Specifically, more than 60 percent of critical access hospitals and  federally qualified health centers, a type of federal grantee, had all of their  contract pharmacies within 30 miles. The flat fees  generally ranged from $6 to $15 per prescription, but varied by several  factors, including the type of covered entity and drug, as well as the  patient’s insurance status. In addition to flat fees, many of the contracts  we reviewed included provisions for the covered entity to pay the  pharmacy a fee based on the percentage of revenue generated by each  prescription. About Half of the Covered Entities GAO Reviewed Provided Low- Income, Uninsured Patients Discounts on 340B Drugs at Some or All of Their Contract Pharmacies

Thirty of the 55 covered entities responding to our questionnaire reported  providing low-income, uninsured patients discounts on 340B drugs at  some or all of their contract pharmacies. Of the 30 covered  entities that provided discounts, 23 indicated that they pass on the full  340B discount to patients, resulting in patients paying the 340B price or  less for drugs. Fourteen of the  covered entities said they determined eligibility for discounts based on  whether a patient’s income was below certain thresholds as a percentage  of the federal poverty level, 11 reported providing discounts to all patients,  and 5 said they determined eligibility for discounts on a case-by-case  basis. Oversight Weaknesses Impede HRSA’s Ability to Ensure Compliance at 340B Contract Pharmacies

We found weaknesses in HRSA’s oversight that impede its ability to  ensure compliance with 340B Program requirements at contract  pharmacies. We found that HRSA  audits do not fully assess compliance with the 340B Program  prohibition on duplicate discounts for drugs prescribed to Medicaid  beneficiaries. Specifically, covered entities are prohibited from  subjecting manufacturers to “duplicate discounts” in which drugs  prescribed to Medicaid beneficiaries are subject to both the 340B  price and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in  Medicaid fee-for-service and not Medicaid managed care, despite the  fact that the majority of Medicaid enrollees, prescriptions and  spending for drugs were in managed care. As a result, we concluded that HRSA does not know the  scope of covered entities’ assessments and whether they were  effective at identifying the full extent of the noncompliance identified in  the audit. We found that prior to  closing an audit, HRSA’s audit procedures do not require all covered  entities to provide evidence that they have taken corrective action and  are in compliance with program requirements. Instead, HRSA relies  on the 90 percent of covered entities subject to risk-based audits to  self-attest that all audit findings have been addressed and that the  entity has come into compliance with 340B Program requirements. Our June 2018 report contained seven recommendations to HRSA to  strengthen its oversight of the 340B Program. HHS did not concur with our three recommendations that HRSA should 1)  require covered entities to register contract pharmacies for each site of  the entity for which a contract exists; 2) require all covered entities to  specify their methodology for determining the full scope of noncompliance  identified during the audit as part of their corrective action plans, and  incorporate reviews of covered entities’ methodology into their audit  process to ensure that entities are adequately assessing the full scope of  noncompliance; and 3) require all covered entities to provide evidence  that their corrective action plans have been successfully implemented  prior to closing audits, including documentation of the results of the  entities’ assessments of the full scope of noncompliance identified during  each audit.
Why GAO Did This Study

This testimony summarizes the information contained in GAO's June 2018 report, entitled Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement ( GAO-18-480 ).

What GAO Found

The 340B Drug Pricing Program (340B Program), which is administered by the U.S. Department of Health and Human Services' (HHS) Health Resources and Services Administration (HRSA), requires drug manufacturers to sell outpatient drugs at a discount to covered entities so that their drugs can be covered by Medicaid. Covered entities include certain hospitals and federal grantees (such as federally qualified health centers). About one-third of the more than 12,000 covered entities contract with outside pharmacies--contract pharmacies--to dispense drugs on their behalf. GAO's review of 30 contracts found that all but one contract included provisions for the covered entity to pay the contract pharmacy a flat fee for each eligible prescription. The flat fees generally ranged from $6 to $15 per prescription, but varied by several factors, including the type of drug or patient's insurance status. Some covered entities also agreed to pay pharmacies a percentage of revenue generated by each prescription.
Thirty of the 55 covered entities GAO reviewed reported providing low-income, uninsured patients discounts on 340B drugs at some or all of their contract pharmacies. Of the 30 covered entities that provided discounts, 23 indicated that they pass on the full 340B discount to patients, resulting in patients paying the 340B price or less for drugs. Additionally, 14 of the 30 covered entities said they determined patients' eligibility for discounts based on whether their income was below a specified level, 11 reported providing discounts to all patients, and 5 determined eligibility for discounts on a case-by-case basis.
GAO found weaknesses in HRSA's oversight that impede its ability to ensure compliance with 340B Program requirements at contract pharmacies, such as:
HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, manufacturers cannot be required to provide both the 340B discount and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care. As a result, it cannot ensure compliance with this requirement for the majority of Medicaid prescriptions, which occur under managed care.
HRSA requires covered entities that have noncompliance issues identified during an audit to assess the full extent of noncompliance. However, because HRSA does not require all the covered entities to explain the methodology they used for determining the extent of the noncompliance, it does not know the scope of the assessments and whether they are effective at identifying the full extent of noncompliance.
HRSA does not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements prior to closing the audit. Instead, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity came into compliance with 340B Program requirements.
Given these weaknesses, HRSA does not have a reasonable assurance that covered entities have adequately identified and addressed noncompliance with 340B Program requirements.