.”
The 340B program, passed by Congress in 1992, requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations at a discount to remain eligible for reimbursements through Medicaid. The healthcare organizations can then charge their insured patients the usual prices for the drugs, and use the excess money received to pay for charity care or for nearly any other purpose.
Facilities covered by the program include sole community hospitals, hospitals that care for a certain amount of Medicare and Medicaid patients, and community health centers and others that care for rural and underserved populations. In 2022, sales of 340B covered drugs generated as much as $54 billion and accounted for 7.2% of all sales in the U.S. drug market, according to a subcommittee memorandum.
Witnesses at the hearing who worked for hospitals covered by 340B testified that the program was vital to their institutions’ survival. “Government health programs chronically underpay for our care, and we rely on 340B savings to fill the gap,” said Matthew Perry, MBA, president and CEO of Genesis HealthCare System, in Zanesville, Ohio. “We save about $56 million a year through 340B discounts … 340B is the difference between us operating on a razor-thin positive margin or an unsustainable deficit. Without 340B savings, Genesis would not be able to continue to operate.”
Genesis “invests all of the 340B financial benefit back into patient care,” Perry said. “Some 340B hospital savings help reduce patients’ healthcare bills as well. We provide more than $3.5 million in free or discounted prescriptions. We also provide more than $75 million in uncompensated care.”
Subcommittee members also heard testimony about the 340B program’s effect on hospital consolidation due to the fact that health systems buying up independent physician practices can be more competitive financially because they get the 340B discount. “If one oncology clinic can purchase drugs at a 340B discount, and the other oncology clinic can’t, the one that can purchase the drugs at a discount is going to have a competitive edge,” Anthony DiGiorgio, DO, MHA, a neurosurgeon at the University of California San Francisco, said in response to a question from Rep. Cathy McMorris Rodgers (R-Wash.), chair of the full Energy & Commerce Committee. “They’re going to have more revenue that they can put into making their facility look nice, outreach efforts, and advertising, and simply, they’re going to put that other practice out of business.”
The ability of 340B hospitals and other facilities in the program to use contract pharmacies — such as retail or specialty pharmacies — to fill their patients’ prescriptions was another concern among committee members. Recently, some drug manufacturers began putting limits on how many contract pharmacies they would be willing to deal with for each 340B facility, and in response, several states passed laws allowing hospitals to use multiple pharmacies, prompting lawsuits from drugmakers. HHS also issued guidance in 2021 stating that 340B participants could continue using multiple pharmacies.
Rep. Jan Schakowsky (D-Ill.) said she opposed proposed legislation that would allow restrictions on contract pharmacies. “Some of the changes that have been suggested and implemented have been a real detriment to places in my community,” she said. “In Evanston [Illinois], we have a community health center where, due to some of the restrictions that have been made, we find that the closest available pharmacy to be able to access the [medication] is an hour drive away from what it used to be. What does that mean? [It means] that low-income people don’t go and get the drugs that they need.”
Perry said his healthcare system had also been affected by the contract pharmacy restrictions. “We lost about $5.7 million over the last 3 years, and in what we can actually save” because the number of contract pharmacies was reduced. “And these pharmacies are located — the ones we still do have — the specialty pharmacies, some are located hundreds of miles away, and that’s the only place that you can get those medications.”
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