WASHINGTON — Lawmakers impatient with the lack of progress on a key health care issue — the long-debated need for changes to what’s known as the 340B drug pricing program — say they are closing in on legislation aimed at what they say are abuses in the program.

The program, established in 1992, requires drug companies to sell deeply discounted drugs to community health centers and hospitals that serve high numbers of low-income patients. These 340B providers spent $66 billion on discounted drugs in 2023.

During a Senate Health, Education, Labor and Pensions Committee hearing last week, senators of both parties discussed potential improvements to the program, which has raised costs for drug companies amid questions about whether it is meeting its designed purpose of serving low-income communities.

Drug companies and some lawmakers have argued that hospitals are increasingly taking advantage by using the drug savings to pad their bottom lines. Hospitals counter that the savings help them stretch limited federal resources.

“I’m frustrated,” Sen. Roger Marshall, R-Kan., said at the hearing. “Before we leave for Christmas, I hope that we have legislation passed through committee, marked up, and I think we’re real close on what that looks like. I think it’s time to quit thinking about it. … We absolutely know what we need to do here.”

Lawmakers argue the program incentivizes practices that drive up health care costs. A report released last month by the Congressional Budget Office found the program’s design encourages prescription of higher-cost drugs and promotes increased vertical integration among facilities.

When 340B hospitals acquire or open new outpatient clinics, such as infusion centers or specialty medicine practices, those clinics also become eligible for the program. Critics say the hospitals collect discounts on drugs offered at those clinics and then sell them at full price to insured patients.

“Our goal is to make health care more affordable, but 340B is making employer-sponsored insurance, which pays for the health care for 150 million people, less affordable,” Senate HELP Chair Bill Cassidy, R-La., said.

Hospitals question the data that leads to such conclusions.

“Opponents often suggest that it has grown ‘out of control’ and is not operating consistent with congressional intent. These accusations are not based on real evidence,” the American Hospital Association wrote in a statement to the HELP Committee, criticizing the CBO report. “These unsupported allegations about the growth and impact of the 340B program have become the basis for repeated attempts to scale back the program at the expense of Americans nationwide.”

Legislation

Congress has been debating an overhaul for several years, but action has stalled with the clash of powerful special interests — mainly hospitals and drugmakers.

“We must take steps to better understand how program savings are used and how that affects patients and communities without putting undue burden on providers,” said Sen. Tammy Baldwin, D-Wis., who is leading a working group focused on 340B. “We must also ensure that there is appropriate oversight of the program and that there are adequate resources to conduct this oversight.”

The working group released draft legislation last year aimed at changes to the program, which has been plagued by lawsuits arising from disagreements about the intent of the law among drug companies, pharmacies and providers.

One of the most significant parts of the draft would require drug companies to provide discounts to 340B providers that use contract pharmacies. Contract pharmacies are third-party entities that dispense drugs for 340B participants. Many drug companies have stopped providing discounts through contract pharmacies, decisions that are the subject of litigation still moving through the courts.

The draft legislation would clarify that drug companies must offer 340B discounts to participants regardless of whether the drugs are dispensed by a contract pharmacy. It would require 340B providers to annually register their contract pharmacy sites with the Department of Health and Human Services.

The draft also would require “child sites,” or off-site locations of 340B providers, be wholly owned, while also clinically and financially integrated with those providers. Those child sites would also need to be registered with the HHS secretary and meet other requirements.

The drafters of the legislation said they intend to add language defining what a 340B “patient” is in their final legislation, which has not yet been introduced.

Drug companies have argued some providers are diverting drugs and claiming discounts on people who shouldn’t be eligible for the program.

Cassidy said he will look at the draft and that he hopes to introduce legislation as well. He released a report in April calling for changes, particularly around hospitals not passing savings on to patients and the lack of transparency around contract pharmacies.

The hearing comes as the Trump administration proposes moving to a “rebate” model for the 340B program, which would require providers to pay for drugs up front at their regular price and then seek reimbursement from drug companies, instead of getting up-front discounts. Critics have said this approach would disadvantage smaller providers that can’t front the cost for more expensive drugs while waiting for reimbursement.

The voluntary pilot takes effect in January.

“I’ve heard from hospitals and community health centers across Wisconsin that a rebate model would be disruptive to their finances and threaten their ability to continue to provide their current level of care and services,” Baldwin said.

The pilot could increase pressure on Congress to pass 340B legislation after debating it for several years, said Darbin Wofford, deputy director of health care for Third Way’s economic program. But action is doubtful with Congress in the throes of a government shutdown.

“It’s unlikely we see movement for any 340B policy in Congress this year, but there are opportunities next year and in the following Congress,” Wofford said.

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