Specifically, they must sell outpatient drugs to covered entities at or below  the statutorily determined price. 340B Revenue Generated by Covered Entities Varied, but All Entities Reported That the Program Was Used to Support or Expand Access to Services

About half of the covered entities we interviewed reported that they  generated 340B program revenue that exceeded drug-related costs—the  costs of purchasing and dispensing a drug—and revenue generation  depended on several factors. Of the 16 remaining, 10 did not generate enough 340B revenue  to cover all drug-related costs, and 6 covered entities were unable or did  not report enough information for us to determine the extent to which they  generated 340B revenue due, in part, to their inability to track 340B- specific financial information. Covered Entities Reported Using the 340B Program to Support or Expand Access to Services

Regardless of the amount of revenue generated through the program, all  of the 29 covered entities we interviewed reported that the 340B program,  including the up-front savings they realized on the cost of drugs, allowed  them to support their missions by maintaining services and lowering  medication costs for patients, which is consistent with the purpose of the  program. In addition, the 13 covered entities that generated 340B revenue that  exceeded drug-related costs were able to use this revenue to serve more  patients and to provide services that they might not have otherwise  provided, including additional service locations, patient education  programs, and case management, which is also consistent with the  purpose of program. For example, 36 of the 61 program stakeholders we interviewed did not  report any effect on covered entities’ or non-340B providers’ access to  drugs related to manufacturers’ distribution of drugs at 340B prices. These stakeholders represented a wide range of perspectives on the  340B program, including those representing manufacturers, covered  entities, and non-340B providers. The remaining 25 program stakeholders—also representing a wide range  of perspectives on the 340B program—reported that manufacturers’  distribution of drugs at 340B prices affected providers’ access to drugs  primarily in two situations. The two situations were: (1) for intravenous  immune globulin (IVIG), a lifesaving immune deficiency drug, the supply  of which is inherently limited; and (2) when there was a significant drop  in the 340B price of a drug, which may result in increased demand for the  drug by covered entities. Stakeholders reported that manufacturers’ restricted distribution of IVIG at  340B prices resulted in 340B hospitals having to purchase some IVIG at  higher, non-340B prices in order to meet their demand for the drug. Stakeholders reported that manufacturers’ distribution of drugs at 340B  prices also affected providers’ access to drugs when the 340B prices  dropped significantly. HRSA’s Oversight Is Inadequate to Ensure Participants’ Compliance with 340B Program Requirements

HRSA’s oversight of the 340B program is inadequate because it primarily  relies on covered entities’ and manufacturers’ self-policing—that is,  participants ensuring their own compliance with program requirements. HRSA’s guidance on key program requirements often lacks the  necessary level of specificity to provide clear direction, making it difficult  for participants to self-police or monitor others’ compliance and raising  concerns that the guidance may be interpreted in ways that are  inconsistent with its intent. Because of HRSA’s reliance on self-policing to oversee the 340B  program as well as its nonspecific guidance, the agency cannot provide  reasonable assurance that covered entities and drug manufacturers are  in compliance with program requirements and is not able to adequately  assess program risk. Hospitals’ participation in the  340B program has also grown markedly in recent years. The increasing number of hospitals participating in the 340B program has  raised other concerns for some stakeholders we interviewed, such as  drug manufacturers, including whether all of these hospitals are in need  of a discount drug program. Nearly a third of all hospitals in the U.S.  currently participate in the 340B program, and HRSA estimates that more  may be eligible. According to HRSA, the agency largely relies on  participants’ self-policing to ensure compliance with program  requirements, and has never conducted an audit of covered entities or  drug manufacturers. Therefore, we recommend that the Secretary of HHS  instruct the administrator of HRSA to take the following four actions to  strengthen oversight:  conduct selective audits of 340B covered entities to deter potential  diversion;  finalize new, more specific guidance on the definition of a 340B  patient;  further specify its 340B nondiscrimination guidance for cases in which  distribution of drugs is restricted and require reviews of  manufacturers’ plans to restrict distribution of drugs at 340B prices;  and  issue guidance to further specify the criteria that hospitals that are not  publicly owned or operated must meet to be eligible for the 340B  program. 2 organizations representing non-340B providers, including 1 trade organization and   1 non-340B provider.
Why GAO Did This Study

