Hospitals Are Not the Only 340B Providers Under Scrutiny

By Ted Slafsky

Veteran 340B observers were surprised to see that Sen. Bill Cassidy (R-La.) has expanded his 340B investigation into community health centers. In September, Cassidy, a long-time critic of the program, launched an inquiry into hospital use of the 340B program. Cassidy cited front-page reports in the New York Times and Wall Street Journal that raised questions about whether hospitals were good stewards of the program.

Extensive Document Request

Last month, the senator, who serves as the ranking Republican member of the Senate Health, Education, Labor and Pensions (HELP) Committee, which has jurisdiction over the 340B program, announced he wrote the CEOs of two of the largest U.S. health centers requesting answers to a series of questions about their use of the 340B program. The senator also requested a number of documents including “unredacted copies of pharmacy service agreements with contract pharmacies….and TPA agreements.” In the letter, Cassidy cited a 2018 Government Accountability Office report and wrote it, “found that nearly half of the covered entities it reviewed failed to extend discounts to patients accessing medications at their contract pharmacies.” Cassidy also raised concerns about the government’s 2010 decision to allow use of multiple contract pharmacies, which the senator said allowed “covered entities to use complex arrangements that included multiple pharmacies.”

Unlike the hospital inquiry, the investigation into the health centers was not initiated after high profile news investigations. Cassidy said in his letters to the two health centers that he chose them since they are among the 10 highest paid “CHCs in the nation.” One of the two health centers, Yakima Valley Farm Workers Clinic in Washington state, is “ranked as having the highest compensation among all CHCs in the nation,” Cassidy wrote.

A New Area of Focus

Health centers and other federal grantees have largely avoided the spotlight when it comes to the 340B program. Drug manufacturers, and their allies in Congress, have focused almost all of their attention on the hospitals in the program. Hospitals account for 87% percent of the purchases in the program, while health center and other grantee purchases represent the rest.

But there are recent indications this dynamic is changing. For instance, Gilead Sciences funded a May 2023 study by the Berkeley Research Group that questioned whether patients of Ryan White Clinics and other covered entity grantees benefit from the 340B discounts. The report suggested that grantees’ share of total 340B revenues was likely larger than what government data indicates, and that grantees’ use of contract pharmacies is increasing faster than their use by 340B hospitals. The study called for more transparency requirements for grantees. Ryan White Clinics for 340B Access (RWC-340B), an influential advocacy group of 340B providers, slammed the report as “self-serving” and said that the HIV clinics were already subject to extensive reporting requirements.

Investigation in Context

Notably, no other members of the HELP Committee joined Cassidy in his investigation. In addition, the senator, due to his party’s minority status, does not have subpoena power to require responses or testimony. Nonetheless, both hospitals who received letters told 340B Report that they responded to the senator, are fully compliant with the 340B law, and are acting responsibly. Yakima Valley also said it is cooperating with the request and the other health center, Sun River Health in New York City, did not respond to 340B Report.

Long Term Implications

While it is unclear what will result from Cassidy’s current investigation, one thing is certain: We can expect more congressional focus on the 340B program in the coming years and Cassidy will feature as a prominent player in the action. Senate Republicans have a very favorable map in the upcoming November elections and have a strong chance of taking back control of the chamber. Cassidy is in line for the chairmanship of the Senate HELP Committee.  If that occurs, the senator will have a much larger committee staff and additional power.

We can expect Cassidy to hold 340B hearings, likely continue his investigation, and push for significant changes to the program. Whether he will have much success remains uncertain considering the broad bipartisan support of the program. Nonetheless, 340B providers will need to remain diligent in educating lawmakers and the public about their use of the program and prepare for tough questions and more scrutiny.

Ted Slafsky is the Publisher and CEO of 340B Report, the only news and intelligence service exclusively covering the 340B program.  Slafsky, who has over 25 years of leadership experience with the 340B program, is also Founder and Principal of Wexford Solutions.  Ted can be reached at ted.slafsky@340Breport.com.

Disclaimer: The views and opinions expressed in this blog are those of the authors. They do not necessarily reflect the official policy or position of any other agency, organization, employer, or company.