340B Program Integrity Challenges
11/26/2024
Growing concerns with 340B program abuse
Congress created the 340B program to provide access to discounted medicines for certain providers, known as “covered entities,” that generally serve uninsured or other vulnerable patients. The program requires manufacturers to offer their outpatient medicines at significantly reduced prices for covered entities to purchase for 340B eligible patients.
Unfortunately, the program lacks transparency and has been subject to widespread abuse, with many covered entities and their business partners, such as large retail pharmacy chains, putting profits over the vulnerable patients the program was intended to help.
By the numbers
Program abuse examples
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Problems with current payment system
Currently, the 340B program predominantly operates based on a chargeback and replenishment system, where covered entities purchase medicines from the manufacturer at Wholesale Acquisition Cost and determine whether it was 340B eligible after a unit is dispensed ― sometimes weeks to months later. The covered entity then purchases replacement units through a chargeback at the 340B price, presumably to be made whole after the fact.
Although the chargeback process is used beyond 340B to facilitate accurate pricing, it typically is used only where a given medicine’s eligibility for discounted pricing is known at the time of sale, and therefore faces unique challenges in the 340B program. For example, the current 340B chargeback model does not provide claims-level data, which enables program abuse. The covered entity instead determines 340B eligibility after the fact and does not share the data supporting that determination with the manufacturer. It also makes it difficult for manufacturers to determine if a Medicaid rebate is being paid on a 340B units – even though that duplication is prohibited by law. Lastly, it allows for 340B-priced units to be dispensed to an individual who is not a patient of the covered entity.
The Inflation Reduction Act’s so-called “Maximum Fair Price” (MFP) will exacerbate this dynamic by creating the possibility of unlawful duplicate 340B and MFP discounts, beginning in 2026. Currently, the government has not offered a way to de-duplicate the 340B price and the new MFP.
A proposed improvement
The 340B statute allows for the 340B price to be provided in the form of a rebate or up-front discount. Bristol Myers Squibb’s intended use of a rebate model, in which data validating eligibility is provided prior to receiving 340B pricing, consistent with standard business practices, would ensure 340B requirements are met and support program integrity and benefit patients by:
1. Increasing transparency and reducing the likelihood of unlawful duplicate discounting
2. Encouraging covered entities to use the 340B benefit to lower out-of-pocket costs for vulnerable patients
3. Aiding the government’s 340B program compliance efforts, decreasing costly audits
References
- Berkeley Research Group, 2024 340B-Program-at-a-Glance_2024-FINAL-CLEAN.pdf.
- IQVIA, "Unintended Consequences: How the Affordable Care Act Helped Grow the 340B Program." August 2024.
- North Carolina State Health Plan,"Overcharged: State Employees, Cancer Drugs and the 340B Drug Pricing Program."
- The New York Times, "Patients Over Profits: How a Hospital Chain Used a Poor Neighborhood to Turn Huge Profits,” September 2022.