The intent of the program is to allow covered entities to "stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.
[2][7] Congressional hearings in 1992 found that failing to exempt these voluntary discounts under the Medicaid Drug Rebate Program caused prices to rise "dramatically" for such facilities.
[8] This law requires pharmaceutical manufacturers participating in the Medicaid program to enter into a second agreement with the Secretary of HHS—called a pharmaceutical pricing agreement (PPA)—under which the manufacturer agrees to provide statutorily specified discounts on "covered outpatient drugs" purchased by government-supported facilities, known as covered entities, that are expected to serve the nation's most vulnerable patient populations.
In 2012, the Health Resources and Services Administration (HRSA) began requiring hospitals to register all offsite facilities using 340B drugs.
[6][22] These policies and procedures are supposed to include internal controls that provide reasonable assurance that an agency has effective and efficient operations and that program participants are in compliance with applicable laws and regulations.
Once enrolled, covered entities are assigned a 340B identification number that vendors must verify before allowing an organization to purchase discounted drugs.
[16] In 2005, Congress expanded the program under the Deficit Reduction Act to make certain free standing children's hospitals eligible.
[34] Individuals are considered "patients" if: In 2007, HRSA stated that "some 340B covered entities may have interpreted the definition too broadly, resulting in the potential for diversion of medications purchased under the 340B program.
The covered entities reviewed in the study reported different methods of identifying 340B eligible prescriptions to prevent diversion in their contract pharmacy arrangements.
Most covered entities in the study prevent duplicate discounts by not dispensing 340B purchased drugs to Medicaid beneficiaries through their contract pharmacies.
However, some covered entities that do dispense 340B purchased drugs to Medicaid beneficiaries through their contract pharmacies did not report a method to avoid duplicate discounts.
For example, all covered entities reported that program participation allowed them to maintain services and lower medication costs for patients.
Moreover, GAO said the 340B program has increasingly been used in settings, such as hospitals, where the risk of improper purchase of 340B drugs is greater, in part because they serve both 340B and non-340B eligible patients.
The 2010 changes allowing unlimited outside contract pharmacies to distribute 340B discounted medications were also seen by GAO as a specific source of heightened concern for HRSA's inadequate oversight.
[44] Findings: (1) Approximately half of states have written 340B policies that direct covered entities to bill Medicaid at cost for 340B-purchased drugs.
(3) Over half of states developed alternatives to OPA's Medicaid Exclusion File to identify 340B claims and prevent duplicate discounts.
[45] Objective: To determine (1) whether five manufacturers of 11 prescription drugs sold them to 340B covered entities using the correct Medicaid rebate amount; and (2) the extent of any overcharges.
[47] The study, conducted by the healthcare economics and policy consulting firm Dobson DaVanzo & Associates, set out to determine the extent to which disproportionate share (DSH) hospitals enrolled in the 340B drug pricing program focus their services on vulnerable patient populations.
Oregon is weighing whether to require these health centers to hand over essentially all of their savings on 340B drugs provided to Medicaid beneficiaries.
A new analysis published in 2014 indicates that a substantial portion of hospitals enrolled in the 340B program provide only a minimal amount of charity care; as such, they may not be fulfilling Congress' expectations.
[50] The study, compiled from newly available public data noted that the 340B drug discount program was designed by Congress to help safety net providers improve access to prescription medicines for uninsured, vulnerable patients in the outpatient hospital setting.
Specifically, the new research shows: Currently, hospitals that qualify for the program claim 340B discounts for most outpatient prescription drugs, for both insured and uninsured patients.
And while the 340B program lowers outpatient drug costs for qualifying hospitals on the presumption that it will help significant numbers of vulnerable, uninsured patients, participating hospitals currently see no restrictions on the way they spend the revenue generated if they charge both insured and uninsured patients higher prices than the 340B-discounted price.
This stands in contrast to many other covered entities that participate in the 340B program as a result of a specific grant (often referred to as "grantees") from the U.S. Department of Health and Human Services.
Today, one-third of all hospitals in the country participate in the 340B program and get 340B discounts; that number is expected to grow, particularly absent an effort to tighten eligibility requirements.
This report goes a step further by suggesting that many hospitals don't deserve to be in the program based on a narrow and misleading interpretation of care to needy patients.
The Alliance for Integrity and Reform of 340B report found that some hospitals enrolled in the 340B Drug Pricing Program provided only a minimal amount of charity care.
In a September 28, 2012 letter to the Carolinas Medical Center Senator Grassley stated: "The intent and design of the [340B] program is to help lower outpatient drug prices for the uninsured.
[60] The report calls for a number of reforms to modernize the program, including more pricing transparency to ensure that health care providers are not being overcharged, audits of drug manufacturers, as well as a look at the use of contract pharmacies to determine whether the program is helping vulnerable patients better access prescription medications and pharmacy care.
In fact, it is very likely that some version of these programs will be needed for the foreseeable future because, under the best-case scenario, the ACA will still leave millions without adequate coverage.