TAPP Calls on Congress to Reject 340B PATIENTS Act, Enact Real Reforms

Congresswoman Doris Matsui (D-CA) and Senator Peter Welch (D-VT) recently re-introduced a highly problematic bill called the 340B PATIENTS Act. The Trade Alliance to Promote Prosperity is encouraging Congress to reject the bill.

340B is a federal mandate, named after a section of the 1992 law containing it, which has grown by leaps and bounds in just the past few years.

Congress enacted Section 340B of the Public Health Service Act, created under Section 602 of the Veterans Health Care Act of 1992. Section 340B requires pharmaceutical manufacturers to enter into an agreement with the HHS Secretary in exchange for having their drugs covered by Medicaid and Medicare Part B. Under the agreement, the manufacturer provides front-end discounts on covered outpatient drugs purchased by specified providers, called covered entities, that serve the nation’s most vulnerable patient populations.

The “covered entities designation” includes six categories of hospitals: disproportionate share hospitals, children’s hospitals and cancer hospitals exempt from the Medicare prospective payment system, sole community hospitals, rural referral centers, and critical access hospitals. The idea was that these “Federally Qualified Health Centers” (FQHCs) could, in turn, provide the medicines to patients at a great discount. There was also some built-in overhead reimbursement to help covered entities cover the cost of charity care. 

The problem began as for-profit hospitals started purchasing 340B covered entities in order to gain access to 340B prices. The problem really exploded as those hospitals began contracting with multiple pharmacies that also received the 340B discount. Many of those pharmacies or hospitals turn around and charge Medicare & Medicaid and private insurance companies the full price for a medicine acquired at the 340B discount. 

Without a definition of a 340B patient or putting reasonable limits on the number of contract pharmacies (contract pharmacies are not mentioned in federal law), the program will continue to grow with no oversight.

While the law was meant to help low-income people afford their medicines, “The financial benefits of the 340B discounts are accruing almost entirely to hospitals, clinics, and physicians; and patients’ out-of-pocket costs and total cost of care are being increased,” according to a 2013 JAMA article. Indeed, the profit has become a major revenue source for for-profit healthcare providers.

State-by-state 340B expansion over the years has given more and more economic power to the already-monstrous, national chain pharmacies that have driven many local, mom-and-pop pharmacies out of business over the past several years. 

Instead of codifying all these problems into law, Congress should recognize that the 340B program needs to be reformed.

That’s why TAPP is calling on Congress to reject the 340B PATIENTS Act and instead pursue real reforms. These could include oversight and transparency so that hospitals and pharmacies must report exactly how much revenue they generate from the 340B program and exactly how much of that money is used to provide prescription drug discounts to patients like the original law intended. Congress should also define exactly who a 340B patient is and require that patients be notified if they are designated as 340B patients. This would be a good start.