Lawmakers look to step up oversight on discount drug program

Greg Nash

House Republicans are demanding more oversight and transparency for a discount drug program they say has grown out of control in recent years.

The 340B drug program, created to help rural and charity hospitals and clinics, has become the subject of intense scrutiny in recent years, with more than 12,000 entities now participating in the multibillion-dollar program, far more than when the program was created in 1992.

340B requires drug companies to sell some drugs at steep discounts to hospitals and clinics that serve large numbers of low-income patients. Medicare then reimburses those hospitals at a higher rate than what they paid, allowing them to keep the difference and pay for expanded services for patients.

Following a two-year review by the House Energy and Commerce Committee, Chairman Greg Walden (R-Ore.) told reporters Tuesday that Republicans will push for substantial changes to bring what they argue is much-needed transparency and oversight to 340B, namely by expanding the federal government’s authority over the program.


“We understand this is a very important program in many of our communities. It does amazing work and helps a vulnerable population,” Walden said.

“But clearly when you have this many participants and a growth rate at the pace it’s on, the lack of audits, the lack of transparency, the lack of accountability and the lack of consistent reporting, it’s time for Congress to do its job and step up and give definition, transparency and accountability to the 340B program.”

Walden said the committee’s review found that participating hospitals and clinics aren’t required to track how much they’re saving through the program or how they’re using the money. The federal government also has limited authority to ensure participating hospitals are following the rules of the program, he said.

“There’s no clear definition of what they should do with this money. I think that needs to be fixed,” Walden said.

The panel’s report recommends that Congress give the Health Resources and Services Administration (HRSA) the authority to “adequately administer and oversee the program,” including the ability to monitor and track program use and ensure that low-income and uninsured patients directly benefit from the 340B program.

The report also recommends Congress equip HRSA with more resources and staff so it can conduct more rigorous oversight.

Congress should also establish a way to monitor the level of charity care provided by the participating hospitals and clinics, the report says.

Drug companies have long pushed for changes to the program, arguing that it has grown out of control in recent years and that hospitals use the savings to pad their profits, not to help low-income patients. 

“The Committee’s new report reaffirms much of what has been raised in recent years by independent economists, [the Government Accountability Office] and [the Office of Inspector General] who have looked at the program and determined that 340B and its perverse incentives are distorting the entire health care marketplace and, ultimately, contributing to higher costs for patients. We look forward to reviewing the report more closely and working with the Committee on next steps,” The Pharmaceutical Research and Manufacturers of America said in a statement Wednesday.

Hospitals were already dealt a blow earlier this month when a rule from the Trump administration cutting funds to entities participating in 340B went into effect.

The rule reduces the Medicare reimbursement rate for participating hospitals, which will result in about $1.6 billion in cuts to the program.

The American Hospital Association, the Association of American Medical Colleges and America’s Essential Hospitals have sued the Trump administration over the cuts.

The case was dismissed because the case was filed before the cuts took effect, but the groups plan to appeal, noting that the judge didn’t rule on the merits of the case.

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