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December 09, 2022

After a Lull in Action, Expect 340B to Be Under the Microscope in the Next Congress

Ted Slafsky
Founder and Principal of Wexford Solutions, Publisher, 340B Report

Political pundits and others in Washington, D.C. should be thankful that betting on U.S. elections is illegal. Otherwise, there would have been a lot of money lost on the Congressional midterm races where the expected “red wave” never materialized. History shows the president’s party almost always loses seats in the midterm elections. This is particularly true when a president has an approval rating in the low 40s and the country is grappling with record inflation and supply chain challenges. Instead, President Biden and his Democrat colleagues will continue to control the Senate. In the House, most observers were expecting significant gains for the GOP that would result in a comfortable governing margin for the Republican leadership. Instead, presumed GOP House Speaker Kevin McCarthy is scrambling to cobble together enough support in a caucus that may only have a margin of either four or five members.

Nonetheless, a win is a win and the GOP will control the agenda in the House. This means different leaders and different priorities than we have seen over the past four years of Democratic control. As a result, you can expect a significant change in posture when it comes to the 340B program. The key committee to keep an eye on is the House Energy and Commerce (E&C) Committee which has jurisdiction over the 340B program.

Keep an Eye on GOP-Led Energy and Commerce Committee

The last time Republicans controlled the committee from 2016 to 2018, it held numerous hearings on the program and considered—but did not pass—over a dozen GOP-sponsored bills that would have changed 340B to the benefit of drug manufacturers. Some GOP committee members pushed back at the restrictions and even advocated for legislation promoted by 340B providers, therefore scuttling plans to bring the bills to the floor for a vote.  

Nonetheless, the efforts culminated in a January 2018 report by the E&C GOP Committee majority which called for legislative action to clarify the intent of the 340B program and to impose new parameters on program use.

In contrast, during the last four years of Democratic control, the E&C Committee has not held one hearing on the 340B program and there has been little in the way of 340B legislation introduced or debated in the lower chamber with the exception of the 340B provider friendly Protect 340B Act.

Rep. Cathy McMorris Rodgers (R-Wash.) will be the new chair of the E&C Committee. She was considered a covered entity ally during her early years in Congress. But as she rose in the House Republican leadership ranks, she spoke less publicly about 340B and her position on the program today is not as clear.  

McMorris Rodgers, along with Sen. Richard Burr (R-N.C.), ranking Republican on the Senate Health, Labor and Pensions (HELP) Committee, recently requested a Government Accountability Office study about the March 2022 law that enables hospitals to maintain or regain their 340B eligibility despite having fallen below the minimum required Medicare disproportionate share (DSH) adjustment percentage due to COVID-related changes in patient mix.

As part of the GAO study, the watchdog agency wants to know if 340B hospitals give low-income uninsured patients a break on drug prices at their contract and in-house pharmacies.

Scrutiny Over Drug Industry Also to Increase

At the same time, you can expect scrutiny of the drug industry’s efforts to restrict access to 340B pricing in the contract pharmacy setting to receive increased scrutiny. Lawmakers from both parties are increasingly frustrated by a lack of action by HHS to stop the restrictions and impose steep fines on the 18 drug manufacturers who have defied the government’s demand to cease and desist. This includes a bipartisan group of 181 House lawmakers who have been prodding the administration to step up their efforts. HHS Secretary Xavier Becerra has told the lawmakers that his department is doing all it can with the tools it has to address the pricing denials and that Congress needs to give the agency broad regulatory authority. 

Meanwhile in the Senate, the Senate HELP Committee, which has jurisdiction over the 340B program will be under new leadership. Sen. Bernie Sanders (I-Vt.) will be chairing the committee and Sen. Bill Cassidy (R-La.) will be the committee’s ranking Republican member. Sanders is a well-known critic of the pharmaceutical industry and will use his new committee perch to shine a light on what he considers to be the outrageous cost of drugs including the high prices for insulin.

In September 2020, he signed a Senate Democratic letter to Pharmaceutical Research and Manufacturers of America’s (PhRMA) President expressing “deep concern” over drug manufacturers’ denials or impositions of conditions on 340B pricing on drugs dispensed by contract pharmacies. Don’t be surprised to see pharmaceutical executives called up to testify regarding their actions on contract pharmacy program. 

When it comes to drug pricing, Sanders and Cassidy are polar opposites. While Sanders has been advocating for allowing the government to negotiate drug prices since his early days in the House, Cassidy supports a free-market health care system and is considered a very close ally of the pharmaceutical industry. Cassidy, a gastroenterologist, has been a consistent critic of 340B program growth and has introduced legislation to narrow its scope. 

Cassidy's most recent 340B bill, introduced in 2018, would impose a two-year moratorium on new disproportionate share hospital and child site registration in 340B. His bill also would have made it harder for DSH and children’s hospitals to register child sites after the moratorium, and would have required both types of hospitals to report their total revenues from 340B drugs, their patient mix broken down by payment source and child site, charity care expenses by child site, percentage of revenues at the child site level derived from infused or injected drugs, and all of the hospitals’ 340B vendors.

Cassidy also sparred with government officials and 340B provider advocates during a 2018 Senate HELP Committee hearing on the program. If the HELP Committee holds hearings on 340B, you can expect fireworks as neither Sanders nor Cassidy will withhold punches.

End of the Impasse?

As the contract pharmacy standoff reaches the 2 ½ year mark, 340B providers are increasingly frustrated and there is growing concern that the courts will not be resolving the matter expeditiously. They are also taking heed of the Sec. Becerra’s argument that Congress needs to intervene. I would not be surprised to see a serious bipartisan effort at ending the contract pharmacy impasse in the coming months. If that occurs, all parties, particularly drug manufacturers and hospitals, will need to be prepared to make concessions. 

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The views and opinions expressed in this blog are those of the authors. They do not necessarily reflect the official policy or position of any other agency, organization, employer, or company. Assumptions made in the analysis do not reflect the position of any entity other than the author(s). These views are always subject to change, revision, and rethinking at any time and may not be held in perpetuity.