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The 340B program remains essential in ensuring equitable access to crucial medications for vulnerable, underserved populations. The program provides safety net providers with critical resources necessary to expand health related services to low-income and uninsured individuals. Over the past decade, controversy, criticism, and disagreement between manufacturers and program participants, along with regulatory agency indecision, has put the 340B program’s longevity and efficacy into question. To secure its sustainability, all 340B stakeholders must embrace a paradigm shift. Outmoded practices of mistrust and secrecy among stakeholders serve as obstacles to progress and must give way to transparency and collaboration.
Challenges to Sustainability
The sustainability of the 340B program, which is primarily funded through significant discounts from pharmaceutical manufacturers, faces major hurdles if the program continues to be perceived by manufacturers as expanding well beyond the program’s original scope and intent. The program’s expansion, driven by the Affordable Care Act (ACA), has significantly broadened access to 340B pricing, resulting in substantial increases in discounts from $5.3 billion in 2010 to $54 billion in 2022.
In response to this expansion, drug manufacturers have imposed certain restrictions on program access to limit perceived financial exposure from program misuse. These restrictions, initiated in 2020, have sparked controversy within the 340B community and detrimentally impacted provider budgets. As result, twenty-two states have introduced or passed legislation to prohibit these restrictions.
SUSTAIN 340B Act
In February 2024, a bipartisan group of U.S. senators released a discussion draft of a bill which attempts to address the most highly debated issues in the 340B program. The SUSTAIN 340B Act, which Senator Thune (R-S.D.) says they hope to introduce in May, covers the use of contract pharmacies, patient definition, preventing duplicate discounts, protection from discriminatory PBM practices, child sites, provider transparency, and user fees. Of these, contract pharmacies, and duplicate discounts are two of the most closely followed by the pharmaceutical industry.
Contract Pharmacies
Based on the information currently available, the SUSTAIN 340B Act favors allowing rather broad use of contract pharmacies to expand access to larger patient populations. However, the use of 340B contract pharmacies is directly tied to the manufacturer concerns regarding duplicate discount claims. Therefore, for the contract pharmacy model to work, the associated duplicate discount issue must be resolved.
Duplicate Discounts
The 340B program has always grappled with the issue of duplicate discounts. A duplicate discount occurs when a drug purchased under the 340B program is also submitted by a health plan, PBM, or state Medicaid agency to the manufacturer for an additional rebate. This type of administrative error is estimated to impact between 15-22% of the total discounted dollars paid under 340B. A primary reason for drug manufacturers imposing expanded pharmacy network restrictions was the challenge in segregating aggregated 340B and non-340B claims when submitted for rebate purposes.
The SUSTAIN 340B discussion draft nicely summarizes the corrective actions to be taken to resolve the duplicate discount problem.
- Directs the Secretary to enter a contract with an independent, third-party entity to carry out the duties of a national clearinghouse to prevent duplicate discounts between the 340B program and Medicaid.
- The national clearinghouse must perform the duties laid out in this section, including requesting, and receiving claims level rebate file data from State Medicaid agencies and covered entities and maintaining the data in a confidential manner.
- Covered entities must participate in the data exchange with the third-party clearinghouse, including available data from contract pharmacies.
- All information exchanged between the third-party clearinghouse and covered entities is subject to HIPAA privacy laws.
- Covered entities will be required to repay manufacturers of identified duplicate discounts for 340B drugs.
- One year after enactment, CMS and HRSA must issue a report to Congress detailing coordinated efforts to address duplicate discounts.
- The Secretary shall promulgate regulations as determined necessary to address duplicate discounts
The legislation’s direction to use a third-party clearinghouse chosen by the government to accurately identify and segregate 340B from non-340B claims is an important step towards resolution of the duplicate discount issue. A clearinghouse platform that is perceived by all parties to be neutral will be key to mitigate the prevailing mistrust among stakeholders concerning data sharing. This solution will serve as a pivotal component of the program for years to come.
Mesfin Tegenu is CEO and Chairman of RxParadigm, a technology solutions provider committed to supporting initiatives that advance the 340B program. He can be reached at Mesfin.Tegenu@rxparadigm.com.
