340B and an unsustainable status quo

Pharma professionals are concerned about current uncertainty around the administration’s intentions for a 35-year-old program gone awry

As the upcoming Medicaid Drug Rebate Program (MDRP) Summit gears up for fall, one significant development looming over 340B is the potential transfer of the Office of Pharmacy Affairs (OPA) to the Centers for Medicare and Medicaid Services (CMS), as proposed in the president’s budget.

“From my perspective, what’s keeping me up at night is the uncertainty of what’s going to happen in the government,” Cathy Burton-Meza, associate director, government rebates at Gilead Sciences, told Access Insider. “There’s a lot of discussion right now that the Office of Pharmacy Affairs will roll under CMS at some point. I see a lot of pros and a lot of cons to it.” Cathy Burton-Meza, associate director, government rebates at Gilead Sciences

Outside of this overarching issue lies a 35-year history from the creation of the MDRP, and establishment of the 340B Drug Pricing Program in 1992. Then, as now, it requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations and covered entities at significantly reduced prices. The intention was to create a safety-net for hospitals to provide low-income individuals who have limited or no health insurance access to needed medications. The money that hospitals saved was to be reinvested in services for the financially marginalized.

Since then, the program has been largely left alone, with two expansions in 2003 and 2005 to allow more rural and small urban hospitals, and free-standing children’s hospitals eligible as covered entities. In 2015, an overhaul to 340B was submitted by the Health Resources and Service Administration (HRSA), but nothing ever came of it. Burton-Meza concluded it fell victim to the circular government operation process of OPA to Office of Management and Budget and back again, with no legislation or actionable direction.

“The statute was written in 1992 when we didn’t have a lot of the technology we have today,” Burton-Meza pointed out. “Technology has been great in advancing a lot of things, but this program hasn’t kept up with the technology that’s available.”

The time is right for an intervention

Besides the technology stagnation and the lack of meaningful change, the program has grown in scope and unchecked by incredible numbers; PhRMA lists these as:

• Three-fifths of all U.S. hospitals participate in the 340B program, totaling nearly 3,000 hospitals
• Those hospitals have a significant number of contracts with pharmacies to dispense 340B medicines
• There are more than 205,000 contract pharmacy arrangements
• Total discounted purchases through 340B reached $54 billion in 2022, representing a 22% increase in just one year as compared to 2021
• 340B is now the second-largest federal prescription drug program, surpassing Medicare Part B and Medicaid

Outside of these numbers is a lot of finger-pointing and blame to go around, but the bottom line for pharma is the program’s rapid expansion with little or no oversight has impacted their costs and revenue, in addition to the costs of duplicate discounts. Duplicate discounts occur when both a 340B discount and Medicaid drug rebate are applied to the same claim. For 2021, IQVIA noted duplicate discounts accounted for about one-quarter of total 340B drug sales, representing approximately $20 billion–$25 billion.

Duplicate discounting is high on the list for pharma to address through litigation. With no other avenues currently available for relief, these costly but apparently necessary approaches address concerns about duplicate discounting and program integrity. J&J is suing HRSA over its right to verify 340B claims are actually purchased and dispensed by a 340B entity.

Cathy Burton-Meza will be speaking at MDRP in September.

Header image: Depositphones@volodymyr.martyn