On February 2, 2024, the “gang of six”—a bipartisan group of six senators who have traditionally championed reforms to the 340B program¹ —introduced a discussion draft of a bill that would modify the program that provides safety net providers with access to low-cost medications from participating manufacturers. The 340B statute has not been modified since 2010. If enacted, the bill would codify for the first time contract pharmacy and child site arrangements in the 340B statute, but would do so in exchange for certain program integrity reforms. As a discussion draft, the bill includes placeholders, to be addressed in response to certain requests for information (RFIs) released alongside the draft bill. Comments/edits to the discussion draft are due to Bipartisan340BRFI@email.senate.gov by April 1, 2024. 

Notable elements of the bill include:

• Contract Pharmacies: The 340B statute is currently silent on covered entity use of contract pharmacy arrangements, although the Health Resources and Services Administration (HRSA), the agency responsible for administering the program, has permitted the use of contract pharmacies since 1996. As a result of extraordinary growth in such arrangements, a number of manufacturers have recently placed certain restrictions on contract pharmacies, resulting in a spate of litigation. For the first time, the bill would codify 340B contract pharmacy arrangements and extend the statutory “must offer” requirement to 340B scripts dispensed through such entities. However, in exchange, the bill would extend certain obligations to covered entities with respect to their contract pharmacy arrangements, including to require covered entities to register their contract pharmacies and to submit all contract pharmacy arrangements for review by HRSA, including certain new requirements with respect to such contracts. 
  • The Supplemental RFI includes certain questions for stakeholders regarding contract pharmacy arrangements, including: appropriate geographic restrictions, limitations that would not compromise patient access, and policies to limit the role of pharmacy benefit managers (PBMs) in the 340B program.
• Patient Definition: One of the most contentious elements of the 340B program is the “patient” definition, which defines the program’s scope by virtue of the existing statutory prohibition on “diversion” (i.e., the requirement to dispense 340B drugs only to patients of covered entities). However, the term “patient” is not defined in statute and has been the subject of much dispute and litigation, including most recently in the Genesis Health Care Inc. v. Becerra case striking down HRSA’s 2015 patient definition². Perhaps in light of this controversy, the bill merely inserts a placeholder for the patient definition, without defining the term.  
  • The Supplemental RFI includes a number of questions with respect to the patient definition, including: factors to inform whether a covered entity has a meaningful relationship with a patient; the length of time a relationship exists between a patient and a covered entity; the timing of such determinations; how to determine which covered entity can claim a discount when there are multiple covered entity relationships with a given patient; and what tools HRSA should be provided to implement a patient definition that “accommodates diversity in covered entity types while promoting consistency, clarity, and integrity in the program.”
• Child Sites: While the 340B statute expressly identifies only certain entities as “covered entities” eligible for discounts under the 340B drug discount program, HRSA has extended this benefit to certain affiliated entities known as “child sites.” The bill would, for the first time, codify child sites in statute. However, in light of recent articles in the popular press which have revealed that some such child sites may not have provided access to needed benefits in their communities, the bill would further impose certain requirements on child sites, including a requirement to register such child sites, and to ensure that each child site satisfies certain new eligibility requirements (e.g., application of the covered entity’s financial assistance policies, participation in Medicare and Medicaid, and certain terms to ensure an appropriate clinical relationship exists between the child site and covered entity).
  • The Supplemental RFI includes a number of questions with respect to child sites, including: whether the Medicare provider-based guidelines at 42 CFR 413.65 are an appropriate framework for identifying 340B child sites; appropriate levels of covered entity oversight; policies to ensure child sites located in different areas use 340B “savings” to help underserved in the same manner as the parent entity; other policies and program integrity measures or reporting requirements; and exemptions or special considerations for child sites in rural, frontier, or areas of high medical need.
• Transparency: Among a number of the complaints levied against the 340B program by manufacturers is a lack of transparency around the 340B program, including how the program benefits patients receiving care at covered entities and how covered entities use “savings” – the difference between the 340B acquisition price and the amount of reimbursement received – to benefit patients served. To expand insight into the program, the bill would require covered entities to file an annual addendum to their Medicare cost report on a variety of data, including: the number of 340B drugs dispensed, how such drugs were reimbursed by insurance, the level of charity care provided by the covered entity, how the covered entity uses 340B savings, and the demographics of patients served. The bill would also authorize HRSA to audit the records of covered entity’s for purposes of confirming the information being reported, and require the public reporting of the data collected.
• Enhancing Program Integrity: While the 340B statute already provided limited authorization for HRSA and manufacturers to audit covered entities at their expense on the duplicate discount and diversion requirements, the bill would grant HRSA new, broader audit authority over covered entities, child sites, contract pharmacies, and manufacturers. Among other issues, HRSA could assess compliance with eligibility for the program and use of contract pharmacies. The bill directs HRSA to promulgate regulations regarding these new audit and reporting procedures.
• Preventing Duplicate Discounts: The 340B statute currently prohibits duplicate discounts – that is, the receipt of both a Medicaid rebate and a 340B discount for the same drug. The bill would create a new third-party “clearinghouse contracting entity” to ensure compliance with this existing requirement. Among other duties, the clearinghouse would receive claims level rebate file data from State Medicaid agencies and from covered entities. The bill would further provide such claims level data to manufacturers to permit them to identify 340B claims that may generate a discount under a voluntary discount arrangement (such as a commercial rebate). 
• Ensuring Equitable Treatment of Covered Entities and Participating Pharmacies: Mirroring a number of recent state “anti-pickpocketing” bills, the bill would amend the Public Health Service Act to restrict health plans and PBMs from imposing separate coverage or reimbursement terms based on whether a covered entity or contract pharmacy is dispensing a 340B drug. In particular, the bill would prohibit reimbursing a covered entity or contract pharmacy less for a 340B drug, charging different fees or imposing different network restrictions, or denying coverage when a drug is a 340B drug. 
• User Fee Program: The bill authorizes HRSA to begin a user fee program that will required covered entities to pay a fee of no greater than [.1]% of the savings the covered entity received under the 340B program. 
• Studies and Reports: Requires the Medicaid and CHIP Payment and Access Commission (MACPAC) to submit a report to Congress on the efforts of State Medicaid agencies to prevent duplicate discounts under the 340B program, and requires HHS to conduct a study on dispensing fees.
  • The duplicate discount study does not appear to address the potential for duplicate discounts with Medicare as a result of the Inflation Reduction Act of 2022.
• Additional Resources for Oversight: The bill authorizes $3,000,000 to HHS-OIG for conducting the audits, investigations, oversight, and enforcement activities associated with the 340B drug discount program.