February 05, 2024

Bipartisan Reform of 340B Drug Discount Program?

At a Glance

  • The discussion draft includes a transparency section, which would require annual reporting of several points concerning how 340B sites are using savings from the program.
  • The draft proposes additional registration and oversight of “child” sites — those connected to the parent covered entity — and would require that all child sites be wholly owned and integrated clinically and financially.
  • To prevent covered entities from receiving duplicate discounts, lawmakers propose increased audit authority and a national clearinghouse for data-sharing.
  • To fund these expanded activities, the bill also proposes a user fee for covered entities.

On February 2, 2024, a bipartisan group of six U.S. senators released much-anticipated draft legislation to reform the Health Resources and Services Administration’s (HRSA) 340B drug discount program. Known as the SUSTAIN 340B Act (Supporting Underserved and Strengthening Transparency, Accountability, and Integrity Now and for the Future of 340B Act), the discussion draft follows a summer 2023 request for information from stakeholders, which received nearly 300 responses and marks the latest effort by members of Congress to enact legislation to address various concerns about the more than 30-year-old program that enables health care providers serving low-income populations to purchase certain prescription drugs at a lower cost.

The bipartisan group is led by Senate minority whip John Thune (R-SD) and includes Debbie Stabenow (D-MI), Shelly Moore Capito (R-WV), Tammy Baldwin (D-WI), Jerry Moran (R-KS) and Ben Cardin (D-MD).

The 340B program has been a flashpoint between health care providers on one hand and drug manufacturers on the other. Providers maintain that the program and the savings it provides enables them to deliver prescription drugs to low-income populations and to put resources into additional health care services. Drug manufacturers, which are required to provide medications at discounted prices, have criticized the explosion of the number of participating program sites, questioned how providers use the savings, and called for additional auditing of the program by HRSA.

Members of Congress have attempted to reform the 340B program before, but to no avail. For example, in 2018, the House Committee on Energy and Commerce under then-Chairman Greg Walden (R-OR) issued a report and corresponding reform recommendations, and in 2020 then-Ranking Member Walden and then-Senate HELP (Health, Education, Labor and Pensions) Committee Chairman Lamar Alexander (R-TN) issued a call for stakeholder input on program modernization.

In addition to legislative fits and starts, the 340B program has also been challenged with delayed and amended regulations as well as litigation, including on the question of whether drug manufacturers can limit the number of contract pharmacies that serve covered entities.

The discussion draft contains several provisions to respond to concerns that have arisen over the years, including the expansion of the program and questions as to how participating providers are using its savings. The discussion draft includes proposals to require greater transparency of how 340B sites are using savings from the program, more stringent definitions of child sites, and increased audit authority and data-sharing to prevent providers from achieving duplicate savings. The bill also proposes a user fee for covered entities to fund these expanded activities.

Following are specific components of the discussion draft.

Contract Pharmacies

The legislation sets statutory criteria for contract pharmacies. The bill leads are seeking additional feedback on the criteria, including possible hard caps on the number of contract pharmacy arrangements permitted, how caps would impact patients in certain geographies, such as rural regions, and how caps could impact access to medications dispensed by specialty pharmacies. The legislation proposes requiring that covered entities annually register contract pharmacy arrangements with the secretary of Health and Human Services (HHS), who shall develop a process to review all such agreements. The legislation also requires the secretary of HHS to issue rules on agreements between covered entities and contract pharmacies. The proposed agreements would include provisions that prohibit a covered entity from requiring patients to use certain pharmacies, stipulate that the agreement for drugs acquired is limited to patients of the covered entity, and require verification of patient eligibility, prevention of duplicate discounts, and regular audits.

Definition of Patient

The senators are proposing to establish a statutory definition of patient under the 340B program. This would fill a gap, but the discussion draft does not actually include a definition. Instead, lawmakers are seeking further inputs from stakeholders, including responses to several questions, to inform this provision in a subsequent draft.

