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Hospital Drug Discount Program Under Lawmakers’ Microscope

House panel to examine legislation Wednesday

Department of Health and Human Services Secretary Alex Azar was to address a conference of hospitals participating in a drug discount program facing Congressional scrutiny. (Sarah Silbiger/CQ Roll Call file photo)
Department of Health and Human Services Secretary Alex Azar was to address a conference of hospitals participating in a drug discount program facing Congressional scrutiny. (Sarah Silbiger/CQ Roll Call file photo)

A House panel that has been scrutinizing hospitals’ use of a drug discount program will examine on Wednesday pieces of legislation that stem from members’ concerns over the discounts.

The Energy and Commerce Committee’s oversight panel has had two hearings in the past year on the program, known as 340B. The committee has requested information from hospitals that participate and in January published a report outlining ways the drug discount program could be better run.

On Wednesday, it will begin debating legislative proposals targeting 340B with the health subcommittee set to discuss as many as 15 bills, including eight newly-written draft measures.

The legislative debate comes alongside the Trump administration’s push to more strictly regulate the 340B program. Health and Human Services Secretary Alex Azar on Monday will address a conference of hospitals participating in the drug discount program. The administration has sought to limit federal payments to 340B hospitals and has suggested that Congress needs to grant it additional regulatory authority.

The 340B program allows hospitals that serve a certain threshold of low-income patients to purchase some drugs at a discount. Established in 1992, the program has grown to include roughly half of the nation’s hospitals, many of which joined after the 2010 health care law expanded eligibility.

The pharmaceutical industry argues the amount of discounts it gives hospitals — around $8 billion worth out of $320 billion in total U.S. sales in 2016 — has forced it to keep prices higher elsewhere in the health care system.

The hospitals buy drugs at a discount and can then provide them at low or no cost to patients who don’t have adequate insurance coverage. For insured patients, whether covered privately or by Medicare or Medicaid, hospitals can seek reimbursement at closer to a drug’s actual price. They are supposed to use the difference to help offset the cost of uncompensated care, which is around $50 billion a year.

The law isn’t explicit about what exactly hospitals have to spend that money on. But some lawmakers think savings derived from drug purchases and reimbursements should be passed along to patients actually getting the drugs.

“We support the 340B Program because it is critically important in its ability to help many safety net providers stretch resources to help provide care for more patients,” Energy and Commerce Chairman Greg Walden, R-Ore., and Health Subcommittee Chairman Michael C. Burgess, R-Texas, said in a statement in late June. “But with this program’s rapid expansion in recent years, many questions have arisen about the role of the program today.”

One of the new draft bills, introduced by Burgess, is aimed specifically at making sure discounts are passed along to low-income or uninsured patients. It would require hospitals to charge those patients no more than the hospital itself paid for the drug.

While the 340B debate doesn’t break down cleanly along party lines, Republicans tend to favor bills that would slow enrollment of new hospitals in the program or institute more requirements for them. Many of the measures the committee will consider Wednesday are along those lines.

A draft bill from Rep. Joe L.Barton, R-Texas, would alter the eligibility formula for 340B hospitals to require participants to serve an even greater threshold of low-income patients. In exchange, some of the hospitals and other providers that remain would enjoy a 5 percent greater discount on certain drugs.

Jeff Davis, a senior adviser at the law firm Baker Donelson who was previously with hospital advocacy group 340B Health, said the Barton bill “would likely remove from the 340B program a significant number of hospitals that treat high volumes of low-income patients and provide high levels of uncompensated and unreimbursed care.”

Another draft bill, from Rep. Chris Collins, R-N.Y., would create a definition of who counts as a patient for the purposes of 340B and would impact which drugs the hospitals could claim a discount on.

Such measures are likely to spark debate over whether Congress is pursuing policies that are in the best interest of patients or the pharmaceutical industry.

“Any narrowing of 340B eligibility to a smaller set of qualifying institutions would transfer the corresponding share of government payment for drugs from the hospital or the clinic to the manufacturer,” Allan J. Coukell and Sean Dickson of the Pew Charitable Trusts wrote in a May commentary for JAMA Internal Medicine.

The administration has asked for greater authority from lawmakers to set rules and regulations governing the 340B program, and some of the bills would take a step in that direction. A draft bill from Rep. Markwayne Mullin, R-Okla., would give the administration fairly broad powers to issue whatever regulations it sees fit.

Another bill from Collins would give HHS authority to collect a fee from hospitals to pay for extra staff to oversee the program. And a draft bill from Rep. Richard Hudson, R-N.C., would create a Senate-confirmed position to oversee the 340B program.

Other measures would create new requirements for 340B participants. One draft bill would require hospitals to report on how they spend the money they save because of the program, as well as the amount of uncompensated care they provide. Another bill would require 340B participants to be certified to conduct forensic exams for victims of sexual assaults.

A couple of bills the committee will discuss next week are also likely to have some bipartisan support.

Last year, the Trump administration cut the amount that Medicare would reimburse for certain drugs purchased with a 340B discount, so that Medicare would pay a rate closer to the discounted price. The move sparked concern from lawmakers in both parties. One of the bill under consideration Wednesday, led by West Virginia Republican David B. McKinley, would reverse that reimbursement rate cut.

Another measure would address yet another issue involving certain drugs used for conditions considered under-treated. Those medications, which are designated “orphan drugs,” aren’t eligible for a discount under the 340B program. But some drugs for fairly common conditions also have an approved “orphan” use for rare diseases.

The drug industry has successfully argued that no matter what the hospital is using the drug for, if it has a single orphan use, it shouldn’t be eligible for the discount. A bill  from Reps. Peter Welch, D-Vt., and Gregg Harper, R-Miss., would change that, so a hospital would pay full price when using an orphan drug for an orphan use but get a discount when using it for a more common condition.

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