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July 30, 2021

Legislation that 340B Providers and the Drug Industry Can Both Embrace

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

Imagine if there was a way to resolve two of the most intractable challenges in the 340B compliance program in one fell swoop: one that has a significant impact on the financial health of 340B providers, and another that affects the pharmaceutical industry’s bottom line? It may be hard to imagine, but there is now a bill in Congress that can be welcomed by both the 340B covered entity community and the drug industry.

One of the growing complaints that I have heard from 340B providers over the past decade is that the benefit of the program is being transferred from safety net hospitals, health centers and clinics to private payers. More and more commercial insurers are insisting on contract terms that require covered entities to accept reimbursement rates that can be significantly below the rates offered to non-340B providers and pharmacies, resulting in an indirect transfer of 340B savings from the covered entities to the insurance companies and pharmacy benefit managers. When these payers ratchet down reimbursement, it undercuts 340B’s intent “to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”

As Rep. Abigail Spanberger (D-VA), a rising star in Congress and in the 340B community, puts it: “the rising trend of 340B ‘pick-pocketing’ by third parties threatens to undermine these savings and put the financial security of patients and providers at risk. Congress did not intend for 340B savings to subsidize for-profit insurance companies and pharmacy benefit managers.”

Spanberger and long-time 340B champion Rep. David McKinley (R-WV) have introduced a bill that would prevent this discriminatory reimbursement. The Protect 340B Act (H.R. 4390) would also prohibit other discriminatory practices, including imposition of increased pharmacy fees, exclusion from PBM networks, interference with patient choice, and application of onerous claims reporting requirements. As long-time 340B advocates Peggy Tighe and Colleen Meiman point out, the bill builds on the momentum at the state level where sixteen states have passed various anti-discrimination bills since 2019. The federal bill also provides protection to 340B providers in the Medicare Parts C and D markets, which can’t be addressed at the state level.

Resolution of the Duplicate Discount Problem

Not only does the bill address discriminatory practices by the insurance industry, but it also tackles one of the biggest complaints of pharmaceutical manufacturers. Due to the intersection of the 340B program with the Medicaid drug rebate program and a lack of standardized Medicaid information, manufacturers sometimes end up providing an upfront discount to 340B covered entities and then a rebate to the Medicaid program on the same drug.

Pharmaceutical manufacturers are rightly concerned about exposure to two different discounts, particularly as the Medicaid rebate and 340B programs have grown in size. While there have been efforts over the years by the federal government, state Medicaid programs and third-party vendors to try to prevent duplicate discounts, the problem has not been resolved. Recent attempts by drug manufacturers requiring covered entities to submit contract pharmacy claims data to third-party vendors in order to access 340B discounts at contract pharmacies are viewed with caution by 340B providers, since the vendors are working on behalf of the drug industry.

The Protect 340B Act provides a solution. Under the legislation, HHS will be required to contract with a neutral third party to serve as a claims data clearinghouse that will protect drug manufacturers from giving Medicaid rebates and 340B discounts on the same drugs. The contractor will collect data on 340B drugs reimbursed by Medicaid to ensure that those claims are not included in states’ Medicaid rebate requests.

As Ryan White Clinics for 340B Access’s (RWC-340B) President Shannon Stephenson puts it: “It’s the right thing to do. Federal government oversight is necessary to ensure that manufacturers providing 340B discounts on drugs are not also paying state rebates on those drugs.” RWC-340B, state primary care associations and the National Association of Community Health Centers all played a key role in advocating for the bill’s introduction.

It’s no surprise that all of the national 340B provider organizations have endorsed the legislation. However, the Protect 340B Act has also received a warm welcome from state Medicaid directors, who are sometimes skeptical of 340B provider-supported initiatives. Hopefully, pharmaceutical manufacturers will also support this common-sense legislation and help get this through the finish line.


The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author(s). views are always subject to change, revision, and rethinking at any time and may not be held in perpetuity. For more information on the programs history and a digestable synopsis of the 340B program explained, visit our blog!

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