Speeches & Floor Statements

Hearing Statement: Perspectives on the 340B Drug Pricing Program

Posted on March 15, 2018

The 340B Drug Pricing Program was created by Congress in 1992 to help qualifying hospitals and clinics that treat low-income patients.

The program requires drug manufacturers that participate in Medicaid to provide discounts on prescription drugs or treatments, including treatments for cancer, diabetes, or HIV – to qualifying hospitals and clinics.
The hospitals and clinics may then provide the drugs at the reduced price to low-income patients.  Or they can sell the drugs at a higher price to patients who have insurance and then keep that money and use it to provide care to low-income patients or for other purposes.
According to the Government Accountability Office, approximately 40 percent of all hospitals in the United States participate in the 340B program. In just the last five years, the number of hospitals and treatment sites participating in the 340B program has nearly doubled to almost 38,000 in 2017.
Today’s hearing will focus on 2 things: First, what is the purpose of the 340B program and is it fulfilling that purpose; and second, should there be changes in the law so that the program can fulfill the purpose?
First, we need a better understanding of its purpose, and why the 340B program exists and how it is being used.
Today there is confusion about the program’s goals and requirements because Congress did not make clear in the 1992 law what the purpose of the program actually is.
The closest the law came to defining the purpose is a House of Representatives report accompanying the legislative text, which says the program was created to “Permit covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”
This has usually meant helping low-income patients afford their medications and health care, and to ensure that qualifying health centers can provide care to their most vulnerable patients.
Here’s one example of 340B in practice from St. Thomas Hickman Hospital in Hickman County, Tennessee—the hospital participates in the 340B program.

A Hickman County resident with diabetes was unable to afford the $332 cost of insulin, and went into a diabetic coma.
He was told about the 340B program at St. Thomas Hickman and was able to buy the insulin for $8.90.

According to St. Thomas Hickman, the 340B program has also helped the hospital expand mental health care services and reduce emergency room visits.
The Health Resources and Services Administration (HRSA), the Health and Human Services agency that oversees the program, estimated that hospitals and clinics purchased $12 billion of discounted prescription drugs through the 340B program in 2015. 
The House Energy and Commerce committee has estimated that just a year later, in 2016, 340B hospitals and clinics spent more than $16 billion on discounted drug purchases – a 30 percent increase.
340B hospitals saved $6 billion in 2015 by buying prescription drugs at a discount. That $6 billion represented about 1.3 percent of the total purchases of prescription drugs in the United States in 2015.
In other words, about 1.3 percent of the total amount spent on prescription drugs in the United States is devoted to the hospitals and clinics that qualify for the 340B program.
Hospitals will point out that, according to the Department of Health and Human Services, hospitals spent more than $50 billion in 2013 on uncompensated care –that’s service to patients that is not reimbursed. Hospitals and clinics use the $6 billion in savings they generate through the 340B program to help offset the money they spend in uncompensated care.
On the other hand, we also know there are instances where 340B hospitals and clinics may not be using the savings to help low-income patients afford their medications or to provide care.
There is no limit in the statute that says what hospitals may or may not spend the money on.
Some have criticized this, such as Dr. Rena Conti from the University of Chicago and Dr. Peter Back from Memorial Sloane Kettering who have found that “the 340B program is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics.”
This is why there have been reports – including from the Health and Human Services Office of the Inspector General, the Government Accountability Office, the National Academies, and from the House Energy and Commerce Committee – that suggest that, while the 340B program does provide real benefits, there needs to be more clarity around what the program allows and does not allow.
For example, one 2011 report by the Government Accountability Office recommended increased oversight of the program and that the Health Resources and Services Administration, or HRSA issue and finalize guidance on the definition of a 340B patient.
Last year the National Academies recommended more oversight and regulation to ensure that the program provides direct benefits to patients.
I hope today we can learn more about the program, and how the program might be improved so hospitals and clinics can continue to provide low-income patients with help to afford their health care.