PhRMA urges HRSA not to impede new 340B pricing approaches to improve transparency and integrity

In a letter submitted to the Health Resources and Services Administration (HRSA) last week, PhRMA expressed serious concerns regarding the agency's recent public statements about use of rebates to offer 340B ceiling prices to covered entities. PhRMA's letter detailed persistent abuses and instances of some covered entities breaking the law in the 340B drug pricing program - and how the 340B statute contemplates manufacturers implementing alternative approaches to providing 340B prices that increase transparency and improve program integrity. Our letter to HRSA outlines the following:

As the 340B program continues to balloon in size, the Department of Health and Human Services (HHS) has not taken necessary action to prevent statutory 340B/Medicaid duplicate discount violations.

• 340B is the second largest federal prescription drug program, behind only Medicare Part D. Nearly 60% of all hospitals participate in 340B. The program's unrestrained growth has exacerbated program integrity challenges, and HRSA's oversight has not kept pace. For example, HRSA has failed to ensure that manufacturers have access to even basic information about their medicines on which 340B pricing is requested. Covered entities have also resisted this transparency, including efforts to require covered entities to report how much money they are making from the program.
• Government watchdogs like the Government Accountability Office and HHS Office of Inspector General have repeatedly highlighted the pervasive issue of 340B/Medicaid "duplicate discount" violations. This is when covered entities, such as hospitals, purchase a drug at the discounted 340B price while the drug also generates a Medicaid rebate. Duplicate discounts are an absolute prohibition under the law, but the issue has gone largely unaddressed. Worse, new requirements under the Inflation Reduction Act (IRA) would actually increase duplicate discount risks.
• HRSA's own covered entity audits suggest a concerning trend of non-compliance. However, when audits find program violations, they almost never result in penalties. It has also become more common for covered entities to try to thwart manufacturer audits by refusing to cooperate or even suing HRSA to try to stop the audits. Covered entities' resistance to transparency on the front end while simultaneously resisting audits to remedy non-compliance on the back end highlights the need for a new approach.

Manufacturers want to make sure the requirements in the 340B law are met, and rebates are a common-sense approach used in numerous other federal health care programs.

• When the 340B program was first created in 1992, U.S. health care looked very different than it does today. 340B must be modernized to reflect the realities of our current health system. To that end, manufacturers are working to address long-standing program violations and bring 340B in line with new policies like the IRA.
• One possible approach is implementing a rebate model, which would provide manufacturers with information about 340B purchases before providing discounted pricing, thereby preventing program violations in the first place. Rebates are a common form of discount used in many other federal health care programs and would help improve integrity and transparency in 340B.
• Rebates are explicitly mentioned in the 340B statute as a possible mechanism for offering reduced pricing to covered entities. Given the well-documented history of program violations, it would be wrong for HRSA to reject a rebate model without considering the increased transparency and program integrity improvements such a model could offer.

The profits covered entities generate through the 340B program should be used to help low-income, uninsured and other vulnerable patient populations access affordable medicines. Instead, the inadequacy of procedures to prevent duplicate discounts, along with other abuses in the system are enabling large, for-profit corporations to line their own pockets, raising costs for patients, employers and the government. It's past time to get 340B back on track and working for patients.

Read the full letter.