The Health Resources and Services Administration (HRSA), within in the Department of Health and Human Services (HHS), oversees the 340B Drug Pricing Program, through which participating drug manufacturers give certain entities within the health care safety net--known as covered entities--access to discounted prices on outpatient drugs. Covered entities include specified federal grantees and hospitals. The number of covered entity sites has nearly doubled in the past 10 years to over 16,500. The Patient Protection and Affordable Care Act (PPACA) mandated that GAO address questions related to the 340B program. GAO examined: (1) the extent to which covered entities generate 340B revenue, factors that affect revenue generation, and how they use the program; (2) how manufacturers' distribution of drugs at 340B prices affects covered entities' or non-340B providers' access to drugs; and (3) HRSA's oversight of the 340B program. GAO reviewed key laws and guidance, analyzed relevant data, and conducted interviews with 61 340B program stakeholders selected to represent a range of perspectives, including HRSA, 29 covered entities, 10 manufacturers and representatives, and 21 others. Selection of stakeholders was judgmental and thus, responses are not generalizable.

What GAO Found

Thirteen of the 29 covered entities we interviewed reported that they generated 340B program revenue that exceeded drug-related costs, which includes the costs of purchasing and dispensing drugs. Of those remaining, 10 did not generate enough revenue to exceed drug-related costs, and 6 did not report enough information for us to determine the extent to which revenue was generated. Several factors affected 340B revenue generation, including drug reimbursement rates. Regardless of the amount of revenue generated, all covered entities reported using the program in ways consistent with its purpose. For example, all covered entities reported that program participation allowed them to maintain services and lower medication costs for patients. Entities generating 340B program revenue that exceeded drug-related costs were also able to serve more patients and to provide additional services. According to the 61 340B program stakeholders we interviewed, manufacturers' distribution of drugs at 340B prices generally did not affect providers' access to drugs. Specifically, 36 stakeholders, including those representing manufacturers, covered entities, and non-340B providers, did not report any effect on covered entities' or non-340B providers' access. The remaining 25, also representing a wide range of perspectives on the 340B program, reported that it affected access primarily in two situations: (1) for intravenous immune globulin (IVIG), a lifesaving drug in inherently limited supply; and (2) when there was a significant drop in the 340B price for a drug resulting in increased 340B demand. In both situations, manufacturers may restrict distribution of drugs at 340B prices because of actual or anticipated shortages. Stakeholders reported that restricted distribution of IVIG resulted in 340B hospitals having to purchase some IVIG at higher, non-340B prices. They also reported that restricted distribution when the 340B price of a drug dropped significantly helped maintain equitable access for all providers. HRSA's oversight of the 340B program is inadequate to provide reasonable assurance that covered entities and drug manufacturers are in compliance with program requirements--such as, entities' transfer of drugs purchased at 340B prices only to eligible patients, and manufacturers' sale of drugs to covered entities at or below the 340B price. HRSA primarily relies on participant self-policing to ensure program compliance. However, its guidance on program requirements often lacks the necessary level of specificity to provide clear direction, making participants' ability to self-police difficult and raising concerns that the guidance may be interpreted in ways inconsistent with the agency's intent. Other than relying on self-policing, HRSA engages in few activities to oversee the 340B program. For example, the agency does not periodically confirm eligibility for all covered entity types, and has never conducted an audit to determine whether program violations have occurred. Moreover, the 340B program has increasingly been used in settings, such as hospitals, where the risk of improper purchase of 340B drugs is greater, in part because they serve both 340B and non-340B eligible patients. This further heightens concerns about HRSA's current approach to oversight. With the number of hospitals in the 340B program increasing significantly in recent years--from 591 in 2005 to 1,673 in 2011--and nearly a third of all hospitals in the U.S. currently participating, some stakeholders, such as drug manufacturers, have questioned whether all of these hospitals are in need of a discount drug program.

What GAO Recommends

To ensure appropriate use of the 340B program, GAO recommends that HRSA take steps to strengthen oversight regarding program participation and compliance with program requirements. HHS agreed with our recommendations.