The Government Accountability Office (the audit, evaluation, and investigative arm of Congress) examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. As part of their mandate, they monitor and review the 340B drug discount program to determine if there are any issues with integrity and oversight and offer recommendations for greater compliance. In 2011, the GAO gave specific recommendations for HRSA. How much has been done and what is next for the 340B program?
Since 2012, the number of Covered Entities (CE’s) in the 340B program has doubled to approximately 38,000 entities and the number of contract pharmacies has grown in seven years from 1,300 to 18,700. This exponential growth has heightened calls from stakeholders for greater transparency and increased oversight. The U.S. Government Accountability Office (GAO) was tasked with identifying areas of improvement in compliance and oversight.
The September 2011 report from the GAO recommended four specific actions that HRSA should take to improve 340B Program integrity. The recommendations were as follows:
GAO recommended that HRSA conduct audits of covered entities. GAO stated HRSA’s oversight of the 340B program was weak because it relied on covered entities and manufacturers to self-audit and self-certify, with HRSA engaging in very few oversight activities.
GAO requested HRSA clarify its guidance for manufacturers’ restriction of drug distribution.
GAO requested HRSA clarify its guidance on the definition of patient eligibility.
GAO requested HRSA clarify its guidance on the definition of hospital eligibility criteria for program participation.
In response to the GAO report, HRSA implemented the following changes:
Beginning in FY 2012, HRSA implemented a systematic approach to conducting annual audits of CE’s. HRSA audits approximately 200 CE’s annually and has conducted 844 total audits from FY 2012 through FY 2017. HRSA has identified non-compliance issues and publishes all audit findings on their website. They also address each issue of non-compliance with a corrective action plan.
- In May 2012, HRSA clarified its policy for manufacturers' restriction of drug distribution and added details on the information manufacturers should include in the restricted distribution plans.
HRSA created a comprehensive 340B program regulation to address specific guidance on the definition of an eligible patient and hospital eligibility criteria. The regulation was submitted to the Office of Management and Budget for review in April 2014 then subsequently withdrawn after a May 2014 federal district court ruling stating HRSA did not have broad rulemaking authority for the 340B program.
HRSA issued a proposed guidance (340B Drug Pricing Program Omnibus Guidance) in August 2015 to interpret requirements for the 340B program, including criteria for eligible patient and hospital requirements. This too was withdrawn after the current administration in January 2017 directed all agencies to withdraw or postpone regulations and guidance not yet in effect.
In July 2017, HRSA indicated it is unable to further clarify guidance without additional authority to do so. Stakeholders at the Energy and Commerce hearings agreed that HRSA needs broader authority given by Congress and that there should be greater oversight and transparency for the 340B program. Congressional legislation to regulate 340B is in process, yet nothing is finalized. To watch a recording of the hearings and to review supporting documentation, please go to the Energy and Commerce Committee website at https://energycommerce.house.gov/hearings/examining-hrsas-oversight-340b-drug-pricing-program/
What's next for the GAO? The GAO is tasked to review contract pharmacy use under the 340B program to determine:
To what extent do the various types of covered entities use contract pharmacies and where are the pharmacies located?
What, if any, financial arrangements do covered entities have with contract pharmacies and third-party administrators related to the administration and dispensing of 340B drugs, and how, if at all, this varies by entity type?
To what extent do covered entities provide low-income, uninsured patients with discounts on drugs dispensed by contract pharmacies?
How, if at all, do covered entities and HRSA ensure compliance with 340B program requirements at contract pharmacies?
While in early stages of this examination, a report will be forthcoming from the GAO on recommendations for 340B contract pharmacies. In addition, following the July 2017 meeting with the GAO, the Energy and Commerce Committee sent letters to 19 hospitals and health systems inquiring how the 340B program savings are calculated and used to benefit patients. The hospitals' deadline to submit a response and required documents is September 22, 2017.
We will continue to monitor and keep you apprised of any updates on the contract pharmacy report or legislative changes with 340B.
