Health Center Regulatory Issues, Uncategorized

New GAO Report on 340B Program

By Lidia Neiko, Regulatory Affairs Intern

On September 23, 2011, the Government Accountability Office (GAO) released the  Drug Pricing: Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement” report.  The 340B Drug Pricing Program (340B Program) provides covered entities with access to discounted prices on outpatient drugs, and it is overseen by the Health Resources and Services Administration (HRSA). The GAO research, mandated by the Patient Protection and Affordable Care Act (PPACA), addressed:

1) the revenue resulting from the 340B Program to covered entities,

2) the 340B Program utilization by covered entities,

3) the effect of drug distribution at 340B prices on access to covered drugs for both covered and non-340B providers, and

4) HRSA’s oversight of the 340B program.

First, the GAO reported that 45 percent of the covered entities it interviewed generated 340B revenue that exceeded drug-related costs (costs), which included the costs of purchasing and dispensing drugs. On the other hand, 34 percent reported that they did not
generate enough revenue to exceed costs, and 21 percent did not give enough information for GAO to determine if they did. The GAO interviewed 29 covered entities.

Second, the GAO found that regardless of revenue generated, all covered entities interviewed reported using the 340B Program consistently with its purpose, including to maintain services and lower medication costs for patients. Plus, those entities whose
revenue exceeded costs were able to also serve more patients and to provide

Third, according to the 61 340B Program stakeholders that the GAO interviewed, manufacturers’ distribution of drugs at 340B prices generally did not affect providers’ access to drugs. In fact, 59 percent of the stakeholders reported no effect on covered entities’ or non-340B provider access. The remaining 41 percent of stakeholders reported that access was affected in only two situations: 1) drugs were in inherently
limited supply, specifically the life saving intravenous immune globulin (IVIG),
and 2) a significant drop in a 340B price occurred, which increased the demand
for the drug. Of note, in situations of actual or anticipated drug shortages,
manufacturers may restrict distribution of drugs at 340B prices.  Stakeholders reported that such restriction helped to maintain equitable access for all providers. In case of IVIG, for example, this resulted in 340B hospitals purchasing some of the IVIG at higher,
non-340B prices.

Fourth, the GAO concluded that HRSA’s oversight of the 340B Program was inadequate to provide reasonable assurance of compliance with program requirements. According to the report, HRSA has been relying primarily on self-policing, while the agency’s guidance
on self-policing has lacked specificity to provide clear direction. Thus, the
GAO recommended for HRSA to strengthen oversight regarding program
participation and compliance with requirements. For example, the GAO specified
that HRSA did not periodically confirm eligibility for all covered entity types
through audits, which the GAO finds especially important in light of the
growing number of hospitals utilizing the 340B program while serving both 340B
and non-340B patients.