The President’s Budget and Congress Target 340B Program Reform Legislation

Since the new administration began in January, federal 340B drug discount program (340B program) stakeholders and covered entities have been looking for signals regarding the direction of the program.  Recently, members of Congress and the Trump Administration have shown renewed interest in the 340B program. Representative Chris Collins (R-NY) indicated that he is developing legislation that would alter the 340B program.  Days ago, HRSA released its fiscal year 2018 budget justification, which also indicated that 340B legislation is forthcoming.

340B Reform Legislation Described by Two Members of Congress

On May 2, Representative Chris Collins addressed an annual summit of 340B program critics hosted by the Alliance for Integrity and Reform of 340B (AIR-340B) in Washington, D.C.  According to one report, Rep. Collins said that he plans to introduce legislation to change aspects of the 340B program, including which patients qualify to receive 340B drugs, which provider facilities qualify to participate in the program, and how certain hospitals qualify to participate in the program.[1]

Rep. Collins may have the right connections in Congress for his 340B reform legislation gain traction. He serves on the Energy and Commerce Committee in the House of Representatives, which has jurisdiction over the 340B program.  According to the report, Rep. Collins indicated that he has assurances that the committee’s leadership will consider his bill.  Senator Bill Cassidy (R-LA), who also addressed the summit, indicated that he too is working on drug pricing legislation that might address the 340B program.

HRSA’s Budget Justification

This week, HRSA issued its fiscal year budget justification for the Office of Pharmacy Affairs (OPA), which oversees and administers the 340B program.  Within the budget justification, which does not request any additional funding in fiscal year 2018, HRSA indicated that “HHS will work with Congress to develop a legislative proposal to improve 340B Program integrity and ensure that the benefits derived from participation in the program are used to benefit patients, especially low-income and uninsured populations. This proposal would provide regulatory authority.”[2]

The second sentence of the budget justification is nothing new. HRSA has made its desire for regulatory authority over the 340B program known since the Pharmaceutical Research and Manufacturer of America (PhRMA) successfully challenged the agency’s authority to promulgate regulations in 2014.  As a result of that litigation, a federal court determined that HRSA lacks statutory authority to promulgate regulations governing the conduct of the 340B program, except in three narrow areas.[3]  Instead, HRSA can only issue non-binding guidance that indicates how it interprets the 340B statute.[4]

The remainder of the statement raises significant questions.  Congress created the 340B program to enable safety net providers “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”[5]  The program is designed to reduce drug expenditures for safety net providers so that they can better allocate their limited resources to provide services to their patients in the manner that, in the provider’s judgment, best benefits its patients.  The budget justification language implies that legislation being developed by HRSA might impose new restrictions or requirements on how covered entities use their savings to benefit their patient populations.  HRSA will be challenged to develop standards that work for the full spectrum of covered entities that participate in the 340B program, and the extremely different environments in which they operate (e.g., rural versus urban).

For more information about 340B issues, contact Jason Reddish or Michael Glomb.  Follow us on Twitter and Facebook for more updates.

[1] 340B Health, 340B Legislation Update (May 15, 2017) (citing RPM Report), at http://www.340bhealth.org/news/340b-legislation-update/ (last visited May 23, 2017).

[2] HHS, HRSA, Justification of Estimates for Appropriations Committees, pp. 244-47 (May 2018).

[3] Pharm. Research & Mfrs. of Am. v. U.S. Dep’t of Health & Human Servs., 43 F.Supp.3d 28, 42-45 (D.D.C.2014).

^[4] Id.

^[5] H.R. Rep. 102-384(II), at 12 (1992).