WASHINGTON – Today, U.S. Senator Bill Cassidy, M.D. (R-LA), chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, released a report detailing findings from his years’ long investigation into how covered entities use and generate revenue from the 340B Drug Pricing Program. Cassidy also outlined potential reforms needed to improve the program to better serve patients.
“This investigation underscores that there are transparency and oversight concerns that prevent 340B discounts from translating to better access or lower costs for patients. Congress needs to act to bring much-needed reform to the 340B Program,” said Dr. Cassidy. “I look forward to continuing my efforts to bring transparency and improvements to the 340B Program.”
In 1992, Congress created the 340B Program to allow certain health care facilities or programs that serve low-income patients to purchase outpatient drugs at a discounted rate “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Drug manufacturers are required to provide these discounts as a condition of participation in the Medicaid Drug Rebate Program.
The 340B Program has grown considerably since its creation, reaching a record high of $66.3 billion in drug purchases in 2023. However, there are concerns about whether the 340B Program truly benefits low-income and uninsured patients, with some studies suggesting that the 340B benefit does not translate into increased care or lower costs for vulnerable populations.
As part of his investigation into the 340B Program, Cassidy requested information from hospitals, Federally Qualified Health Centers (FQHCs), contract pharmacies, and drug manufacturers to better understand how revenue flows throughout the 340B Program and how covered entities use 340B revenue to benefit patients. He found:
- Bon Secours Mercy Health and Cleveland Clinic, both hospital covered entities, generated hundreds of millions of dollars in 340B revenue, but do not pass 340B discounts directly to their patients. They also differ on how patients receive discounts on their 340B drugs. Additionally, these hospitals report using 340B revenue on “capital improvement projects” and “community benefit programs,” but do not account for what specific expenses 340B revenue goes towards.
- Sun River and Yakima Valley, both FQHC covered entities, generate significant revenue from the 340B Program with a few therapeutic drug classes accounting for a majority of this revenue. There are also differences in how these FQHCs utilize contract pharmacies and provide 340B drug discounts to patients.
- CVS Health and Walgreens charge covered entities a complex range of fees for using their pharmacy services to dispense 340B drugs to patients. They also charge additional administrative fees for Third Party Administrator (TPA) services. These fees, which generally increase each year, divert resources from the 340B Program’s intended purpose of allowing covered entities to use federal resources to benefit as many patients as possible. Covered entities argue that these rising fees make it increasingly challenging to deliver essential services and care to patients.
- Drug manufacturers report significantly increasing 340B sales to contract pharmacies compared to direct sales to hospitals and grantees. However, their data shows that manufacturers’ policies limiting the number of contract pharmacies that covered entities can use have not led to a meaningful decline in purchases of 340B drugs. Additionally, despite providing billions in discounts, drug manufacturers claim they have difficulty taking actions that ensure 340B Program integrity, such as preventing unlawful diversion to ineligible patients and duplicate discounts.
In light of these findings, Cassidy laid out potential reforms for Congress to improve transparency in the 340B Program and ensure vulnerable patients directly benefit from revenue created by discounted drugs:
- Require covered entities to provide detailed annual reporting on how 340B revenue is used to ensure direct savings for patients, providing a more transparent link between program savings and patient benefit.
- Address potential logistical challenges caused by increased administrative complexity, leading to burdens that may impede patient benefit from the program.
- Investigate the types of financial benefits contract pharmacies and TPAs receive for administering the 340B Program to ensure that increasing fees do not disadvantage covered entities and patients.
- Require transparency and data reporting for entities supporting participants in the 340B Program (i.e., contract pharmacies and TPAs).
- Provide clear guidelines to ensure that manufacturer discounts actually benefit 340B-eligible patients, including examining legislative changes to the definition of eligible patient and contract pharmacies’ use of the inventory replenishment model.
Read the full report here.
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