September 29, 2023
The Latest Trends Taking Aim at the 340B Program
The 340B program was created in 1992 to help eligible entities stretch limited federal resources and reach more vulnerable patients. Program participation has grown since the Affordable Care Act expanded its definition of eligible entities. Recent studies show the dramatic increase in the number of 340B contract pharmacy locations: 1,300 in 2010 to more than 33,000 in 2023; and how spending under the 340B program has grown by more than 340% since 2015. Because of this growth and the desire to increase their revenue, Pharmacy Benefit Managers (PBMs) and pharmaceutical manufacturers began enacting policies discriminating against 340B covered entities. This includes denying the 340B discounts to hospitals contracting with various pharmacies. Coupled with the increasing scrutiny on non-profit hospitals over community benefit spending, legislators are also questioning how hospitals are using their 340B savings and seeking changes to the program. All these issues have resulted in both federal and state legislators promoting legislation to reform the program or change how it is implemented.
340B Antidiscrimination Legislation
This month, the California state legislature unanimously passed a bill prohibiting PBMs from discriminating against 340B covered entities. Arkansas became the first state to address PBM discriminatory practices in 2015. Since the U.S. Supreme Court upheld the Arkansas law in 2020, the list of states which have passed such legislation has grown to 27 states – including Oregon, Ohio, Kentucky, Georgia, Illinois, and Maryland. The most-commonly prohibited practices under these laws include:
- Reimbursing 340B entities for drugs at a rate lower than the rate paid to non-340B entities.
- Imposing extra fees, chargebacks, or adjustments on 340B entities that are not equally imposed on non-340B entities.
- Excluding 340B entities from the PBM’s pharmacy network based on criteria not applied to non-340B entities.
- Requiring modifiers to identify that the drug is a 340B drug.
- Discriminating against a 340B entity in a manner that prevents or interferes with a patient’s choice to receive drugs from the 340B entity.
Arkansas, leading the way again, passed legislation in 2021 prohibiting pharmaceutical manufacturers from denying 340B drug pricing to 340B entities using contracted pharmacies. This law is seeing intense pushback from manufacturers; last week, a Federal Appeals Court heard arguments in the case brought against the state by PhRMA arguing that the law “trespassed on exclusively federal turf.” Even though it is expected the case will go before the U.S. Supreme Court, Louisiana enacted similar legislation in June of this year. Other states have introduced legislation targeting manufacturers, including California, but have seemingly chosen to wait and see how the Arkansas case plays out in the courts.
340B Hospital Transparency
PBMs and drug manufacturers are not the only ones facing heat in the 340B space. This year, amidst rising health care costs, hospitals are facing increasing scrutiny over community benefit spending and what they do with the savings they earn from the 340B program and their tax-exemptions. This has led to many states creating additional reporting requirements on 340B entities. Minnesota was the first state to enact new reporting requirements in May with Maine quickly following suit passing their version of the bill in June. The laws will require hospitals to submit reports detailing:
- How the hospital uses 340B program savings to benefit its community through programs and services funded by savings from the 340B program.
- Estimated annual savings from the 340B program by comparing acquisition price of 340B drugs to group purchasing organization pricing.
- The hospital’s 340B program savings compared to its total drug expenditure.
- The hospital’s internal review and oversight of the 340B program.
Indiana and Virginia introduced bills similar to those passed in Minnesota and Maine but failed to pass them. Connecticut included similar language in its PBM antidiscrimination bill, but the transparency reporting language was dropped from the final version passed this year.