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HRSA yesterday told Congress in its budget request that it needed comprehensive regulatory authority over the 340B program to resolve the dispute over the 340B contract pharmacy program.

HRSA Invokes Contract Pharmacy Fight in Pitch for Comprehensive 340B Regulatory Power

Congress needs to give the U.S. Health Resources and Services Administration (HRSA) comprehensive regulatory authority over the 340B program to resolve the dispute over the 340B contract pharmacy program, the Biden administration said yesterday in its proposed budget—although it did so without saying the words “contract pharmacy.”

The administration called for 340B legislation in its fiscal 2023 budget request for HRSA. HRSA has been asking Congress without success since the Obama administration for general rulemaking authority over the 340B program. It asked for that authority again yesterday. HRSA also repeated its request, made for the first time in last year’s proposed budget, for authority to audit covered entities about how they use net income derived from 340B drug purchases, and to require entities to report how much money they make through 340B and how they use those revenues to HRSA.

HRSA invoked the contract pharmacy dispute yesterday in its appeal in its proposed budget for authority to make enforceable rules for 340B. Although it never used the words “contract pharmacy,” it referred to current disagreements, lawsuits, and court rulings in the 340B space—all of which match the current state of the fight over 340B contract pharmacy.

“Ongoing Litigation” Makes “this Issue Even More Urgent”

“Despite the broad reach and impact of the [340B] program, HRSA’s regulatory authority in this area is limited,” HRSA said. “This has led to disputes over compliance and oversight in the program as evidenced by ongoing litigation making this issue even more urgent. Court decisions completed have outlined the need for Congress to act in this space.”

“Over the years, HRSA has received significant feedback from Congress urging HRSA to take action under the authority it has in the statute, which we have done to the fullest extent,” HRSA said. “However that authority is not sufficient. Legislative action is necessary to provide the kind of transparency, accountability, and oversight needed to ensure that the intent of the program is met to stretch scarce federal resources for safety net providers and the safety net has access to discounted drugs for their patients.”

The National Association of Community Health centers last month told a House Republican task force that Congress should let HRSA “address issues in ongoing litigation, like the use of contract pharmacies, data collection, and unilateral pricing restrictions.”

NACHC Senior Vice President for Public Policy and Research Joe Dunn said yesterday, “In light of recent actions by the drug industry against the 340B program, legislative action to extend this regulatory authority will enable the agency to hold pharmaceutical companies accountable and protect a program that is a lifeline to health centers and their patients.”

Hospital group 340B Health said last month that it is prepared to go in the direction of 340B contract pharmacy legislation, but it did not say what it thinks such legislation should do. The group yesterday declined comment on HRSA’s request for more 340B regulatory authority. The American Hospital Association and America’s Essential Hospitals also declined comment.

Pharmaceutical Research and Manufacturers of America did not immediately respond to a request for comment.

Funding Request

The administration seeks $17 million in FY 2023 for HRSA’s Office of Pharmacy Affairs, which oversees the 340B program. That’s either $7 million or $6 million more than this fiscal year’s spending level. Both figures appear in different tables in the budget proposal.

HRSA said it would use the increase to support implementation of the 340B administrative dispute resolution (ADR) process, including “establishing an intake system and security

controls for protecting proprietary information.” Additional funding also would go toward boosting the annual number of covered entity audits from 200 to 225 and the number of manufacturer audits from five to 10.

340B Sales Leaped 31% in 2020

HRSA said in its proposed budget that total drug sales in the 340B program were approximately $38 billion in 2020. That is 31% above the $29 billion in total 340B sales in 2019 that HRSA reported in its last budget request in May 2021.

HRSA estimated yesterday that 340B sales are approximately 7.2% of the total U.S. drug market. In last year’s budget request, it said the figure was about 6%. Drug manufacturers began imposing limits on sales involving 340B contract pharmacies during the latter half of 2020. Most companies did not implement their policies until 2021. Those policies are likely to have a dampening effect on the dollar value of total 340B sales and 340B sales’ share of total U.S. drug sales for 2021.

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