The federal government’s 340B Drug Pricing Program has had its critics from the very start. Among those critics are pharmaceutical companies who insist that the program needlessly cuts into their profits while simultaneously enriching healthcare providers. Their accusations may not be entirely accurate, but a recently released study suggests they might have a fairly strong case on some of their points.

The study in question was published by the JAMA Health Forum in late November. Researchers reviewed some 900 documents along with databases maintained by a variety of organizations including the Government Accountability Office (GAO) and the National Bureau of Economic Research (NBER). What they discovered is compelling evidence that not every covered entity in the 340B program is following the rules.

The Purpose of 340B

Congress launched the 340B Drug Pricing Program back in the 1990s. Its original intent was to help healthcare providers whose services covered a disproportionate number of low-income individuals stretch their budgets further by giving them access to deeply discounted prescription medications. Discounts can be as high as 50% compared to retail.

At its inception, the program enrolled about 1,000 healthcare providers, also known as covered entities. The total number of covered entities enrolled in 2020 eclipsed 50,000. Critics point out that enrollment should not be so high for what amounts to a subsidy program targeting disproportionate care hospitals.

What the Study Revealed

Whether or not 50,000 is too many program enrollees, what the study revealed gives weight to critic accusations. While researchers concluded that some covered entities are using their savings to expand healthcare services to underserved populations, others are not.

The data seems to indicate that a certain number of covered entities are using their savings to open new facilities in higher income areas. They are also acquiring private practices and investing in other patient care opportunities unrelated to the purposes and mission of 340B.

Most troubling is the discovery that some covered entities are reselling discounted drugs in direct violation of program rules. What makes all this possible? A lack of transparency and reporting requirements. Covered entities are responsible for a certain amount of annual reporting, but it is minimal.

Auditing Covered Entities

The government relies on annual audits to ensure that covered entities maintain compliance. Audits can be conducted by either government agents or pharmaceutical companies. To prepare, covered entities often bring in organizations like Ravin Consultants to conduct 340B mock audits. A well-executed mock audit can reveal deficiencies that can be corrected prior to a real audit taking place.

Audits are good and necessary. However, critics say they are not enough to prevent program abuse. Pharmaceutical companies and others opposed to the program are now calling on Congress to overhaul 340B completely. It might actually happen within the next year or two.

Certain members of both the House and Senate are investigating complaints of program abuse. The assumption is that new legislation will be forthcoming once those investigations are complete. The only question is this: will the legislation be an overhaul, or will it bring the program to an end?

The Evidence Is Compelling

340B proponents insist that pharmaceutical companies are only opposed to the program because it cuts into their profits. They say the drastic changes could have profound impacts on healthcare services for the indigent. Nonetheless, the evidence suggesting widespread program abuse is compelling.

We will have to wait to find out where the current Congressional investigations lead. If it turns out that critics are right, there seems to be no other choice but to overhaul or abandon 340B.