A Way Around HHS 340B Program Delays

Mya Strauss

Associate Editor

Beazley Institute for Health Law & Policy, Loyola University Chicago, LLM 2019


Access to quality, comprehensive health care services seems to always be at the forefront of our health care industry. One’s ability to gain access measured in terms of utilization, is dependent upon financial affordability, and physical accessibility. While a seemingly small issue under the overarching ‘access to health care’ topic, talks about access to medication and its affordability in particular for the vulnerable and underinsured patients must also be addressed. A number of health organizations have sued HHS for delaying the implementation of rules that would force drug companies to be transparent about their pricing and punish them for overcharging participating hospitals in the federal program that discounts outpatient medication. Due to HHS’ delays, hospitals cannot challenge drug manufacturers for overpricing outpatient medication thus they cannot access refunds of discounts that are due to them under statute

340B Program

While minor modifications to the 340B rule have taken place over the years, the final rule was set to take effect March of 2017. However, HHS has now delayed the effective date five times over the last two years, pushing it to take effect July 2019, stating that its delay is due to the complexity of the program within our currently changing ACA environment. Congress’ 340B program gives hospitals, community health centers, including low-income and uninsured individuals, a discounted price on prescriptions drugs. In order to have their outpatient drugs reimbursed through the state Medicaid programs, prescription drug companies are required to offer discounts to covered entities.

This program enables eligible public and not- for-profit hospitals and other covered institutions to use the savings generated to provide additional critical health care services for their communities and the underserved populations within those communities. This is done by providing free or discounted drugs or other services, increasing service locations, and developing patient education programs to improve patient’s access to high-quality care.  The statute establishes mandatory discounted outpatient drug prices and gives access to those ceiling prices charged to the covered entities. To ensure transparency by manufacturers, and to prevent overcharges, Congress imposed sanctions for drug companies that knowingly and intentionally overcharge covered entities.

Trump Administration Plan

In May 2018, the Trump Administration issued its “Blueprint to Lower Prices and Reduce Out-of-Pocket Costs” plan. Trump stated, “Everyone involved in the broken system—the drug makers, insurance companies, distributors, pharmacy benefit managers, and many others — contribute to the problem… We are putting American Patients First… begin moving forward on reforms that will bring soaring drug prices back down to Earth.”

If there were any words out of that particular statement, from the current administration, which both sides of the political table could agree with, it would be that drug prices are soaring, all parties have contributed to the issue, and Patients must be put first by lowering drug prices. Whether the proposed plan is the proper one to reach that goal is for your own assessment.

State Initiatives

Given delays by HHS and the pending final outcome of the American Patients First plan, states should take it upon themselves to implement legislation focused on Medicaid medication costs by assessing the communities that have a high-underserved population in order to sustain the states budgets through cost containment and provide access to its residents. States could opt for outpatient medications similar to 340B drug pricing program. In contrast, states could perform an in depth federal funded analysis in order to determine what medical issues is most prevalent amongst its vulnerable and underinsured patients.

The latter choice is similar to Louisiana’s most recent publicly initiated Medicaid purchasing idea for subscription-based payment model for Hepatitis C in efforts to eliminate the virus for individuals enrolled in Medicaid or in Louisiana’s correctional system. Payments to its manufacturers are equal or less than what the state spends to guarantee its vulnerable populations access to the anti-viral medication. Over the past three years, a total of 119 signed bills from 45 states illustrate that the majority of the states have decided to take things into their own hands concerning pricing for medication, payment, and costs associated with prescription drugs.

Local Action

If cost containment policies are absent stateside, hospitals can implement procedures from within their systems. Hospitals providing care to its underserved populations, who are typically “sicker” patients with access to care as a long-term issue, are not only hit with the superfluity of underserved patients but also have to deal with rising costs of prescription dipping into its Medicaid dollars. Procedures from within the hospitals could permit its leadership to be better stewards of their Medicaid funding, affording some type of negotiating power with its contracted manufacturers to disperse funding from paying for medication across its population to possibly saving the next patients life that walks through its doors.

If there is concern by manufacturers’ inability to make profits, especially considering the cost that go into making different drugs, composing a list according to the necessary medical concerns of the community is likely to have little effect on the drug manufacturer’s margins. According to HRSA, the outpatient drugs within the 340B program accounted for only 3.6 percent of the total drug market in 2016. Despite this discount program, drug manufacturers were still able to achieve double-digit margins.

While the Hospitals Wait

As better reporting systems and transparency are necessary to begin effective change, the envelope needs to be pushed a little further for transparency to continue, ultimately leaving a lasting effect on hospitals purse. A Nevada law, enacted to ensure transparency and contain costs, went a step further and put best practices into action to ensure drug price transparency. Among other practices, the law requires its pharmacy managers to report dollar value of rebates collected on listed essential medications.

Well-monitored, effective procedures can allow hospitals to remain patient-focused and assist patients in maintaining their health outside of the hospital setting by stretching resources to provide greater access and health care services to the community. Placement of a hospital compliance committee monitoring the best practices either yearly similar to 340B auditing system, or on a quarterly basis to track progression. Based on the hospitals assessment of medications, these lists can be placed in areas where physicians, nurses, pharmacists and their technicians are constantly reminded setting a standard of conduct for every hospital employee. In the meantime, while drug prices continue to rise drastically faster than inflation in congruence with HHS delays to afford the hospitals some type of relief by holding manufacturers accountable, it is up to the State and its hospitals to keep the conversation going in order to see real change.