340B is back on deck in Congress after Chevron, but hurdles loom

By Michael Mcauliff / August 7, 2024

What looked like one of the more promising efforts to update the 340B drug discount program took a step backward at the start of the month, suggesting stakeholders are in for a protracted battle if they hope to see an overhaul.

Analysts say that the problem facing the 340B program is Congress never really spelled out how key aspects should be run when it created the program in 1992. Since then, it has grown enormously, with more than 2,600 hospitals eligible and, according the pharmaceutical industry, more than $50 billion worth of discounted sales running through 340B every year.

That growth has prompted legal battles that have left courts and litigants as much in charge of the rules as Congress or the Health Resources and Services Administration, which oversees 340B. Adding more urgency, the Supreme Court elevated the role of judges in federal lawsuits further by overturning the 40-year-old precedent known as Chevron deference, which had required courts to defer to agencies in disputes over statutory interpretation, in June.

With key aspects of 340B dependent on litigation, lawmakers and analysts agreed Congress needed to act.

"It seems like we're inching towards a critical head right now on 340B," said Mark Faccenda, a partner at the law firm Norton Rose Fulbright who has represented drugmakers and hospitals.

"From a biopharmaceutical perspective, the 340B discount program is ripe for legislative reform," said Lindsay Bealor Greenleaf, a policy adviser at the pharmaceuticals consulting company ADVI. "340B is in need of legislative guardrails and legislative clarity."

Legislative delay

It's not as though Congress disagrees.

A House subcommittee held a hearing in June, and four significant bills have been introduced the lower chamber to reform various elements of 340B. Those measures, however, have not advanced.

When a bipartisan group of six senators announced in June 2023 that they wanted to hear from stakeholders on how to renovate 340B, they attracted intense interest. That feedback informed a legislative outline the senators released in February for a pending bill entitled the Supporting Underserved and Strengthening Transparency, Accountability, and Integrity Now and for the Future of 340B Act, or SUSTAIN Act.

The plan was to release a more final draft last Thursday, giving interested parties the summer to mull it over. Indeed, one of the leaders of the effort, Minority Whip John Thune (R-S.D.), told reporters last Tuesday that moving ahead was especially important after the Supreme Court overturned Chevron deterrence in its Loper Bright decision.

"It is a post-Chevron issue," Thune said, though he noted lawmakers began work prior to the ruling. "It ties into the the need to make sure that Congress is speaking clearly so that there aren't agency [actions] and then grounds for endless litigation, which is what this program has been about for the last several years."

Yet the group failed to release that draft. Sen. Debbie Stabenow (Mich.), the lead Democrat on the effort, did not respond to requests for comment.

Thune's side, which also includes GOP Sens. Jerry Moran (Kan.) and Shelley Moore Capito (W.Va.), said in a joint statement that they "need a little more time."

"On something of this magnitude, getting it right is far more important than setting an artificial deadline," the GOP senators said, hinting that some undisclosed partisan rift could be hampering the talks."Republicans have committed to working in good faith over the upcoming recess to ensure we have as strong of a product as possible to introduce this fall. We sincerely hope Democrats join us in that effort."

While no one revealed what the splits were, Moran explained why the process is difficult.

"I think we've had 100 drafts," Moran said last Tuesday. "We're trying to bring two sides of an issue together that are sometimes hard to bring together. And so we're trying to find something that is doable, can be broadly supported, and create some certainty and accountability in this program."

340B issues

The draft bill issued in February identifies the major issues under dispute.

At the top of the list in that outline, and in lawsuits, is where patients can get discounted drugs.

In the early years of 340B, drugs had to come from the "covered entity" that prescribed them, but HRSA expanded that to contract pharmacies because many smaller providers lack in-house pharmacies, treat patients who live too far away to use 340B pharmacies or prescribe medicines only available from specialty pharmacies.

Drug companies have been restricting distribution by contract pharmacies and have won federal court decisions finding that unlimited contract pharmacies are out of bounds. At the same time, courts have upheld state laws that say contract pharmacies are allowed.

Another key issue involves what are known as child sites, which are essentially satellite branches that 340B-eligible providers open in areas away from their base locations to expand their reach. But pharmaceutical manufacturers complain such child sites can be placed in well-off neighborhoods, where they do little to help the underserved, but do boost hospital bottom lines. There are also allegations of third parties or private investors actually running such sites and siphoning profits.

A third issue the SUSTAIN Act aims to resolve is who counts as a patient. Drugmakers, in particular, are concerned that hospitals can reap windfalls by sending people who do not qualify as 340B patients to get drugs at 340B pharmacies.

Other issues that the bill authors want to address are boosting transparency so the dollars spent under 340B can be more thoroughly tracked and evaluated; strengthening HRSA's audit authority; creating a clearinghouse to ensure hospitals and others don't double-dip on savings by getting 340B discounts and Medicaid price breaks, and adding restrictions to prevent insurers and pharmacy benefit managers from funneling away 340B savings.

One group desperately hoping Congress acts is community health centers, who were some of the original intended beneficiaries of 340B. Advocates had hoped to see a final draft of the SUSTAIN Act ahead of National Health Center Week in Washington this week.

"The program has begun to narrow over time because of the actions of pharmaceutical companies, because of the actions of PBMs and others," said Stephanie Krenrich, senior vice president of policy and government affairs at Advocates for Community Health. "This is a really important program for community health centers and other entities."

Still, even if the bipartisan group pulls together a broad-based agreement, it faces a long road, including with the Senate Health, Education, Labor and Pensions Committee, which has legislative jurisdiction over HRSA.

HELP Committee ranking member Dr. Bill Cassidy (R-La.), who put out his own request for 340B proposals last year, said the Thune-Stabenow bill would most likely inform his panel's work, not become law.

"Do I think it would get all the way through the process? Simple answer: No," Cassidy said. "We'll look at what they've done. They're good people. They've got their work. We'll take what their work is and try and get something which we think can preserve 340B for its original intent."