Specifically, the RFI asks for input as to how the evolution of the program should be reflected in any definition of patient, what factors should determine if a covered entity has a “meaningful relationship” with a patient, if the length of time for any such relationship should inform the definition, and how the definition factors into patients who may be cared for by multiple covered entities for the purposes of determining discounts tied to the patient.

Child Sites

The discussion draft proposes additional registration and oversight of “child” sites, those connected to the parent covered entity, and would require that all child sites be wholly owned and integrated clinically and financially. The discussion draft includes several criteria to meet the integration requirements including employee status of prescribers, range of services provided by child sites, licensure arrangements between covered entities and child sites, clinician privilege arrangements, and requirements pertaining to patient medical records as well as various financial management standards. The discussion draft also authorizes rulemaking to address situations in which an existing child site fails to meet the criteria of the legislation, if enacted. Legislators are also asking for feedback on this approach and included several specific questions for stakeholders to consider.


Concerns about limited or uneven transparency as to how covered entities use savings from the 340B program have been common in recent years. Recognizing this, the senators included a transparency section in the discussion draft, which would require annual reporting of several points as an addendum to a covered entity’s Medicare cost report. Proposed data points included in the discussion draft include:

  • Number of patients who received drugs under the program during the prior year
  • Number of prescriptions filled each year, classified by payer
  • Charity-care costs incurred at each site, coming from the cost report, or, if an entity is not required to submit a cost report that includes charity-care statistics, a qualitative description of the care provided
  • How the covered entity used the savings from the program, including services or benefits provided to uninsured and underinsured patients and to the larger community
  • Financial demographics, including percentage of patients eligible for financial assistance, who reside in a health professional shortage area (HPSA), and who are in the Medicaid and CHIP programs.

The secretary of HHS would be required to report to Congress annually on this data.

Program Integrity

Given concerns from some stakeholders as to limits with the existing oversight of the program, the discussion draft includes a section that authorizes audit authority and tasks the secretary of HHS with developing guidance on such audits. It also requires that if an entity does not meet the criteria for a covered entity, the entity will incur “consequences that are consistent and appropriate with the violation and that do not treat the failure to meet eligibility criteria as an issue that can be corrected retroactively.”

Preventing Duplicate Discounts

To prevent covered entities from receiving duplicate discounts, lawmakers propose to create a national clearinghouse, which would obtain claims-level rebate and other data to identify potential violations. If duplicate discounts are identified, covered entities will be required to repay manufacturers. The discussion draft also stipulates that discounts in the Medicaid program apply to both fee-for-service and managed-care plans. This section also includes a clause that requires that the patient assistance programs of a covered entity apply to child sites and contract pharmacies and that such policies be transparent to patients at the point care is received.

Equitable Treatment of Covered Entities and Pharmacies

This section would prohibit insurers or pharmacy benefit managers (PBMs) from instituting policies on covered entities, contract pharmacies or beneficiaries that differ from policies on nonparticipating entities or enrollees. Specific prohibited actions would include:

  • Providing lower reimbursement levels for drugs obtained under the program
  • Instituting fees, clawbacks, dispensing fees or other costs
  • Instituting other restrictions or requirements that differ from terms applied to nonprogram participants

The draft legislation also authorizes civil monetary penalties on PBMs that violate these provisions, up to $5,000 per violation, per day.

User Fees

The discussion draft authorizes user fees, which would be paid by covered entities to HRSA, to provide the agency with added resources to administer the program, including the data clearinghouse and additional program integrity activities authorized in the bill. The draft includes a proposed user fee of 0.01% of a covered entity’s savings by participating in the program. The user fees would supplement and not supplant annual appropriations for the 340B program.

MACPAC Report & HHS Study

The legislation directs the Medicaid and CHIP Payment and Access Commission (MACPAC) to conduct a review of state Medicaid program efforts to prevent duplicate discounts and requires the secretary of HHS to conduct a study on dispensing fees within the 340B program.

In Closing

The legislators are seeking input by April 1 and expressed a desire to enact legislation in this Congress, which may be ambitious given the challenges in enacting 340B legislation in prior Congresses and the overall political climate and legislative landscape.

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