Congress Holds Subcommittee Hearing on 340B Program; Legislative Action Likely

The Oversight and Investigations Subcommittee of the House Energy and Commerce Committee convened a hearing today titled “Examining HRSA’s Oversight of the 340B Drug Pricing Program.”[1]  Hearing testimony and witness questioning focused heavily on transparency in the use of 340B program savings to benefit underserved patient populations, clarity in program requirements, and the integrity of the program.  Many representatives from both sides of the aisle expressed support for the 340B program, but supported legislative changes that would give the Health Resources and Services Administration (HRSA) regulatory authority to act on their concerns.

Captain Krista Pedley,[2] Director of HRSA’s Office of Pharmacy Affairs (OPA), was invited to testify alongside Debra Draper[3] from the Government Accountability Office (GAO) and Erin Bliss[4] from the Office of the Inspector General (OIG).  The witnesses gave statements regarding their own perspective on the 340B program and program integrity.  Captain Pedley focused on OPA’s accomplishments in recent years, including substantial audits.  Ms. Draper focused on recommendations made by GAO in 2011, to clarify non-profit hospital eligibility requirements and to clarify the patient definition.  Ms. Bliss expressed concerns regarding the lack of transparency in 340B ceiling prices, the use of 340B drugs when billing Medicaid, the patient definition, and whether 340B providers must offer discounts to uninsured patients.

With respect to transparency, members peppered Captain Pedley with questions regarding HRSA’s insight into how covered entities, and particularly hospitals, use their 340B savings.  Repeatedly, Captain Pedley said that the statute does not require reporting on savings or for savings to be used in a particular way.  The questioners seemed to be very interested in establishing reporting requirements.  Some expressed support for establishing requirements for how covered entities use their 340B savings for patients.

A few participants cited high levels of non-compliance detected in HRSA’s audits of covered entities, and asked what can be done to improve program integrity.  Some, including Energy and Commerce Committee Chairman Walden (R-OR), expressed concern that only a small percentage of covered entities could be expected to be audited in a given year at the current rate.  Many noted that program requirements are not clear, and that stakeholders disagree on what compliance actually means.  The patient definition, in particular, was cited as an area for concern.

On the common themes of transparency, integrity, and clarity, members described regulatory authority as a possible solution.  At least two members expressed an eagerness to grant HRSA the regulatory authority it needs to establish legally binding requirements, including Rep. Buddy Carter (R-GA), a pharmacist by trade, who told Captain Pedley she could “count on it.”  Rep. Collins (R-NY), also requested specific language from Captain Pedley.  Rep. Castor (D-FL), expressed some concern that HRSA might pursue some of the policies that appeared in the aborted 2015 omnibus guidance if it were given regulatory authority.

Individual members raised additional concerns.  Multiple members were critical of the Centers for Medicare and Medicaid (CMS) proposal to dramatically slash Medicare Part B reimbursement for 340B drugs, though Rep. Carter supported it.  Other expressed concerns with contract pharmacies, including oversight, growth, and whether pharmacies were sharing in 340B savings.  Many voiced concerns, typically in the context of oncologists, that hospitals are acquiring physician practices in order to take advantage of 340B discounts on higher cost drugs.  Rep. Griffith (R-VA) questioned whether the disproportionate share hospital adjustment percentage is a proper criterion for hospital eligibility.  Rep. Costello (R-PA) asked what authority would be needed to permit HRSA to share 340B ceiling price information with state Medicaid agencies.

The subcommittee was universally in support of the 340B program in general, and acknowledged that it is a critical tool for safety net providers.  Some representatives, including notably Reps. Castor (D-FL), DeGette (D-IL), Ruiz (D-CA) and Welch (D-VT), spoke strongly in support of the 340B program.  Rep. Welch, who has sponsored legislation to limit the application of the 340B statute’s orphan drug application on rural hospitals, was particularly concerned with changes that would reduce program benefits for rural hospitals.  Rep. Collins (R-NY), who has been critical of the 340B program, expressed strong support for grantee covered entities (a category which includes community health centers, hemophilia treatment centers, and Ryan White HIV/AIDS clinics).  Reps. Ruiz (D-CA) and Castor (D-FL) questioned whether enough attention is being paid to manufacturers, and Rep. Clarke asked when the 340B ceiling price verification tool will be available to covered entities.

The hearing is the latest sign that Congress intends to pursue legislative changes to the 340B program.  On June 1, 2017, the subcommittee sent a detailed information request to HRSA (which HRSA apparently responded to prior to today’s hearing).[5]  HRSA’s budget request explicitly requested regulatory authority, and indicated that HRSA would work with Congress to develop legislation to improve integrity and ensure that program savings benefit patients.[6]  With the support of the leadership of the Energy and Commerce Committee leadership, such legislation would likely have significant traction.

For more information, if you are interested in commenting on the proposed rule, or if you have any questions regarding this topic, please contact Michael Glomb at mglomb@ftlf.com or the Feldesman Tucker Leifer Fidell LLP attorney with whom you regularly work.

[1] The full hearing can be viewed at https://www.youtube.com/watch?v=o6zX-M5kLLE.

[2] Statement of Capt. Pedley (July 18, 2017), at http://docs.house.gov/meetings/IF/IF02/20170718/106269/HHRG-115-IF02-Wstate-PedleyK-20170718.pdf.

[3] Statement of Ms. Draper (July 18, 2017), at http://docs.house.gov/meetings/IF/IF02/20170718/106269/HHRG-115-IF02-Wstate-DraperD-20170718.pdf.

[4] Statement of Ms. Bliss (July 18, 2017), at http://docs.house.gov/meetings/IF/IF02/20170718/106269/HHRG-115-IF02-Wstate-DraperD-20170718.pdf.

[5] Letter from Chairmen Walden, Murphy and Burgess to HRSA Administrator George Sigounas (July 1, 2017), at https://energycommerce.house.gov/sites/republicans.
energycommerce.house.gov/files/documents/20170601HRSA.pdf.

[6] Department of Health and Human Services, Justification of Estimates for Appropriations Committees (Fiscal Year 2018), page 246, at https://www.hrsa.gov/about/budget/budgetjustification2018.pdf.