Senators Target Abuse in 340B Drug Discount Plan

Momentum is mounting in the Senate to reform a prescription drug pricing program whose rapid growth, lawmakers contend, has led to higher costs for patients and taxpayers.

The Senate Committee on Health, Education, Labor and Pensions held a hearing Thursday on the 340B drug pricing program, which allows certain healthcare facilities that serve low-income patients to purchase outpatient drugs at a discounted rate.

"Anyone who says that 340B is cost neutral to taxpayers is not paying attention," Committee Chair Sen. Bill Cassidy, R-La., said.

"As the 340B program grows, so have healthcare costs. 340B should be about making drugs more affordable. It should not be a line item on an investor call," Cassidy said.

According to a Sept. 9 report by the Congressional Budget Office, purchases through the 340B program rose from $6.6 billion in 2010 to $43.9 billion in 2021 — an average annual growth rate of 19% — and reached an estimated $66.3 billion in 2023.

The agency found that the program's expansion has contributed to higher federal spending by encouraging hospitals to prescribe costlier drugs and expand their networks through acquisitions.

The hearing came a day after Building America's Future launched an ad campaign in Washington, D.C., and in the home states of eight Republican senators on the committee, thanking them for supporting President Donald Trump's effort to reform the 340B program.

Reform advocates cited growing reports of abuse across several states, including a case in Alabama where a hospital purchased a cancer drug for about $3,400 through 340B discounts and then billed patients more than $25,000.

Similar profit gaps and questionable contract-pharmacy arrangements have been documented in states such as Kansas, Oklahoma, Ohio, and Florida.

Cassidy said only five of the 20 oversight recommendations made since 2011 by the Government Accountability Office have been implemented.

GAO Health Care Director Michelle Rosenberg told the panel that the Health Resources and Services Administration lacks the enforcement authority to ensure that hospitals meet eligibility requirements and comply with program rules.

Sen. Roger Marshall, R-Kan., said the program's benefits are "flowing to big monopolistic hospital systems" while rural hospitals "get less than 2% of all the dollars spent on 340B."

Marshall urged the committee to "define who qualifies, improve transparency, and protect the hospitals that truly serve low-income and rural communities."

Ranking Member Sen. Tammy Baldwin, D-Wis., countered that "340B is a critical lifeline for rural hospitals, community health centers, and other safety-net providers," adding that reforms should "increase transparency without putting undue burden on providers."

The American Hospital Association emphasized that many rural hospitals rely on 340B savings to maintain operations and provide specialist services in hard-to-reach communities.

"If these services were unavailable in their communities, rural patients would be forced to drive far distances to access the same level of care," the AHA said in a statement to the committee.

Meanwhile, 340B Health, representing more than 1,600 hospitals, warned that proposals to overhaul 340B must preserve its safety-net mission.

"Some of the discussions from panel members relied on reports that don't reflect the full picture of how hospitals use their 340B savings," said Maureen Testoni, president and CEO of 340B Health, in a news release.

"We urge Congress to take this evidence into account, especially at a time when safety-net hospitals are preparing for a rise in uninsured patients and facing lower Medicaid reimbursements because of legislation passed earlier this year," she added.

Cassidy and Baldwin said they expect the committee's bipartisan working group to release draft legislation aimed at tightening oversight while preserving access for safety-net providers.

"340B should be about making drugs more affordable," Cassidy said. "It should not be a line item on an investor call."