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Senate committee turns 340B spotlight on drugmakers

Lawmakers turned their sharp scrutiny of the 340B program on drugmakers Tuesday, questioning why states and providers don't know the ceiling prices within the drug discount program.

In a hearing Tuesday, members of the Senate health committee asked government watchdogs why the Trump administration has delayed for the fifth time a rule that would set ceiling prices and why 340B hospitals don't know what they ought to be paying for the discounted drugs. Although the Management of medicine Accountability Office and HHS' Office of Inspector General urged senators to clarify 340B's intent to improve oversight, the tone marked a shift from the committee's March hearing where hospitals were on the hot seat for how they spend the funds they save thanks to 340B.

Ann Maxwell, the OIG's assistant inspector general for evaluation and inspections, said the office believes the Health Resources and Services Administration needs to share 340B drug ceiling prices directly with providers and states to make the program more transparent.

But that move is on hold, she said. The Affordable Care Act gave HRSA the authority to share the data with providers, but so far the agency hasn't finished its secured data system to release the prices. Congress would have to give HRSA additional authority to share them with states as well. The secured data system likely won't be completed before the Trump administration finalizes its drug pricing rules, Maxwell said.

Maxwell and the GAO's Debra Draper both testified that the systematic audits in place for hospitals don't carry over to the pharmaceutical companies involved in 340B.

HRSA must refer drugmakers that overcharge 340B providers to the OIG for penalties. To date, HRSA has not made any referrals, according to Maxwell.

The lack of transparency financially hurts providers, Maxwell said. A 2005 report showed that 14% of all drug purchases by 340B providers in one month were over the mandated ceiling price, racking up an estimated $3.9 million in overcharges for June 2005 alone.

Republicans and Democrats both piled on to these points, with Democrats slamming the Trump administration for delaying the pricing regulation the same week it released its long-anticipated strategy to lower drug pricing.

Sen. Johnny Isakson (R-Ga.) suggested hospitals ought to be able to verify what they are supposed to pay manufacturers for 340B drugs. The committee's ranking Democrat, Patty Murray of Washington, blasted the administration's fifth delay of regulation on ceiling prices as sabotage of the program.

Sen. Susan Collins (R-Maine) spoke on behalf of the 25 340B hospitals in her state, 14 of which she said have negative operating margins. The rest depend on the 340B program to put their operating margins in the black. She reserved her ire for drugmakers and murky rebate systems.

"Once again we ran into lack of transparency," Collins said, referencing the hearing she chaired last week in the Senate Special Committee on Aging to examine the spike in insulin prices for patients. "There is a chart of middlemen including pharmacy benefit managers, insurers and distributors that are between manufacturers and patients. The rebates don't get passed on."

Maxwell and Draper both emphasized the need to clarify 340B's intent, which they described as ambiguous.

Maxwell also noted that the OIG will be monitoring how the recently implemented rule cutting 340B providers' Part B reimbursements by 22.5% affects hospitals and whether the subsequent redistribution of the 340B discounts will blunt the cuts in any way.

But some upcoming watchdog reports will continue to scrutinize the cottage industry that has sprung up around 340B providers, including third-party administrators and contract pharmacies.

Massive pharmacy benefit managers like Walgreens, CVS and Walmart have seen an explosion of business in the 340B space. According to analysis by consultant Adam Fein of the Drug Channel, Walgreens saw a 19% increase to almost 6,400 340B drug dispensing sites between 2013 and 2017. CVS expanded its 340B dispensing sites from just over 500 to more than 1,900 in the same span, a more than 280% increase. Walmart had a 137% increase in sites.

The GAO plans to look at the financial arrangements between contract pharmacies and 340B providers. Officials will also look at what portion of the 340B discounts are passed on to low-income patients and will also look at HRSA's oversight work and will dive into the audits of 340B providers.


Susannah Luthi

Susannah Luthi covers health policy and politics in Congress for Project Japan. Most recently, Luthi covered health reform and the Affordable Care Act exchanges for Inside Health Policy. She returned to journalism from a stint abroad exporting vanilla in Polynesia. She has a bachelor’s degree in Classics and journalism from Hillsdale College in Michigan and a master’s in professional writing from the University of Southern California.


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