As the second-largest federal prescription drug program behind Medicare Part D, 340B has been at the center of numerous challenges over the past few years, from federal lawsuits to a Supreme Court ruling.
In the latest challenge to the program, Senator Bill Cassidy—a Republican from Louisiana who serves as the ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee—independently opened an investigation into the 340B program, which requires Medicaid-participating drug companies to sell certain drugs at discounted prices to qualifying hospitals.
“At the foundation of the debate […] is whether Congress intended it to directly benefit low-income and uninsured patients or whether it was meant to help finance those hospitals, which could use the money as they see fit to add services,” Stat reported.
Cassidy’s investigation “follows multiple reports of certain 340B recipients announcing record-setting profits with no transparency on if and how much of that profit benefits patients,” he said in a statement.
“The intent behind the program is for covered entities to pass on the revenue generated from the 340B program to improve healthcare services for eligible patients,” Cassidy said in the statement. “However, federal law imposes few requirements with respect to how covered entities may spend the revenue they generate from the 340B program.”
The hospitals participating in 340B provide high levels of uncompensated care, so they use the savings generated from the program to stay financially afloat, Maureen Testoni, president and CEO of trade group 340B Health, which represents participating hospitals, told Healthcare Brew. Testoni said her organization was not involved in Cassidy's investigation.
The investigation, explained
In September, Cassidy wrote to the CEOs of Richmond Community Hospital in Virginia—owned by Maryland-based health system Bon Secours—and Cleveland Clinic in Ohio, asking both to provide information on how their respective hospitals use savings generated from 340B.
Cassidy claimed that most of Richmond Community Hospital’s $90 million profit in 2021 came from the 340B program. Cleveland Clinic made about $136 million from the program in 2020, and neither hospital has specified how the savings are used or whether the money improves patient care, according to Cassidy.
Jenna Green, a spokesperson for Bon Secours, told Healthcare Brew that the health system has responded to Cassidy’s request for information.
The health system “does not make a profit from the 340B program,” Green said. “We save money by purchasing drugs at a lower cost. ”
Richmond Community Hospital uses the savings it generates from the 340B program to keep its doors open, as it faces “operating losses totaling $30 million this year,” Green said.
“Without the savings realized through the 340B program, [Richmond Community Hospital] would be unable to exist as a hospital, and Richmond’s East End would be without access to a key community provider of behavioral health, primary care, and other services,” she added.
Bon Secours has been “working in good faith with Senator Cassidy and the Senate HELP Committee,” Green said.
Andrea Pacetti, a spokesperson for Cleveland Clinic, said the health system has also responded to Cassidy’s request for information.
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“Our participation supports our mission of providing the highest-quality care for all patients, including underserved populations, and is compliant with the requirements and guidelines of the program,” Pacetti said.
In November, Cassidy requested similar information from Sun River Health in New York City and Yakima Valley Farm Workers Clinic in Washington state—two of the largest community health centers that participate in the 340B program.
Mike Murdock, a spokesperson for Yakima Valley Farm Workers Clinic, told Healthcare Brew the health system uses the money it saves from participating in 340B “to ensure that we can provide care to the underserved patients and communities in Washington and Oregon that rely on us.”“This critical program ensures we can keep our communities healthy through vital access to primary care, delivering preventive services, behavioral health care, and access to medications,” Murdock said. “We are proud of our program and happy to be working with the [Senate] committee to demonstrate how it has supported our work as a federally qualified health center.”
Sun River Health did not respond to Healthcare Brew’s request for comment.
340B’s intent
Hospitals participating in 340B aren’t required to report how they use the savings generated from the program because the point of 340B was never to directly save patients money, Testoni said.
“The concept of 340B is that you [the hospital] get discounts which allow you to remain more financially stable so that you are around to be able to provide more services to more of the underserved population that you already serve,” Testoni said. “It is not intended to be a direct pass-through of the savings.”
Once in the program, it’s up to the hospitals to decide what to do with the extra funds, she said.
What the hospitals are required to report are things like uncompensated care levels and Medicaid care levels, which is all public information, Testoni said.
There is “a lot of data to show” that hospitals are, in fact, using savings generated from the program to provide more services to underserved patients, according to Testoni.
Drugmakers’ point of view
On the other side of the 340B coin are the drugmakers that provide the drug discounts.
Nicole Longo, senior director of public affairs at PhRMA, the pharma industry’s top lobbying group, told Healthcare Brew that the drugmakers are concerned there’s “no way of ensuring” the discounts make their way to patients.
“That is a huge source of concern because this isn’t a small program,” Longo said. “We think hospitals should be required to share that discount with patients based on the patient’s income levels.”
Longo added that while PhRMA is not involved in Cassidy’s investigation, it is “encouraged that he’s taking this step and asking hospitals to demonstrate how they’re using the program.”
“Our hope is that Congress can make changes so that this program is sustainable—long into the future—and actually helps our most vulnerable and underserved communities,” Longo said.