HRSA is responsible for administering and overseeing the  340B Program, which, according to federal internal control standards,  includes designing and implementing necessary policies and procedures  to enforce agency objectives and assess program risk. Additionally, they must be (1) owned or operated by a state or  All drug manufacturers that supply outpatient drugs are eligible to  participate in the 340B Program and must participate in order to have  their drugs covered by Medicaid. GAO Previously Found Inadequacies in HRSA’s Oversight of the 340B Program and Made Recommendations for Improvement

In our September 2011 report, we found that HRSA’s oversight of the  340B Program was inadequate because it relied primarily on self-policing  by program participants and because HRSA’s guidance on key program  requirements lacked the necessary level of specificity to provide clear   We also found that changes in the settings  direction for participants.where the 340B Program was used resulted in heightened concerns  about HRSA’s inadequate oversight. We made four recommendations to  address these oversight inadequacies and to ensure appropriate use of  the program. Lack of Specificity in Program Guidance

We found that HRSA’s guidance on key program requirements lacked 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 could be interpreted in ways that were  inconsistent with its intent. HRSA’s nondiscrimination guidance was not specific in the practices  that manufacturers should follow to ensure that drugs were equitably  distributed to covered entities and non-340B providers when  distribution was restricted. We concluded that  increased use of the 340B Program by contract pharmacies and hospitals  may have resulted in a greater risk of drug diversion to ineligible patients,  in part because these facilities were more likely to serve patients that did  not meet the definition of a patient of the program. Recommendations to Improve Program Oversight

To address these oversight inadequacies and to ensure appropriate use  of the program, we recommended that the Secretary of HHS instruct the  administrator of HRSA to take the following four actions: (1) conduct  selective audits of covered entities to deter potential diversion; (2) further  specify its 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; (3) finalize new, more specific  guidance on the definition of an eligible patient; and, (4) 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. HRSA Has Implemented Two of GAO’s Four Recommendations and Reported Plans for Addressing the Other Two

In fiscal year (FY) 2012, HRSA implemented two of the four  recommendations from our 2011 report. Specifically, in response to our  recommendation that HRSA conduct selective audits of 340B covered  entities to deter potential diversion (that is, diversion of 340B drugs to  non-eligible patients), the agency implemented a systematic approach to  conducting audits of covered entities that is outlined on its website. HRSA had planned to address both of  these issues in a comprehensive 340B Program regulation that it  submitted to the Office of Management and Budget for review in April  2014. However, HRSA withdrew this proposed comprehensive regulation  in November 2014 following a May 2014 federal district court ruling that  addressed whether HRSA had statutory authority to issue a regulation   After the  concerning the ineligibility of certain drugs for 340B pricing.district court ruled that HRSA lacked statutory rulemaking authority under  the 340B statute except in three specified areas, HRSA officials reported  that they had to assess the impact of the ruling on the proposed  comprehensive regulation. The outcome of this assessment is that HRSA  plans to issue guidelines to address 340B program areas where it does  not have explicit rulemaking authority. HRSA officials said they expect to  publish proposed guidelines later this year and that they will address  areas such as the definition of a patient and hospital eligibility under the  340B program.
Why GAO Did This Study

The 340B Drug Pricing Program requires drug manufacturers to sell outpatient drugs at discounted prices to eligible hospitals, clinics, and other entities—commonly referred to as covered entities—in order to have their drugs covered by Medicaid. HRSA, an agency within the Department of Health and Human Services, is responsible for administering and overseeing the 340B Program. In recent years, questions have been raised regarding HRSA's oversight of the program, particularly given growth in the program since its inception in 1992. According to HRSA officials, as of 2015, more than 11,000 covered entities were participating in the 340B Program—an increase of approximately 30 percent since 2008.
In September 2011, GAO identified inadequacies in HRSA's oversight of the 340B Program and made recommendations to improve program oversight and ensure appropriate use of the program. This testimony describes (1) inadequacies in 340B Program oversight that GAO previously identified, and (2) progress HRSA has made implementing GAO's recommendations to improve program oversight.
This testimony is based largely on GAO's September 2011 report. For this testimony, GAO also obtained information and documentation from HRSA officials about any significant program updates and steps they have taken to implement GAO's 2011 recommendations.

What GAO Found

In its September 2011 report, GAO found that the Health Resources and Services Administration's (HRSA) oversight of the 340B Program was inadequate to provide reasonable assurance that program participants—covered entities and drug manufacturers—were in compliance with program requirements. Specifically, GAO found the program
lacked guidance on key requirements with the level of specificity necessary to provide clear direction, making self-policing difficult, and raising concerns that the guidance could be interpreted in ways that were inconsistent with its intent. In particular, GAO found HRSA's guidance lacked needed specificity on the definition of a patient eligible for drugs discounted under the program, criteria hospitals not publicly owned or operated needed to meet to qualify for the program, and nondiscrimination guidance manufacturers needed to follow to ensure drugs were distributed equitably to both covered entities and non-340B providers.
had increasingly been used in settings, such as hospitals, where the risk of diverting 340B drugs to ineligible patients was greater, because these settings were more likely to serve such patients.
To address these oversight inadequacies and to ensure appropriate use of the program, GAO recommended HRSA (1) conduct selective audits of covered entities to deter potential diversion; (2) further specify its 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; (3) finalize new, more specific guidance on the definition of a patient eligible to receive discounted drugs; and (4) issue guidance to further specify the criteria that hospitals not publicly owned or operated must meet to be eligible for the 340B Program.
In fiscal year 2012, HRSA implemented two of GAO's four 2011 recommendations. Specifically, the agency implemented a systematic approach to conducting audits of covered entities and issued updated nondiscrimination guidance. With regard to the other two recommendations, HRSA planned to address the definition of a patient and hospital eligibility criteria in a comprehensive 340B Program regulation it submitted to the Office of Management and Budget in April 2014. However, HRSA withdrew this proposal following a May 2014 federal district court ruling addressing HRSA's statutory authority to issue a separate 340B regulation, which found that HRSA's rulemaking authority for the 340B Program is limited to specified areas. HRSA reported that after assessing this ruling, it plans to issue proposed guidelines later this year to address 340B Program areas where it does not have explicit rulemaking authority, including the definition of a patient and hospital eligibility.