Reflections on the Future of the 340B Program

Three key trends with downstream implications

Author: Melissa Opraseuth, SVP Pharmacy Operations

2022’s been a turbulent year for the 340B program, along with its connected providers, payers, manufacturers, and government agencies.

In a unanimous June decision, the Supreme Court struck down CMS’s reimbursement reductions applicable to 340B hospitals, ruling that the Department of Health and Human Services cannot impose different reimbursement rates for outpatient drugs for different classes of hospitals without conducting a survey of hospital acquisition costs for outpatient drugs. Though a positive step for hospitals, the Supreme Court declined to offer an opinion on a potential retrospective remedy – so we have yet to see the financial and logistical implications.

Simultaneously, other developing trends have reached inflection points, and upcoming legislative updates will shift the program’s trajectory. If you are a leader in a 340B-eligible provider, you need to monitor these three key trends that will impact 340B’s future.

#1: Evolving Patient Definition

The 340B program “Patient Definition” for covered entities (CEs) fundamentally influences operations and program savings. But it’s long been a grey area.

In 2017, Health Resources and Services Administration (HRSA) issued a final audit report removing Genesis HealthCare from the 340B Program after finding that Genesis was dispensing 340B drugs to ineligible patients and failed to maintain auditable records. Genesis then sued HRSA, stating that the findings were based on “HRSA’s interpretation of patient’” defined in 1996 guidance, which undermined the purpose of 340B and overextended HRSA’s enforcement capability. HRSA then voided the audit, and the case was dismissed as moot. Genesis appealed to seek further guidance, and the Court of Appeals for the Fourth Circuit reversed, holding that the issues were not moot and sending the case back for further deliberations.

The federal district court has the opportunity to clarify where 340B entities should look to guide their definition of “patient” and whether any of HRSA’s guidance on the patient definition is valid and enforceable. As we await the ruling, some CEs are reevaluating how their policies and procedures support the patient definition, while bearing in mind that documentation and demonstrating patient care ownership are always critical.

#2: Political Shifts in Washington

Upcoming decisions on Capitol Hill have big implications for 340B. Under SCOTUS’s June ruling, 340B hospitals were underpaid in 2018 and 2019.

Since the original policy was budget-neutral, HHS already distributed the increased funds produced by the 340B payment reductions to increased reimbursement for the hospital services. While CMS indicates in the Medicare OPPS proposed rule that it intends to revert to the statutory ASP+22% reimbursement for 2023, CMS is soliciting comments related to the appropriate remedy for past years, and non-340B hospitals are unlike to support any remedy that imposes budget neutrality.

Additionally, revenue cycle management teams need to keep an eye on the upcoming midterm elections. Currently, the Senate is evenly divided between parties, while Democrats have a slim majority in the House. Balance shifts may result in deprioritizing growth of the 340B program. Several past proposed bills have aimed to scale back the pharmacy program.

Who’s in power this fall matters for 340B’s scope and operations – especially with so many funding questions on the line. As the political scene changes, it’s crucial for stakeholders to educate lawmakers about the 340B program, especially given the lack of awareness around the importance of the program to the 340B entity constituents. Third-party partners – who specialize in interpreting regulations and navigating relationships in Washington – can help teams prepare for any upcoming changes and support 340B stakeholders in advocating for the program.

#3: Health Equity Conversations

Since the COVID-19 pandemic, public and private sector leaders are having more conversations about our nation’s health inequity. Amid recent 340B program updates, for-profit pharmaceutical manufacturers have pushed back on its growth, citing skepticism that the 340B dollars are funding care for vulnerable patients and are instead used to generate profits.

To date, nearly 20 drugmakers have cut off sales of 340B-discounted drugs to contract pharmacies, which restricts crucial access to medications for underserved patients.

But recent numbers confront this skepticism by demonstrating that 340B hospitals play a critical role in care vulnerable populations. A new expert report showed that in 2020, 340B disproportionate share (DSH) hospitals provided 67% of all uncompensated care: $41.6 billion.

Though these hospitals, like all others, lost revenue during COVID-19, they made a significant different in their communities. The National Association of Community Health Centers estimates that more than half of health center patients would go without necessary medication without 340B discounts. Safety-net providers provide crucial care in their communities when no other organization does.

340B providers can meaningfully contribute to the health equity discussion by collecting data points around the quantity and depth of care they give to low-income populations. This way, they can demonstrate to corporate manufacturers and government regulators the role they play in local population health.  By entering this conversation at a critical moment, healthcare systems can demonstrate their value to underserved communities, especially when all eyes are on them.

Now’s the time. It’s a key moment for 340B as multiple issues culminate in the coming months. Now’s the time for hospitals to document their patient population, zero in on government relationships, and underscore the importance of their work for underprivileged communities. With an unknown future, staying ahead of these trends can secure 340B-affiliated hospitals for whatever comes.

Visit Cloudmed’s 340B Recovery Program page for more information or to request a demo.

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