- HHS Secretary Alex Azar warned hospitals and drugmakers both on Monday that "change is coming" to the 340B program, stressing the "need to disrupt the entire system of rebates." He emphasized the administration's plans to reduce the gap between drug discounts and reimbursements.
- Speaking at the 340B Coalition's summer conference, he added that hospitals "responsibly investing their 340B savings have nothing to fear" from the administration's proposed changes, which would impose more oversight over how hospitals are allocating their savings and give HHS the regulatory authority to ensure benefits "reach the intended recipients."
- Azar also defended the administration against critics saying it was taking orders from drugmakers. "Some in the 340B community believe our delay of the penny pricing regulations is in deference to the pharmaceutical industry ... We will address this, and propose other changes to the 340B program, as part of our comprehensive approach to lowering drug prices and reducing out-of-pocket costs."
The 340B Drug Pricing Program has been under fire since President Donald Trump took office, with the administration's massive cut to payments to hospitals prompting a lawsuit between HHS and the hospital industry.
It's also been the topic of several Senate hearings regarding the program's ambiguity, lack of transparency on rules and ceiling prices and the level of program oversight granted to the Health Resources and Services Administration.
Hospitals contend that 340B, originally designed to help safety net hospitals better serve low-income patients by freeing up funding otherwise spent on pharmaceuticals, gives drugmakers too much leeway to control drug prices. While civil monetary penalties would hold drug manufacturers accountable for intentional overcharging, the administration has delayed the implementation of such penalties five times since Trump took office.
Defenders of the pharmaceutical industry say hospitals are not using their freed up funds properly. Azar channeled that argument in his remarks, saying the administration believes the gap between prices paid by 340B-covered hospitals and the compensation they receive has "in many cases, grown far too wide."
The Trump administration drastically reduced drug payments to 340B hospitals earlier this year, cutting payment from average sales price plus 6% to 22.5% less than the average price. Azar defended the rule in his remarks.
"The new payment level is still above the average price actually paid by 340B entities, but it is closer to reality," he said.
However, Azar insisted the administration was not carrying water for the pharmaceutical industry, citing a tweet from President Trump earlier in the day.
Pfizer & others should be ashamed that they have raised drug prices for no reason. They are merely taking advantage of the poor & others unable to defend themselves, while at the same time giving bargain basement prices to other countries in Europe & elsewhere. We will respond!— Donald J. Trump (@realDonaldTrump) July 9, 2018
During a Senate HELP panel on 340B last month, HRSA Director Krista Pedley said 12 of 600 manufacturers participating in the program have faced audits over the past five years, compared to 981 of 12,700 of hospitals. No findings of wrongdoing were yielded in any of those 12 manufacturer audits, whereas 60% of hospital audits resulted in repayment to manufacturers.
Late last month, the Government Accountability Office found that HRSA’s audits do not properly examine compliance with a program requirement that there cannot be duplicate discounts for drugs prescribed to Medicaid recipients. Azar attributed this to the Affordable Care Act's expansion of Medicaid, which he said should have reduced the need for the charity care and subsequently the 340B program.
Much of the controversy over 340B stems from confusion over the program's vague intentions and a lack of specificity and guidance, and fueled by growth of the program since its implementation in 1992 and rising drug prices. Azar said "something must be done" about "skyrocketing list prices," but added that the "system that has been built" makes action "nearly impossible."
The administration, Azar said, would be within its rights to address prescription drug prices by eliminating rebates within Medicare and implementing fixed-price discounts.
"Change is coming to prescription drug pricing, whether it’s painful or not for pharmaceutical companies," Azar said.